Evaluating the Application Service Provider (ASP) Business Model: The Challenge of Integration

The paper evaluates the application service provider (ASP) business model. It draws from a large scale research program funded by the European Union and Engineering and Physical Sciences Research Council (EPSRC), into the emerging ASP industry where software is delivered as a service, priced on a per-seat, per month basis. Tracking a taxonomy of ASPs (pure-play, vertical, horizontal, enterprise and enabler) through longitudinal case study research, the paper suggests that two major inhibitors have contributed to the slow growth of this market. The first is economic conditions evidenced by the dot.com downturn, and the second is lack of education in the potential customer marketplace. The paper tracks the strategies of two major players within the ASP industry: Cable & Wireless, a traditional UK telecoms company moving into the IP market, and Jamcracker, a recently established US enterprise web services company. Through careful evaluation of key performance indicators (KPIs) for evaluating ASPs and customer perceptions of the software-as-a-service proposition (and e-business broadly conceived), the paper argues what integration of applications will be the major challenge if the ASP business model is to survive in the overcrowded and intensely competitive e-business sector.