Sunday, June 10, 2001

ASP Market Growth Remains Strong

Despite the challenges application service providers (ASPs) have to endure, market growth remains strong. In fact, ASP revenues are increasing at a blistering compound annual growth rate (CAGR) of 89% that will propel them from $986 million in 2000 to almost $24 billion in 2005, according to IDC.

"Despite the well-publicized challenges facing the ASP market today, the ASP industry is moving beyond the days of hype and producing some real success stories," said Amy Mizoras, senior analyst for IDC's Applications and Application Service Providers research. "Our data clearly shows that ASPs are alive and kicking."

IDC believes the adoption of ASP services within large companies and the formation of supplier partnerships are contributing to the market's growth.

The United States is and will remain the largest market for ASP services through 2005. However, IDC believes Western Europe represents an emerging opportunity. ASP revenues there will soar from $93 million in 2000 to more than $5.7 billion in 2005, representing a 128% CAGR. The lack of skilled IT professionals and the sophistication of service-level agreements are contributing to Western Europe's ASP market growth.

ASP services for personal and collaborative applications will also present a growing opportunity throughout 2005. According to IDC, these applications accounted for just 30% of the market in 2000, but by 2005 their combined share will increase to 45%.

Although IDC believes the ASP market's continued growth is a certainty, there is still much uncertainty about which vendors will emerge as market leaders.

"It's generally accepted that software as a service concept will become the accepted delivery model for application functionality. However what is yet to be determined is who will be the dominant suppliers of these ASP services," said Jessica Goepfert, senior analyst for IDC's ASP research program. "This means that even the ASPs who are the current market leaders cannot afford to rest on their laurels."