US BUSINESSES PREPARED TO OUTSOURCE APPLICATIONS

Under pressure to execute technology-enabled business strategies, US businesses show a willingness to outsource applications according to Cahners In-Stat Group. The high-tech market research firm has found that although these businesses may outsource applications in 2000, many of them, particularly those with 100+ employees, are not likely to turn to Application Service Providers (ASPs) and will, instead, rely on more established technology providers. In-Stat believes these results reflect the fact that US firms are dealing with an array of IT issues, varying by size of business. Given this, ASP's key value proposition: providing access to applications over the Web quickly and cost effectively, does not necessarily solve customers' problems, particularly those of small businesses. In-Stat predicts that ASPs will need to play a part in the "ASP value chain" to address customers' needs over time.

"This research clarifies the role of ASPs in serving evolving business customers: providing application-specific expertise and support. Larger firms like telcos, major integrators and systems hardware vendors have brand, reputation and access to customers. ASPs have expertise with the application and can support it," says Kneko Burney, Director of In-Stat eBusiness Infrastructure & Services. Burney explains that many of the potential customers for application services want much more than hosted applications, requiring end-to-end service, including business process expertise, on-going IT support and strategic guidance in leveraging the power of the Internet. "Any firm can host applications on the Internet, however, it takes an ASP's focus to help customers select and leverage those applications properly. In parallel, it takes massive resources to be in a position to surround customers with an array of interconnected technology services. The major players have this, but often lack the applications expertise." Burney indicates these two groups need to formally partner, with the established providers aggregating and managing ASP services, though some approaches may vary. "Without this partnering, the application services market may never really take off."

In-Stat has also found that:

• Approximately 40% of recent survey respondents employing more than 100 employees said they were considering some type of application outsourcing in 2000. However, only 16% of this group indicated they would choose an ASP for these services.
• In comparison, roughly 30% of survey respondents employing less than 100 employees said they were considering some type of application outsourcing in 2000, with more than 40% of these indicating they would choose an ASP
• Regarding the most challenging IT issues, smaller firms were most concerned about "staying competitive" along with "staffing in the IT department," while larger firms were grappling with the "staffing issues" and "systems management."

The report, Online Computing Infrastructure: Considering the Customer -- Medium & Enterprise Businesses (#ASP0002LB) details IT issues facing medium and enterprise businesses and examines these businesses' propensity to adopt application services, from which types of companies and using what selection criteria. Profiles of key ASPs targeting the corporate market are included. This report also provides detail on respondent's IT infrastructure, primarily as it relates to servers and operating systems. The report price is $4995 USD. For additional information, please visit www.instat.com/catalog/cat-mc-asp.htm - asp0002lb. The report, Online Computing Infrastructure: Considering the Customer -- Small & SOHO Businesses (#ASP0003SB) details IT issues facing small and SOHO businesses in the US. This report also provides detail on respondents IT infrastructure, primarily as it relates to servers and operating systems. Profiles of key ASPs targeting small companies are included. The report price is $4995 USD. For additional information, please visit www.instat.com/catalog/cat-mc-asp.htm - asp0003sb. To purchase reports, please call Matt Woods at 617-630-2139, mwoods@instat.com.

Cahners In-Stat Group 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.

Contact Kirsten Skedd, Marketing Manager, kskedd@instat.com, 480-609-4534.