IT managers who thought that application service providers (ASPs) hosting software online had died with the collapse of dot-coms need to think again - in some sectors at least.

Today, ASPs are supporting customer relationship management (CRM), sales-force automation and other back-office tasks, including accounting, taking advantage of the arrival of cheaper internet connectivity, and more scalable applications. ASPs offer the advantages of low capital outlay, fixed payment schedules and ubiquitous client access - and this time they are attracting cash-strapped IT buyers.

At the end of the 1990s, dozens of broad-brush ASPs offered applications over the internet. Most failed, partly due to buyers' fears about supplier stability, security, privacy and performance.

The new ASP leaders are more focused. Leading the way, Salesforce.com has issued a new version of its hosted sales-force automation and CRM software, raising the stakes in what is now a heavily contested sector. Salesforce has 110,000 users in over 8,000 customer sites, and its products are available in 11 languages.

The success of Salesforce has increased the profile of its rivals, most notably NetSuite, a US company that recently set up a UK operation, tweaking its software to support local needs, in particular for VAT.

NetSuite, previously NetLedger, is perhaps best known for its association with Oracle. Until March, its chairman and biggest financial backer was Oracle chief executive Larry Ellison. NetSuite offers a hosted version of the Oracle Small Business Suite as well as its own eponymous software line. NetSuite's offerings cover salesforce automation and CRM, as well as payroll, e-trade and business intelligence modules.

"You have to recognise that all countries are not the same - you can't just come in with an American offering," said Zach Nelson, NetSuite chief executive. "But the thing that applies globally is that [the ASP model] delivers radical cost savings."

Salesforce sees itself as a more focused company. "The strategy of NetSuite and Salesforce.com are divergent," said Phill Robinson, Salesforce's European vice president of marketing. "Salesforce.com provides deep functionality in CRM in particular, NetSuite focuses on a little of everything. Salesforce.com is not an ERP [enterprise resource planning tools] provider. We will provide new capabilities like contracts, orders, invoicing from a perspective of a CRM application, and link into an organisation's ERP applications - for example, by integrating with SAP."

The development of the pure ASPs is spurring some traditional enterprise software companies to re-enter the field. CRM market leader Siebel Systems this month acquired UpShot, a CRM-focused ASP, to bolster its CRM On Demand effort. "Firms are looking for a hybrid solution [and ASPs] offer reduced training and time to deployment," said Neil Morgan, Siebel European vice president of marketing. "People are trying to get more out of their investments and ASPs offer no up-front costs on servers, for example."