IT Vendors Look to Play in the ASP Market While Avoiding Risks, IDC Says

FRAMINGHAM, MA – APRIL 16, 2001 – Many IT vendors are creating ASP migration programs, hoping to reap the rewards that working with application service providers (ASPs) can bring while limiting their risks. According to IDC, these programs are creatively designed to assist ASPs enter the market and prepare to grow their business with a minimum investment from IT vendors.

 

"As they enter these programs, ASPs need to keep in mind that their interests may not be truly aligned with the sponsoring vendor’s, since the primary purpose of these programs is for vendors to sell more products and services to them," said Nicole Weber, senior analyst at IDC. "Unlike incubators or venture capitalists, these IT firms are generally not providing capital as part of the migration program – or taking equity in lieu of fees – and thus are not tied to the participant’s financial success."

For IT vendors, the motivation of offering these programs is the hope of establishing a strong future customer base. ASPs enter the programs hoping to have their start-up needs fulfilled. However, IT vendors’ attempts to avoid risks mean they are not providing the ASPs with all the services they require.

"ASPs should pay particular attention to vendors that will help them address business problems – not just technical issues with adopting the ASP model," advised Jessica Goepfert, senior analyst with IDC’s Application Service Provider research program. "For instance, traditional software vendors entering the ASP arena probably need assistance with designing an appropriate sales force compensation package."

To attract ASPs, IDC recommends IT vendors with migration programs leverage their ability to help them develop and refine their ASP business plan and strategize appropriately. IDC also believes providing product development assistance and a testing lab will give IT vendors an advantage in obtaining ASPs’ business.

In a new bulletin titled ASP Migration Programs: How Vendors Are Accelerating Young Companies’ Move to the ASP Model (IDC #B24061), IDC examines ASP migration programs of the following companies: Allegrix, Cisco, Geneer, IBM, and Progress Software. The bulletin analyzes how well the programs address the needs of the market and discusses what type of program companies entering the ASP space should consider. To purchase this bulletin, contact Jim Nagle at 1-800-343-4952, extension 4549, or at jnagle@idc.com.

About IDC

IDC delivers dependable, high-impact insights and advice on the future of ebusiness, the Internet, and technology to help organizations make sound business decisions. IDC forecasts worldwide markets and trends and analyzes business strategies, technologies, and vendors, using a combination of rigorous primary research and in-depth competitive analysis. IDC provides global research with local content through more than 700 analysts in 43 countries worldwide. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community. Additional information can be found at http://www.idc.com.

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

 

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