Market Opportunities, Standardisation Challenges: Asian ASP Industry Grows Through Maturation Phase
Madanmohan Rao reports from the ASP Asia Summit in Singapore
The outsourced application service provider (ASP) model has been touted for quite a few years as the perfect way of managing software and business services in the Internet Age, but the ASP industry is only now beginning to mature and take root in the Asia Pacific region.
ASP players, vendors, infrastructure companies and consultancy firms from across the region gathered recently in Singapore for the ASP Asia 2001 summit, hosted by Envision International and supported by the Infocomm Development Authority of Singapore.
"The Internet has already broken lots of barriers in Asia, in terms of information access and e-commerce growth. As de-regulation and improved bandwidth continue to spread across the region, managed networks and increasing local service capacities will boost the ASP market," said Michael Kelly, CTO of the XA Alliance, a pan-Asian ASP.
The global ASP market is projected to reach US$14.3 billion by 2003 (according to Forrester Research) and US$25.3 billion in 2004 (according to Gartner). Hundreds of pure-play ASPs are entering the market today, but IDC predicts major consolidation in the market in the next few years.
Within the "apps on tap" stack, one-stop shop and niche players can choose to focus on one or more of their core competency areas - such as network services, data hosting, site management, office automation, accounting, HR, payroll, supply chain integration, enterprise messaging services, content streaming, financial data management, payment solutions, customer support services, and other back-office applications and professional services.
Japan, Australia, Korea and Taiwan account for the largest share of the regional ASP market -- but by 2005 China will overtake Korea and Taiwan, according to Yeo See Kiat, general manager at ASP player Envision International. He cited UBS Warburg research which pegs application outsourcing revenues in the Asia Pacific region at US$579 million by 2004.
Theoretically, the current economic downturn should prompt a desire for companies to return to core focus areas and outsource other applications to expert players - but industry standards for the ASP sector have yet to be solidified, in areas like security, data integrity, and quality of service (QoS) definitions via service level agreements (SLAs).
And the dotcom bust is unfortunately casting some ASP players also in a poor light, said Roger Poh, VP at DCS Solutions, whose outsourced solution offerings include Web-based support for trade show organisers. "ASPs should not overlook accountability, client RoI metrics, and quality guarantees," he advised.
For ASPs to succeed, they need to have strong focus, channel partners, and effective customer management skills, said Ken Yee, ASP Business Development manager at IBM Asia Pacific.
IBM has forged alliances with Citrix, Cisco and Intel for ASP services like managed hosting and e-marketplaces, and provides integrated e-procurement services for clients like the 25 hotels of the Rydges group.
"ASPs should assume longer sell cycles until end-users are more aware of and comfortable with the ASP model," advised Yee.
Other notable ASP players in the Asia Pacific region include iEmagine (for enterprise solutions like online recruiting and customer surveys), Cavillon (applications for SMEs), Chariot (Australian ISP which provides English language e-learning solutions for schools in China and Brunei), Telstra (e-learning services based on Lotus LearningSpace), Ship'n'Track (shipping and tracking applications), and Dacom (Korean ISP with Intranet and CRM services for SMEs).
The growth of peer-to-peer interactivity, m-commerce, and open digital marketplaces is also increasing opportunities for ASPs, said Kriss Channe, principal consultant at Envision International. For instance, Dutch ISP KPN and e-business solutions provider iPlanet offer a Web-based supply chain management service called NetXchange for SMEs in the Benelux countries (Belgium, Netherlands, Luxembourg).
One service area which is attracting increasing attention is network security, especially in the wake of virus attacks on an international scale; companies like McAfee and Symantec are key players in Internet security.
Guarding against information theft, network sabotage, Internet eavesdropping, denial of service attacks, malicious code, and unauthorized insider access are key concerns in the Internet Age, said Tim Hartman, systems engineer director at Symantec Asia Pacific.
PriceWaterhouse Coopers predicts that dealing with the damage caused by computer viruses will cost a staggering US$1.6 trillion worldwide this year. Virus and hacker attacks are targeting individual users, corporates and government Web sites.
"As a result, large businesses will require their e-partners to comply with security operating regulations to ensure minimum levels of security. This will lead to a growth in distributed firewall solutions and intrusion detection services," said Hartman.
Companies must continuously assess and manage e-security solutions and protect their online assets via security audits. "Security is a cycle and not an event," Hartman said. Key mistakes he observes in the way companies implement security include connecting systems to the Net with default passwords, using un-encrypted protocols like telnet, and changing passwords on the phone.
Security and trust are key foundations of any application that involves financial transactions. Guarding against identity theft and online fraud via digital certificates, risk management, and inspection services will help increase consumer confidence in e-business, said James Kang, managing director for Asia Pacific operations at TrustMarque, an ASP for secure e-tendering and e-procurement solutions.
Online tendering forms a major plank of the ambitious e-commerce goals of the U.K. government, with 100 per cent of government tenders expected to be received online by the end of 2002. The E.U. government procurement market is estimated at US$100 billion, and online tendering in the U.K. is expected to be worth US$86 million by 2005.
In terms of geographic distribution, ASPs are well suited to countries with excellent datacom and IT infrastructure, and requisite application skills.
"Singapore is very well positioned in Asia in this regard thanks to its excellent infrastructure and service orientation, but the ASP concept still needs further evangelism and energy to take root," said Paul Waide, consultant at Strategic Intelligence Advisory Services.
The 'early adopter' vertical markets for ASP vendors - such as finance, IT and high tech manufacturing - are well represented in Singapore. Local ASP players include iAspire, StarBiz, JustLogin, iCentric and Ecnet.
The ASP market in much of Asia will be dominated by MNCs and large local players for the next few years. "SME customers are too labour-intensive for working out complex ASP agreements," said Waide.
Countries like Singapore are also eyeing increasing diffusion of the ASP model within the government sector, but cross-agency bureaucracy inhibits smooth market stimulation.
Waide predicted that the ASP market in Singapore will grow from US$143 million today to US$1.3 billion by 2004, accounting for an increasing share of IT spend from 2 per cent today to 12 per cent in 2004.
To collectively grow the ASP market, Singapore ASPs have banded together to form the ASP Alliance Chapter (www.ASP-alliance.org.sg ) of the IT Federation. There are over a hundred ASPs in Singapore offering workflow and network services to industries like manufacturing, logistics, education, retail, finance, and transportation.
"We have come up with an ASP Code of Practice, and are standardizing the terminology used in SLAs. We are also forming alliances with ASP industry associations in Japan, Australia and Taiwan. We are open to similar alliances in India, because alliances will help grow the ASP industry across the region," said Leong Han Kong, chairman of the ASP Alliance Chapter in Singapore.
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