Application Service Providers Will Emerge as the Newest Competitors in the Internet Service Market, IDC Says

FRAMINGHAM, MA – MAY 1, 2000 – The next battle for ecommerce projects will occur between ecommerce ASPs and Internet service firms, according to a new study released by IDC. Because of the overwhelming demand for ecommerce services, many ASPs are now offering services built around ecommerce applications – a territory that has historically belonged to Internet service firms. Although the services delivered by both types of firms differ, with each bringing its own set of distinct benefits, the risk of customer confusion is high.

"The end result of the ASP and Internet services firm ecommerce work will be similar. However, the way each firm reaches this result will be different," said Meredith Whalen, program manager for IDC's Application Service Provider and Internet Services research programs. "ASPs will not necessarily compete on an apples-to-apples basis with Internet services firms. Instead, they will position their services as an alternative to these firms. The challenge for both types of firms will be in communicating the differences between their offerings. The risk lies in ASPs and Internet service firms trying to be all things to all people. If this occurs, all parties will lose as customers will be confused."

The actual services offered by ASPs and Internet service firms differ. Internet service firms typically offer up-front consulting and design services, whereas ASPs usually don't. On the other hand, ASPs offer ongoing site operation and management services while most Internet service firms do not.

Additionally, there are differences with respect to the approach each type of company uses in developing ecommerce sites. One of the differences is the amount of customization each type of company offers. ASPs perform minimal customization while Internet service firms deliver custom projects. Duration of the projects is also different, with ASPs generally delivering on shorter project time lines than typical Internet service firms. Each type of company also has its own payment structure. Internet service firms typically require a lump sum payment. ASPs spread their fees over several years on a monthly basis.

"Both ASPs and Internet service firms will need to focus on emphasizing only the primary benefits of their respective services to the customer," Whalen said. "By doing this, they'll make it easier for customers to see the advantages that each service delivers and to select the type of service that best meets their requirements."

IDC's new report, eCommerce ASPs: How Will eCommerce Projects Become the Next Battleground for ASPs and Internet Service Firms? (IDC #B21998), analyzes ASPs' move into the Internet services space. The report includes a case history of USinternetworking's design of an ecommerce solution for Hershey Direct. The report highlights the differences between ecommerce ASP and Internet services and list the benefits of each. Additionally, the report looks at the impact ASPs will have on Internet service firms. To order a copy of the report, contact Cheryl Toffel at 1-800-343-4952, ext. 4389 or at ctoffel@idc.com.

About IDC

IDC delivers dependable, relevant, and high-impact data and insight on information technology to help organizations make sound business and technology decisions. IDC forecasts worldwide IT markets and technology trends and analyzes IT products and vendors, using a combination of rigorous primary research and in-depth competitive analysis. IDC is committed to providing global research with local content through more than 500 analysts in 43 countries worldwide. IDC's customers comprise the world's leading IT suppliers, IT organizations, and the financial community. Additional information can be found at http://www.idc.com.

IDC is a division of International Data Group, the world's leading IT media, research, and exposition company.

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