Gartner Dataquest Says Worldwide ASP Hosting to Top $2.3 Billion by 2004; IP Carriers Have Opportunity to Capitalize on Success of ASP Industry

Business Wire, Sept 25, 2000

Business Editors & Computer Technology Writers

SINGAPORE--(BUSINESS WIRE)--Sept. 25, 2000

The emergence of the application service provider (ASP) market is creating new revenue opportunities for Internet Protocol (IP) backbone carriers who provide the infrastructure to deliver these services. The worldwide market for ASP hosting is forecast to grow from $360 million in 2000 to more than $2.5 billion in 2004, according to Dataquest Inc., a unit of Gartner Group, Inc. (NYSE:IT)(NYSE:ITB).

"ASPs depend on reliable and high-performance networks to deliver their service to customers. This puts the Internet hosting players, whose core strength is network infrastructure, in a natural position to play a leading role in this market," said Chee Eng To, senior analyst for Gartner Dataquest's e-IP Backbone Strategies and Opportunities Worldwide program. "The risk is low because hosting players can rely on conventional hosting revenues while building up ASP market share."

The worldwide ASP market is forecast to grow from $3.6 billion in 2000 to $25.3 billion in 2004. ASP hosting accounts for approximately 10 percent of the total ASP market.

ASP hosting provides many challenges and risks, but for many of the carriers the possible rewards in this segment outweigh the risks involved. "The carriers have been battling in the traditional bandwidth market, where competition is driving down prices," Mr. To said. "As such, carriers have to find a way to move up the value chain, differentiate themselves from competitors and find a new revenue stream. With ASP hosting, backbone carriers are in a prime position to capitalize on this potentially lucrative market."

To be successful in the ASP hosting market, players need to demonstrate that they can deliver corporate-class applications. "This means they have to engineer their networks to deliver a consistently high quality service, backed by service level guarantees. Those who can deliver a premium service will be able to charge premium rates," Mr. To said.

Demand for hosting translates into demand for backbone services. Gartner Dataquest analysts said this is because hosting centers depend on IP backbones to connect ASPs with customers. "It's a strategic imperative for IP backbone carriers to be successful in the ASP market because of its enormous growth potential," Mr. To said.

Additional information on this marketplace is available in Gartner Dataquest's e-IP Backbone Strategies and Opportunities Worldwide program. This program provides detailed analysis of the fast-growing and strategically important market of IP backbone services. To purchase reports or subscribe to this program, please call 800/419-DATA, or 408/468-8009. More information about Gartner Dataquest's programs, descriptions of recent research reports, and full text of press releases can be found on the Internet at www.dataquest.com.

This research is published by Gartner's worldwide telecommunications group. This group provides analysis for the full spectrum of telecom and networking issues. To keep up to date on the latest telecommunication issues, please visit Gartner's Telecom Marketplace Resource Center at http://www.gartner.com/public/static/telecom/telecom.html.> The future of the ASP industry will be analyzed during Gartner's Symposium/ITxpo 2000, Oct. 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 800/778-1997 or 203/316-6757, or go to www.gartner.com/symposium. Members of media can register by contacting Lisette Kwong at 212/320-2330 or lkwong@tsicomm.com.

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