ASPs procure software licenses for customers and provide services such as support, applications monitoring, and upgrades. Using ASPs, companies pay periodic subscription fees rather than make huge up-front capital investments for applications. ASPs are especially attractive to smaller companies that don't have the IT budget or staff to invest in their own large-scale implementations. Business OnLine also provides full-time support and maintenance services. Craig Brown, CIO at PointClick.
Analysts expect ASPs to become increasingly attractive to larger companies as well.
Runyan says there's no typical pricing arrangement for an ASP deal, partly because it's a relatively new concept to both providers and customers. Many of the big software companies will launch ASP offerings over the next few years, Runyan says, but it will be a difficult transition. These companies are forgoing a lot of up-front revenue, but this is something customers are requiring. Microsoft is experimenting with subscription-based licenses for the ASP market. The ASPs then charge their customers slight markups to rent the applications and for application administration.