In a move to bolster the image of the Application Service Provider (ASP) computing model, the ASP Industry Consortium’s (ASPIC) chairman, yesterday pointed to a new study from analyst firm IDC, which reports favorably on the financial benefits gained by ASP users.
The IDC report, The Financial Impact of ASPs, found that using the ASP model generated an average five-year return on investment (ROI) of 404 percent. According to Paula Hunter, vice president of marketing with Xevo Corp. and Chairman of the ASP Industry Consortium, the study reinforces the industry’s claims on the ASP model’s financial advantages over traditional forms of computing.
“For over two years now, we in the industry have been talking up the bottom-line benefit of utilizing the ASP model,” says Hunter. “IDC has now provided solid proof that using an ASP not only results in quicker time-to-application and a fractional up-front investment, but that it provides a sizeable savings in the long term.”
Hunter also believes the report, which is being distributed to all members of the ASP Industry Consortium, helps customers understand the value of application services.
Investigating the ROI realized by organizations successful at implementing and using ASP-delivered application services, the study included 54 in-person interviews with IS managers, business managers, department managers, and system users across different industries.
The study’s key findings were:
— ASP implementations generated an average five-year ROI of 404 percent with almost half of the participating organizations reporting payback within six months.
— 44 percent of organizations reported ROI greater than 100 percent, while 12 percent had ROI returns of over 1,000 percent.
— The average payback for an ASP outsourced solution was 1.33 years on an average total investment of $4.2 million. The average initial investment was $399,000.
“The ‘return’ in return on investment will mean something different to every company,” says Meredith Whalen, VP of IDC’s ASP and Internet Services research. She adds that while both quantitative and measurable benefits provide proof of success, ASP customers frequently cite peace of mind, an ability to focus on their core business, and a better work environment as equally valuable benefits of working with an ASP:
“Equipped with both quantitative and qualitative benefits, decision-makers can be better assured of sound business judgments,” she says.
IDC employed a case study technique to collect information and build several financial models focusing on an ROI measure. Qualitative background information was also gathered to help the interviewers understand the factors contributing to success in each installation.