Application Service Provider

An application service provider (ASP) is a business providing computer-based services to customers over a network; such as access to a particular software application (such as customer relationship management) using a standard protocol (such as HTTP).

The need for ASPs has evolved from the increasing costs of specialized software that have far exceeded the price range of small to medium-sized businesses. As well, the growing complexities of software have led to huge costs in distributing the software to end-users. Through ASPs, the complexities and costs of such software can be cut down. In addition, the issues of upgrading have been eliminated from the end-firm by placing the onus on the ASP to maintain up-to-date services, 24 x 7 technical support, physical and electronic security and in-built support for business continuity and flexible working.

The importance of this marketplace is reflected by its size. As of early 2003^[update], estimates of the United States market ranged from 1.5 to 4 billion dollars. Clients for ASP services include businesses, government organizations, non-profits, and membership organizations.

There are several forms of ASP business. These are:

Some analysts identify a volume ASP as a fifth type. This is basically a specialist ASP that offers a low cost packaged solution via their own website. PayPal was an instance of this type, and their volume was one way to lower the unit cost of each transaction.

In addition to these types, some large multi-line companies (such as HP and IBM), use ASP concepts as a particular business model that supports some specific customers.

The application software resides on the vendor's system and is accessed by users through a web browser using HTML or by special purpose client software provided by the vendor. Custom client software can also interface to these systems through XML APIs. These APIs can also be used where integration with in-house systems is required. ASPs may or may not use multitenancy in the deployment of software to clients; some ASPs offer an instance or license to each customer (for example using Virtualization), some deploy in a single instance multi-tenant access mode, now more frequently referred to as "SaaS".

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