Markets which have good infrastructure and an educated user base are giving enough business to ASPs (application service providers) to make the market sector viable in the Asia-Pacific (excluding Japan) region, according to market analyst International Data Corp. (IDC).
Research has shown that the ASP model is inherently powerful, according to David Yew, program manager of IDC's Asia-Pacific IT services research group.
According to IDC, benefits to end users include:
-- immediate access to best-of-breed applications with a low capital investment in technology.
-- significant reduction in ongoing costs of upgrades.
-- costs associated with retaining skilled IT human resources are significantly reduced.
-- access, availability and performance are guaranteed.
-- cash outflows are predictable.
In a survey of 60 ASPs in 13 Asia-Pacific countries, IDC found that because of the expense of providing the necessary sophisticated infrastructure, 65 per cent of ASPs partner with data centers to deliver the services, compared with 25 per cent of ASPs who own their own data centers. The remaining 10 per cent use a hybrid model, using data center partners to ensure scalability but utilizing their own facilities for testing and premium hosting of select customer solutions.
The four key markets in the region for ASPs are Singapore, Malaysia, Hong Kong and Australia, according to IDC. The economic slowdown will further encourage end users to outsource to ASPs over the 2002 to 2004 period, and most ASPs are looking at regional expansion to capitalise on those opportunities, the survey showed.
As customers become more sophisticated, ASPs will need to focus on particular vertical industries in order to provide the level of service required. Already, 77 per cent of ASPs surveyed said they had targeted specific industries for their businesses, of which retail, discrete manufacturing and financial services are currently the most lucrative, according to the IDC survey.
The main inhibitors to growth of the ASP model in Asia-Pacific are poor infrastructure in some regions, lack of end-user awareness; cuts in IT budgets caused by the economic slowdown and continuing security issues, IDC said.
IDC is a subsidiary of International Data Group Inc., the parent company of IDG News Service.