Gartner's Dataquest Forecasts Worldwide ASP Market to Surpass $25 Billion in 2004

Business Wire, August 9, 2000

Business/Technology Editors

SAN JOSE, Calif.--(BUSINESS WIRE)--August 9, 2000

The worldwide application service provider (ASP) industry is poised for explosive growth, as the market is forecast to grow from $1 billion in 1999 to more than $25.3 billion by 2004, according to Dataquest Inc., a unit of Gartner Group, Inc. (NYSE: IT and ITB). The worldwide ASP market is on pace to reach $3.6 billion in 2000.

"The ASP market represents a major computing revolution with the power to dramatically redraw today's IT ecosystem based on the delivery of application services over a network," said Ben Pring, principal analyst for Dataquest's Application Services Worldwide program. "Software licensing models, application and networking architectures, and vendor strategies will all be impacted greatly. Eventually, business services wrapped around application functionality will be most useful to customers."

Within the ASP market, there is the emergence of a new architecture for "Web native software" -- software that exists purely on the Internet and enables the delivery of business services.

"For enterprises of all sizes, the opportunity to secure Tier 1 application functionality while forgoing significant infrastructure, software and personnel investment is alluring, as is the lower total cost of ownership, which is estimated between 30 percent and 70 percent, depending on the application and the services provided," Mr. Pring said.

The worldwide ASP market has been led by the North America region, but the market will become much more global in the next few years. In 1999, North America accounted for 65 percent of ASP revenue. In 2004, the North America region is forecast to represent 45 percent of ASP revenue. Europe accounted for 20 percent of the ASP market in 1999, and the region is projected to have 32 percent of the market in 2004. Dataquest analysts said the Internet is accelerating the adoption of new applications and technologies outside of the United States.

"In the 'pre-Internet' world, it was common for the European and Asian markets to lag behind the United States," Mr. Pring said. "However, by 2004, these markets will be as large and as mature in Europe and Asia/Pacific as in the United States. Another driver in these other regions is European and Asian markets will be more orientated toward 'mobile' ASP applications than the United States. Mobile telecom operators will develop more sophisticated, business-user-focused applications, which are delivered, in essence, via an ASP market. The greater penetration of mobile/cellular users outside the United States will produce a fertile worldwide marketplace to exploit."

While the ASP industry will continue to show strong growth rates through 2004, the ASP industry is in a delicate and precarious phase in its development.

"The next 12 months may very well determine the future prospects of the ASP model, as ASPs scramble to position themselves in the market, chase down an ever-receding customer base and replace grandiose marketing claims with concise, sober-minded business propositions," Mr. Pring said.

The future of the ASP industry will be analyzed during Gartner's Symposium/ITxpo 2000, October 16-20 in Lake Buena Vista, Florida. This event is the IT industry's largest and most strategic conference providing business leaders with a look at the future of IT. Some of the speakers at this year's event include Hewlett-Packard's chairman and CEO, Carly Fiorina; Sun Microsystems' chairman and CEO, Scott McNealy; and Microsoft's president and CEO, Steve Ballmer. To register for Gartner's Symposium/ITxpo 2000, please call 1-800-778-1997 or 1-203-316-6757, or go to www.gartner.com/symposium. Members of media can register by contacting Lisette Kwong at 1-212-320-2330 or lkwong@tsicomm.com.

Additional information on the ASP market is available in the Dataquest Market Trends report titled "The State of Today's Application Service Provider Marketplace." This report assesses the current ASP market trends, evaluates the varied strategies of ASPs, independent service vendors, and infrastructure providers are adopting to take advantage of this marketplace.

To purchase the report, please call 800-419-DATA, or 408-468-8009. More information about Dataquest's programs, descriptions of recent research reports, and full text of press releases can be found on the Internet at www.dataquest.com.

Gartner's Dataquest is the recognized leader in providing the high-technology and financial communities with market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software, and services sectors of the global information technology industry.

Gartner provides unrivaled thought leadership for more than 10,000 organizations, helping clients to achieve their business objectives through the intelligent and efficient use of technology. Additionally, Gartner helps technology companies identify and maximize technology market opportunities. Gartner's technology content and strong brand reach IT professionals globally through Gartner Research, its research and advisory unit, Gartner Services, its custom consulting unit; Gartner Events, including Gartner's renowned Symposia; and, at www.gartner.com. Gartner subsidiary TechRepublic, Inc. (www.techrepublic.com) is the leading online destination developed exclusively for IT professionals by IT professionals. Gartner, founded in 1979 and headquartered in Stamford, Connecticut, achieved fiscal 1999 revenues of $734 million. Gartner's 3,600 associates, including 1,200 research analysts and consultants, are in more than 80 locations worldwide. For more information about Gartner's industry-leading products and services, please visit us on the Web at www.gartner.com.