ASP’s have experienced their up and downs for the last decade. And today, the market for ASP’s has stabilized somewhat. Left in this arena are some major big names and a handful of smaller players.
Unless you are one of the big players (e.g. Verisign, CA, etc.), I would like to argue that the living space for the ASP’s is all but rosy. There are significant risks for the smaller players.
Some of the key risks lie as follows:
- Security: ASP’s have always been high-value targets for hackers. Nothing would be more exciting for these hackers to target just a few ASP’s and bring down hundreds of businesses along with them. And for smaller ASP’s, there simply is not enough resource for them to devote to security measures. The security for most small ASP’s is poor and can not effectively defend themselves from dedicated attacks.
- Scalability: Similar to the above observation, for any ASP’s to succeed, they have to be able to scale to a reasonable size of customer base. This of course requires significant planning ahead for both the infrastructure and the software, which is difficult for small ASP’s to handle. Any service provider (or any company that has a significant web-based customer presence) must have a sound infrastructure and highly-scalable software platform in order to succeed.
- Maintenance and programmability: Having as many customers as possible is always a goal of ASP’s, large or small. The service an ASP provides has to be generic enough for it to maintain. The choice of what kind of service can be best suited with the ASP model is almost the key. And, it seems that this choice can be very limited.
- From the consumer’s perspective: Last but not least, from the stand point of the direct user of the service (e.g. other companies), ASP could be a tough sell. Are there any core business requirements that can’t be fulfilled in-house and must be purchased from and further more hosted by a third party? What are the implications? The implication could be confusing for the end-users. Imaging that you are visiting one company’s website and clicked on a link and realized that the url changed from that company’s that you are supposed to do business with to something different. Given the risks these days with web-based applications, the end-user might wonder if the company’s website is compromised and thus stop his or her intended activity.
So where would these observations lead to ASP’s future? In my opinion, ASP’s main realm would be in key services that a typical company along could not develop (e.g. credit card authorization) and not in applications.
