ASPs offer individuals or businesses access over the internet to application and related services that would otherwise have to be located in their own computers or servers. For some time, ASP services have been expected to become an important alternative, especially for smaller companies with low budgets for IT.
Gartner Group said: “The industry shift toward delivering software as a service has created a gold rush stampede of vendors entering the ASP market, most of which have no idea of what it will take to survive for the longer term.”
Today, there are 480 retail ASPs playing in the emerging $3.6 billion (£2.4 billion) industry, with more entering the market every day. According to the research, by the end of next year, 60% of these ASPs will be gone because of bankruptcy, lack of venture capital, mergers and traditional competition. By 2004, only 20 of those 480 ASPs will remain as enterprise-class, full-service retail ASPs, and less than 100 will offer successful point and product solutions, sharing what will grow into a $25.3 billion industry in 2004.
Audrey Apfel, vice president and research director at Gartner Group said:
"Today's dot.com collapses will pale in comparison to the effect that the pending ASP meltdown will have on organizations that use these ASPs. When dot.coms collapse, they implode and have little effect on their customers and other industries. The ASP consolidation will have a domino effect, affecting business systems like ERP [entertprise resource planning] and accounting systems for companies that have outsourced these functions to ASPs. Then, those failures can quickly spread the damage along supply chains.
"The failure of Pandesic is only the tip of the iceberg. We expect many other major ASP brands will fail during the coming months."
Ms Apfel added: "Many of today's ASPs make the mistake of trying to do everything, including owning the data center. We believe this is a critical mistake and not a sustainable strategy in most cases."