What is an ASP?

1. What is an ASP? Jessica Goepfert Senior Research Analyst,ASP Program jgoepfert@idc.comhttp://www.idc.com

2. Agenda • An ASP Defined • The ASP Landscape • What Lessons Have Customers Learned? • Next Steps: Advice for Procuring an ASP Service

3. What IDC ConsidersASP Services ASPs provide a contractual service offering to deploy, host, manage, and provide access to an application from a centrally managed facility. Defining Characteristics: • Applications-centric • Applications License Ownership • One-to-Many • Responsible for delivering service

4. ASP Service Deploy Integrate Access Train Manage Support What ASP Customers See

5. Services Networking ASP Application What ASP Customers Don’t See Services Sales Expertise Project Management Application Integration Application Management Customer Support Data Center WAN Infrastructure Managed Services Network Monitoring Network Security License Administration Application Sales ExpertiseProduct EnhancementsApplication TrainingApplication Support

6. What is Driving (and inhibiting) ASP Market Growth?

7. Why ASP Services Now? • Shorter Application Cycles • Locating and Retaining Skilled IT Staff • The Internet • Network Improvements

8. $7.8 B $300 M ASP Market Forecast $M 8,000 • 92% CAGR • Notes: • Contract value multiples of recognized revenue • Does not include “free” services 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 1999 2000 2001 2002 2003 2004

9. ASP Growth Inhibitors Technology e.g., • Bandwidth • Application architecture • Service management • Buyer Issues • e.g., • Awareness/buy-in • Internal Infrastructure • Integration • Supplier Issues • e.g., • Business model changes • Channel conflict • Disintermediation

10. Who are the ASP market Participants?

11. Service Firms Network Providers “Pure Plays” Infrastructure & Tools Software Vendors Hardware Vendors • Server • Network • Storage Applications Vendors ASP Market Participants Channel ASP ASP ASP

12. Analytical/DW Vertical Enterprise ASPs ERM CRM Level of Application Complexity Commerce Collaborative ASPs Collaborative Personal ASPs Personal Core Services Managed Services ExtendedServices Extent of ASP Services Provided The ASP Landscape Source: IDC, 2000

13. How ASPs are Selling their Services 100% 90% 90% 81% 80% How are your ASP services sold? N = 46 (multiple responses accepted) 70% 60% 50% 33% 40% 30% 14% 20% 10% 0% Direct Sales Partner Sales Force Reseller Other How ASPs Sell Services Source: IDC’s ASP Leadership Study, 2000

14. 81% of ASPs have a strategic focus on select industries Source: IDC’s ASP Leadership Study, 2000 Most ASPs Have Industry Focus

15. How the Majority of Customers Access Their Applications Internet 27% Dedicated Lease Lines and VPN 73% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% How do the majority of your customers access their application (Internet, dedicated lease lines, VPN)?N = 41 (multiple responses accepted) Not Necessarily Accessed Over the Internet Source: IDC’s ASP Leadership Study, 2000

16. 3-year contracts Range from 12 months to 60 months Up-front implementation fee Due in full at time of implementation Some ASPs have a minimum start-up fee Flat monthly application management fee based on number of users Expect to move to transaction based over time Prices range from $5 to $900 per user/month Estimate value of Enterprise ASP contracts range from $400,000 to $1 million over a three-year period ASP Contracts and Pricing

17. Implementations in weeks or months Consist of app configuration, data migration, training Little to no site preparation on customer part Ability to bring apps in house if end service 75% of ASPs in IDC Leadership Study permit this Customer support Hours vary - - not all 7x 24 Often provided by app partner along with ASP ASP Operations

18. Who Is Buying ASP Services Today?

19. Profile of Early ASP Adopters • Age • Often young; under three years • Size • Small to medium-sized; Ready for rapid growth • Industries • Business services; financial services, banking, and insurance; communications and media; and high-tech manufacturing • Decision Maker • Often business decision maker • However, IT is not left out of the discussion

20. ASP Services Purchased • Enterprise ASP Services • Function of the ASP suppliers • $207 million out of $300 million market in 1999 • Applications • Most customers only purchased service for one applications • ERP most popular in 1999

21. ASP Benefits Perceived • Flexible IT model under which new users can be added with a simple phone call • Provides rapid access to new application environments • Addresses the challenge of locating and retaining IT personnel

22. What to Look for in an ASP Core competency Variety of applications offered Integration of application environments Delivery of service Strength of partnerships References ü ü ü ü ü ü

23. Ask the Right Questions SLA details ü Number and functional allocation of personnel ü On-site requirements (people, systems) ü How handle changing requirements ü Options for the future ü

24. Lessons Learned from ASP Customers Jessica Goepfert Senior Research Analyst,ASP Program jgoepfert@idc.comhttp://www.idc.com