Application Service Providers (ASPs) - Guide to Cloud Computing for Business and Technology Managers - page 231

In the simplest case, the application is merely hosted for the customer.
AO typically does not include responsibility for the underlying business
processes or functions; a more comprehensive engagement like Business
Processing Outsourcing (BPO) may include operations assessment, pro-
cess improvement, and change management services. When standard
applications are being outsourced, the level of staff and asset transfer to
this facility may be minimal and the application itself may be provided
via a license or lease agreement included in the overall service agreement.
On the other hand, for more customized applications, the contract may
include the transfer of people and assets associated with the outsourced
application.
11.1 Enterprise Application Service Providers (ASPs)
The basic idea behind the Application Service Provider (ASP) computing
model is that a provider hosts and manages applications that users can access
over networks like the Internet. This is the final step toward software mani-
festing as a service. The market is evolving toward a state where companies
will pay for the software as services on a usage basis, as they do tradition-
ally with utility services like electricity and gas. This market was pioneered
in 1998 by start-ups such as Breakaway Solutions, USinternetworking, and
Corio. The ASP model typically involves lease-to-own options on software. It
entails renting access at a low rate to the functionality of ERPs, CRMs, SCMs,
etc., over the Internet. In contrast, traditional outsourcing requires upfront
purchase of software licenses and often charges large fees for contracted
services. Recently, however, many ASPs are also experimenting with other
pricing models that involve charges for initial customization, migration, and
integration, plus a flat monthly fee depending on the use of functionality
and services, or even a percentage of the customer's revenue. The ASP ser-
vices could range from infrastructure, colocation, cohosting, dedicated host-
ing right to even hosted businesses such as hosted buying services or hosted
customer relationship management services.
The level of the packaged application could vary from discrete applications
(like web-based transaction application for conducting a commerce-based
transaction) to environment applications (like ERP and CRM). The level of
service provided by an ASP can range from simple hosting of application(s)
to managing the application environment. Hosting is a standardized service
that is based on a high-volume and low-cost business model in which appli-
cations are hosted at a site and accessed remotely. Managing an application
environment goes beyond simple hosting and may include upfront consult-
ing, customization, and extensions of the application and ongoing applica-
tion technical support.