Read and React

"A significant groundswell of ASP practitioners still believe in the ultimate superiority of the online service model, tempered by the wisdom acquired since the first flush of innocence in the industry's early years. " Give us your feedback on the role of Web site hosting companies in the ASPnews Discussion Forum

According to IDC, steady growth in worldwide spending on ASPs will finally nudge the magic $20 billion mark by the end of 2006. "Now that the days of ASP buildup are over, there is a 're-discovery' of the merits of ASP including the business benefits that are already being enjoyed by current ASP customers," said IDC program manager Jessica Goepfert in the press release announcing the report.

Application management, which a lot of ASPs are starting to offer as an on-site complement to their hosted ASP offerings, will also top $20 billion in the same timeframe, according to the second IDC report. So the future apparently looks bright for anyone still standing in the ASP sector with strong application management skills.

Location, Location, Location
This seems to be in stark contrast to my own mantra of the past three years, that the ASP model is "more than just a relocation exercise." I've always argued that outsourcing conventional applications to an off-site data center is only the first step. The ASP model can take off only if those applications also change and adapt to the Internet environment — in other words, if they adopt a Web services architecture.

The theory makes sense, but it depends on software vendors adopting that new architecture, which they haven't been prepared to do for a whole range of reasons. Meanwhile, back in the real world, ASPs have still had to pay their bills while waiting for the change to happen. They have been obliged to tailor their offerings to what vendors have made available and what the market has been willing to pay for. A handful have found success through creating their own Web services-based applications, but even many of these have ended up delivering installed solutions because of customer reluctance to accept applications delivered as a service.

End of the Innocence
Does this mean the ASP model really is just a relocation exercise after all? For some, it may be. But despite so many setbacks, a significant groundswell of ASP practitioners still believe in the ultimate superiority of the online service model, tempered by the wisdom acquired since the first flush of innocence in the industry's early years.

An example of this viewpoint comes in the form of a white paper launched last week by British ASP iRevolution, in which its CEO Eamus Halpin sets out his views on the future of software delivery. Briefly promoted as iFuel, and before that as Integration, iRevolution has five years' experience of delivering ASP services, and over ten years' experience as an IT solutions provider for small and mid-sized businesses.

In his paper, which is downloadable from the company's website, Halpin confirms that there is a market for outsourced and remotely managed applications, but he also explains why the limitations of conventional software packages restrict the scope of that market. He goes on to set out his views of how software will evolve into a more loosely coupled, distributed component model based on XML and Web services, which will deliver software to local devices while managing the applications and data centrally.

This vision of the future happens to coincide with the concepts set out recently in a report from the Yankee Group (see Yankee Group Predicts Shift in Application Paradigm). The Yankee report portrays a new generation of software that operates locally but is managed centrally: "Web services and TCP/IP will be the glue that binds localized processing with centralized services (such as storage, authentication and security)."

The good news for ASPs is that this new generation of software will require exactly the kind of network-savvy application management skills that ASPs have learnt in abundance through their experiences of delivering hosted applications. But those skills will need to be tuned to the highly componentized and distributed architecture of Web services, rather than the tightly integrated format of conventional packaged applications.

Rearchitecting the App
Vendors who are slow to rearchitect their applications using Web services will ultimately find themselves at a disadvantage, along with any ASPs who have remained to closely allied with them. Although the market identified by IDC confirms that outsourcing conventional applications can be a viable offering for the immediate future, long-term success as an ASP will still depend on migrating to software architectures that are designed from the ground up to thrive in a networked environment.