The internet proved itself in its ability to create new business and give birth to companies that succeeded into the millions. These new businesses managed to redefine and recreate business models that worked, but could not have existed without the internet. One of these new business models is the application service provider (ASP), which emerged in the late 1990's on the back of the internet boom.
The Application Service Provider Consortium defines an ASP as an organization that "manages and delivers application capabilities to multiple entities from a data centre across a wide area network (WAN)." Basically an ASP business model is a business that offers software solutions to businesses which they connect to via the internet or a dedicated intranet connection, on a one-to-many basis. The business then pays for the amount it uses the software or pays a regular fixed fee. Many refer to it as outsourcing your IT, yet there are fundamental differences between ASPs and outsourcing. ASPs tend to target SMEs and offer a standard package which is web-based, whereas outsourcing usually involves tailor made packages which can include any aspect of IT; software or hardware.
ASPs were fuelled by the belief that they offered a new business model to customers, similar to gas and electricity, where you only pay for what you use, ?software-as-a-service'. The technological factors, including scalability, speed and focus as well as price and flexibility are what drove the model forward. It was believed that the ASP model could enhance IT efficiency and reduce the total cost of ownership of IT (IDC 2000). This was perfect for new businesses and SMEs as it cut off barriers to entry with cost, eliminating the need for a whole IT infrastructure, time, set up time could b ...