Application service providers (ASPs) will see business nearly double annually in Europe as companies rush to outsource aspects of their IT.
According to research from IDC, total spending on ASP services is expected to grow from $258m in 2001 to $6.5bn in 2006, representing an annual growth rate of 91 per cent.
The analyst pointed out that, despite economic uncertainty impacting ASP spending, the one upside is outsourcing.
Lars Schwaner, research analyst at IDC's European software group, said: "Cost effective and flexible, outsourcing is booming.
"Not just traditional outsourcing, but new forms of outsourcing that run on shared infrastructures and pay-per-user metrics."
But Anthony Miller, an analyst at Ovum Holway, stated: "We are a long way from the shared services model. That is the nirvana of IT as a utility service.
"It is very hard to build an entire service based around a cost-per-seat model unless the only variable cost is the number of users. IT is not a generic service."
According to Schwaner, the market is broadening its appeal across all company sizes and all types of vendor selling the services. "For today's ASPs, strategy cannot remain static. It must tune into the market and adapt," he said.
Principal trends emerging this year affecting the viability of ASPs and impacting the market forecast, are an economy with the focus on costs, lengthening IT sales cycles and declining investor confidence.
Other factors include the propensity to outsource with the emphasis on costs, pushing outsourcing to the top of the corporate agenda and changing market structure, with software and services firms now pushing the ASP model.
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