More Than 75% of ASP Customers Will Evaluate Their Services Provider Based on ROI, According to IDC

FRAMINGHAM, MA – MAY 6, 2002 – Companies delivering applications software as a hosted service will be judged based on their ability to help their customers achieve a high return on their investment (ROI), according to IDC. The age-old concept of ROI, forgotten during the technology spending spree of the 1990s, is now back with a vengeance.

 

"Technology projects generating clear and substantiated economic returns will more likely receive funding, while those lacking such justification will be delayed or entirely passed over," said Amy Mizoras, program manager for IDC's ASP and Application Management Services program. "Application Service Provider (ASP) sales representatives who can successfully articulate the potential financial returns of their application service will elevate the discussion and differentiate their offering. Additionally, companies who invest in ROI will also see long-term success and be able to manage their technology assets and capital successfully. "

Any company contemplating outsourcing their applications to an ASP should seek reference sites with a similar implementation approach first — this is one of the factors that seems to have the greatest impact on ROI. Furthermore, even if a project generates a high ROI, it still may not be a wise investment if the risk associated with the project cash flows is excessively high. Prospects must understand the challenges that lie ahead and recognize the vendors who are leading the charge in delivery of software as a service.

According to IDC, the following steps can help build an economic justification for a technology decision such as using an ASP:

· Establish the Imperative

· Establish Cause and Effect

· Determine the Benefits

· Estimated Incremental Costs

· Calculate the Impact on After-Tax Cash Flows

· Generate the Required Financial Metrics

IDC's recently published document, Measuring the Business Benefits of Software as a Service: ROI Primer for Decision Makers (IDC# 26965) provides essential tools for technology decision-makers to build an integrated business case that applies financial metrics to an ASP decision. A complementary document describes how ASPs can fulfill the wish list of financial executives. This recently published document, Understanding the Needs of the CFO: Selling Software as a Service to Financial Executives, (IDC#27067), discusses the key challenges and motivations of financially-minded decision makers.

To purchase this document, call IDC's volume sales hotline at 508-988-7988 or email ctoffel@idc.com.

About IDC

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and ebusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies and the financial community. Additional information can be found at www.idc.com.

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

 

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