ASPs Represent Potential $1 Billion Market Opportunity for Infrastructure Providers.

Business Editors/High Tech Writers

SCOTTSDALE, Ariz.--(BUSINESS WIRE)--April 17, 2000

U.S. based Application Service Providers (ASPs) are expected to spend nearly $1 billion on infrastructure in 2000 to support their growing application services businesses, according to Cahners In-Stat Group, a high-tech market research firm.

In-Stat finds that these companies are optimistic about their future growth prospects, expecting their current customer base to increase from an average of 25 customers per company in 1999 to nearly 170 in 2000. Despite this optimism, ASPs require a great deal of guidance in building and managing highly scalable and reliable IT infrastructures.

Currently, ASPs are offering more than just access to applications over the Internet, with many offering core IT infrastructure services (management, monitoring, support and troubleshooting) and high-speed connectivity.

"These firms' desire to surround their customers with so many services may present challenges when building their core competencies and IT platforms," stated Kneko Burney, director of markets and computing at In-Stat.

"This clearly indicates that most ASPs are not at all focused on application delivery and/or may still be unsure of what their customers require from them. Further, many of these companies may feel compelled to offer so many services to ensure reliable application delivery."

For ASPs to succeed, these companies will need to build infrastructures optimized for partnering, allowing them to specialize on applications development/optimization for the web and customer support/management.

By focusing on these roles in the "applications delivery value chain," service providers can partner effectively to quickly grow their businesses without sacrificing quality of service or incurring significant infrastructure costs.

In-Stat believes infrastructure providers are in a key position to facilitate this process, as can be seen with Cisco's Hosted Applications Initiative and AT&T's ASP EcoSystem.

A recent In-Stat report finds the following:

-- The number of ASPs has grown significantly in the last year,

from roughly 70 in 1999 to more than 100 in the first quarter

of 2000.

-- The efforts of infrastructure providers to target this segment

has been paying off with Cisco and Sun garnering significant

market share, followed by Microsoft, IBM and Oracle.

-- According to U.S. based ASPs, the primary challenges facing

application services businesses are the impact of additional

customers on infrastructure, the need to expand their

portfolio of services to customers, security and the adoption

of broadband.

The report "Online Computing Infrastructure: Enabling Technologies in the Emerging ASP Industry" (ASP0001MC) focuses on the emerging and evolving ASP industry. The report focuses on the infrastructure requirements of these companies and their expectations for the future.

The report also details these companies' current business models and their preferred infrastructure vendors. To purchase this report or for more information, please contact Matt Woods at 617/630-2139 or [e-mail] or visit http://www.instat.com/catalog/cat-mc-asp.htm.

Cahners In-Stat Group (http://www.instat.com) covers the full spectrum of digital communications research from vendor to end-user, providing the analysis and perspective that allows technology vendors and service providers worldwide to make more informed business decisions.