December 19, 2000, 1:06 PM — Why buy when you can rent? Sounds like an ad for a car leasing company, doesn't it? Well, get ready for the "rent vs. buy" argument in your IT shop because application service providers (ASP) are coming on strong.
ASPs offer a new twist on outsourcing: Instead of outsourcing all your IT functions, you outsource your application hosting. Your ASP operates a data center, and hosts and manages your applications, which you access via the Internet. ASPs are becoming all the rage, especially for small to midsize companies with minimal IT departments and budgets.
In fact, the ASP computing model just might be the great equalizer between big and small companies. For years, small companies were at a disadvantage because they couldn't afford million-dollar applications, such as enterprise resource planning or data warehousing. Now a small company can turn to an ASP to rent access to the same applications the big companies run.
Application hosting isn't strictly for the data center, either. It's about to play on a desktop device near you. Recently, Sun announced big plans for the ASP market involving the office productivity software Sun is acquiring through its purchase of Star Division Software. Sun intends to make its StarOffice desktop applications available free over the Internet. All a user needs to run, say, word processing, is a Web browser and access to the Internet.
Not to be outdone, Microsoft has announced a strategy to host access to Microsoft Office over the Internet. While specifics of this offering aren't clear yet, the company is unlikely to give away its cash cow. Instead, it will fight the battle on the virtue of features and compatibility, hoping that people will be willing to pay to rent access to Office over the Web.
Though the ASP model is in its infancy, it has a lot of support behind it. Membership in the ASP Industry Consortium, founded in May by industry heavyweights such as IBM, Compaq, AT&T, Cisco and Sun, is growing by leaps and bounds. The potential ASP market is huge, and all the players want a hand in educating the marketplace on their particular value propositions.
Just what are the benefits of renting applications? Well, for starters, your company can save money on capital IT investments. Instead of you buying, supporting and managing the servers, network gear and storage systems, the ASP buys these things, and leverages them across multiple customers. You pay monthly rent for the systems and applications you need, helping to make your IT costs more predictable and hopefully more manageable as you pay only for what you need. As a bonus, when the host server needs an upgrade, it's not your hassle.