The worldwide application service provider (ASP) market is poised to explode, according to new figures from Datamonitor.
Revenue from ASP services will hit $5.1 billion in 2001, up from $820 million in 1999, with an average annual increase of 149 per cent , according to the report, Next Generation Carriers: Technologies and Opportunities.
The report, out this month, analyses the high-end ASP market such as database management and ERP hosting. It does not include messaging services and standard Web site hosting.
Datamonitor forecasts that the biggest revenue opportunities will be with small and medium sized enterprises (SMEs).
Companies with a turnover of between $250 million and $1 billion are predicted to make the most dramatic jump, representing $495 million of the ASP market in 1999 (about 61 per cent of market share) and increasing to $3.3 billion in 2001 (about 66 per cent).
Andrew Ponsford, senior analyst at Datamonitor said: "ASPs offer the most cost-effective route for ERP vendors to penetrate the SME market. A host of companies including next generation carriers, software vendors, IT hardware vendors and systems integrators will all benefit from the growth of this sector."
"All of these companies bring different skills to the table which are key to the success of ASPs, and the result is a high degree of co-operating and joint ventures in the industry."
He added: "Increasing bandwidth means falling margins and companies are having to move higher up the value chain - selling the ability to transmit data with applications to protect their position in the market."
Companies with a turnover in excess of $1 billion are more likely to keep complex back office IT systems in house says the report. In 2001, they will represent about 4.8 per cent of the ASP market, or $243 million.
Ponsford said: "Big companies are fairly saturated in ERP terms."
Companies with revenues below £250 million will be a slightly better prospect, representing about 30 per cent of the market by 2001, or $1.5 billion.
The report does not provide a breakdown of figures by regions, but Ponsford said: "There is as much potential for the market to take off in Europe as in the US, but it does depend on the tier of ASP. The high-end tier such as ERP is a very young market in Europe and it is a struggle to name many companies that are operating there. In the US, you have Qwest, US Internetworking and Corio."
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