The lack of customization may not be a problem for a start-up that has no legacy systems and no entrenched business processes. But midsize and larger companies should never consider renting a vanilla ERP application, Greenbaum says. Unexpected downtime and other problems can result as ASPs run multiple copies of the application on the same server. But this problem should take care of itself because the next application versions will come in a multi-tenancy format. Microsoft, Oracle, SAP and other major vendors have announced forthcoming versions of their applications that will be designed to be used by ASPs.
Security can be another bugaboo.
Although the ASP market is growing rapidly, it faces serious challenges. Not the least of these is simple confusion - there are so many players offering so many different applications targeting so many different industries. Plus, if service levels begin to suffer as more customers flock to ASPs, that could damage the concept very quickly. Consolidation among the more than 150 companies in the market is inevitable in the next 18 months. It remains to be seen whether this will occur, as ISVs have good reason to feel threatened by the popularity of the ASP model.