Total spending on ASP services in Europe is likely to grow from US$258 million in 2001 to US$6.5 billion in 2006, representing a compound annual growth rate of 91%, according to a report from IDC.
Although the economic uncertainty in the region continues to impact application service provider (ASP) spending, there is one upside - outsourcing. According to Lars Schwaner, research analyst with IDC's European Software Group, cost effective and flexible outsourcing is booming. And it is not just traditional outsourcing but new forms of outsourcing that run on shared infrastructures and pay-per-user metrics.
IDC has noted that ASPs are now tying value propositions with outsourcing: The 'outsourcing giants' are borrowing from ASPs, meaning that the term ASP is in no danger of dying. As Schwaner explains, "The market continues to develop, preserving the model's central tenets (one-to-many, network delivery, service fee based, third party ownership, and centralisation). It broadens its appeal across all company sizes and all types of vendors. For today's ASPs, strategy cannot remain static. It must tune into the market and adapt."
Principal trends
The principal trends emerging in 2001 affecting the viability of ASPs and impacting the market forecast included:
· The economy - the general focus on costs has lengthened IT sales cycles.
· Changing market structure - software and services firms now push ASP.
· Propensity to outsource - the emphasis on cost has pushed outsourcing to the top of the corporate agenda.
· Declining investor confidence - the collapse of the US venture funded pure play obscures the market reality in Europe.
IDC's recently published report, ASP Industry Review and Forecast 2001, provides Western European ASP spending forecasts from 2001 up to 2006. The forecast is split by software type, country and company size. To provide better context for the forecasts, the report identifies the macro-economic factors, technology developments, market ecosystem activities and other market characteristics as they relate to the European ASP industry.
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