Application outsourcing: a new business model for enabling competitive electronic commerce

This paper gives an overview of the emerging application service provider (ASP) industry. The ASP model is a new form of application outsourcing (AO) which enables customers to access software applications over the internet. The market for branded application outsourcing services is expected to grow to $21 billion by 2001. The USA, UK and Germany will be the leading players. ASPs offer a new model of outsourcing by providing a contractual service which includes deploying, hosting, managing and renting access to an application via a centrally located facility. This paper introduces a research project currently being undertaken in Silicon Valley in the USA, and in Europe on evaluating application outsourcing using the ASP model. It explores some of the benefits and pitfalls of AO and suggests that three factors will drive the ASP market. They are: market forces including, mergers, acquisitions, joint ventures and strategic alliances; innovation and technical changes, including internet technologies; and business practices, such as core competence thinking and outsourcing practice.

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