Once upon a time, when computers were so expensive that not all companies could afford them, most of the processing was performed by specialized firms that rented computer time and services. Some of these organizations have a long history of providing such services; for instance, ADP. The development of Internet and Web-based applications has offered these firms a new infrastructure to offer their services. These companies are known as Applications Services Providers (ASPs). ASPs provide mainly software applications for the basic business functions of a company: human resources, accounting or customer relations, but there are also some organizations targeting the software development domain.
The ASP model was presented at the end of last century as a major trend in the software market. This situation is evident when you research on the Net about ASPs. You will find a lot of material dated from the years 2000 and 2001 with impressive growth rate predictions from the traditional research firms. In 1999, Dataquest predicted that ASP revenues would top $22 billion by 2003. In 2001, the Gartner Group estimated ASP revenues at $2.1 billion and predicted that this number would climb to $7.3 billion in 2003. These were the halcyon days in the business-to-business (B2B) segment, before the burst of the Internet bubble reduced the anticipated growth rate. Many companies operating in this area have been watched closely as their survival capability was questioned.
Even if there have been some costly failures, (Pandesic-a joint venture between Intel and SAP), this market is still alive. According to IDC, companies spent more than $2.3 billion in 2002 for software delivered as services. Selling software as services is still an interesting idea for vendors that prefer a continuous revenue stream to variable license deals. Software vendors like Oracle or SAP and systems integrators like EDS or IBM are also playing a larger role in this market. Siebel recently bought hosted CRM vendor UpShot for $70 million, even though it has its own service, Siebel CRM OnDemand, in association with IBM. Peoplesoft recently added to its hosted software offerings the applications acquired through JD Edwards buyout. The company has about 60 customers using its hosted services.
In a worldwide study of the ASP Industry Consortium conducted in 2001, only 8% of the respondents were using an ASP application. Other surveys performed in 2000 and 2001 showed that between 26% and 31% of US businesses were using an ASP. The applications mostly used in 2001 were communication (e-mail, groupware) 34%, finance 25%, e-commerce (21%) and CRM (19%). In 2000, 90% of ASP users said that the service level agreement provided by their suppliers meets their needs.
In the business functions market, ASPs can offer third-party "branded" solutions like Oracle, Peoplesoft or SAP products, but in the software development segment, companies offer mainly their own solutions. Some tools are provided only on a web-hosted basis. Other companies have developed web-based tools and offer hosting. Hosting is either managed by the tool vendor or by another firm specializing in web hosting. There are commercial services offered on a monthly/project/user fee, but you will also find some services available for free, either completely or on a limited functionality basis. In this article we will mainly focus on companies that offer externally hosted software development tools on a commercial basis.
ASP tools for software development target current functions that request collaboration or centralization of data, like project management and bug tracking. We can expect that in the near future more external services could be available for activities like code validation, code refactoring or language translation. These are the kinds of activities than could use a tool on a rental basis.