An Application Service Provider (ASP) presents an application on the World Wide Web and allows access to that application based on a monthly fee for use.

This differs from a standard Client Server (CS) application for the following reasons:

• An ASP application can reside anywhere in the world whereas the CS application resides on the end user’s premises.
• An ASP application costs the end user only the monthly subscription fee. A CS application has initial capital costs such as licences and equipment, deployment costs as well as ongoing systems support costs and upgrades.
• An ASP application means that risk associated with a poor technology investment is reduced.

Return on investment is consistently used as a primary means of determining if a particular investment should be pursued.

In 2001 IDC conducted a study called The Financial Impact of ASPs. The study was conducted on 54 organisations that had successfully implemented and utilised ASP delivered application services. The study was launched as a result of previous research outlining that greater than 80% of prospective ASP buyers stipulated that ROI would be the key indicator used to evaluate ASPs.

The sample was selected to give a balanced cross section of size, industry and geography and companies were required to meet the following criteria:

• Must have the ASP service implemented
• Must have pre and post implementation information to aid a cost/benefit analysis
• Must be willing to reveal confidential cost and benefit information

The following figures were key outcomes of the study:

• 56% of the organisations surveyed experienced an ROI of greater than 100%
• 12% of the organisations surveyed reported ROI returns greater than 1000%

The average payback for an outsourced solution was 1.33 years on an average total investment of US$4.2 million. The average initial investment was US$399,000.

On average the ASP implementations in the sample produced a 5-year ROI of 404% and almost half of the organisations in the study experienced break-even within six months.

These figures are too strong to ignore and as mindsets change and companies come around to the idea that a solution does not need to be contained within the bounds of the corporate intranet to be secure, we will see even greater take-up rates for ASP based solutions.

The accompanying chart (Figure 1) represents the key finding of the study, namely the percentage of companies studied that reported the ROI on the ASP implementation to be between certain percentile bands.

The IDC report also points out that whilst ROI is an excellent measurable indicator of project success the soft / qualitative benefits can not be ignored. Many of the studies respondents reported the following intangible benefits of their ASP implementation:

• Peace of mind
• Ability to focus on core business
• Better work environment

Source: IDC