Most analysts seem to agree that the Application Service Provider (ASP) market is not only going to grow, but also become a more common outsourcing option for businesses at all levels. Initial thinking tended to lean toward the enterprise marketplace, but the actual makeup of what types of companies use ASPs has turned out to be far broader than originally envisioned. Small- and medium-sized businesses apparently make up a significant part of the ASP client marketplace.

But large corporations have also jumped on the ASP bandwagon. The Phillips Group reports that the use of ASPs by large companies will account for 56 percent of the ASP market by 2004. As the business plans of large companies increasingly incorporate e-commerce, internal applications will need the help that ASPs can provide.

According to the Phillips report, large companies with 500 to 100,000 employees use ASPs in two different ways: internally and for e-commerce. Internal applications are used by employees and include messaging, data management and internal business applications. E-commerce applications are used by customers and suppliers. Internal applications will grow in the next four years.

Since ASPs represent a viable IT outsourcing choice for our readers, ComputerUser has created this column to help you keep tabs on the rapidly growing and constantly changing ASP marketplace. Because we are just starting out, let's take a little space here to go over the basics.

According to industry analysts, the ASP marketplace is slated to become the dominant model for delivering software applications. ASP customers can rent services on a per-user, per-month basis (or other payment models) at a fraction of the cost of purchasing, deploying, and supporting traditional high-end business applications.

While certain hurdles are slowing adoption of ASPs in some areas, in general ASPs are catching on--especially with small businesses. One ASP's typical customer is a small business with fewer than 100 employees and an average of 25 seats. The company uses predefined applications such as desktop productivity and accounting packages, with maybe one custom application that it's either developed itself or brought in from outside.

So just what can you use an ASP for? Just about anything. A quick cruise through the ASP hosting services' Web sites yields a long list of available services. ASPs currently provide common services like e-mail and database hosting, billing and accounting services, e-commerce, collaboration services and office productivity services. They also host mission-specific, custom-developed applications for individual businesses, services that range from applications such as inventory and point-of-sale systems to help-desk operations.

Here's another way of looking at what ASPs provide. The ASP Industry Consortium (ASPIC) has created specific categories that it uses to classify ASP service offerings. These categories include:

Delivery (business models, packaging of services) Integration (infrastructure, providing manageability of applications and synergies) Management and operations (management of the hosted infrastructure: data center, network, and storage) Enablement (services, middleware, tools for creating desktop productivity, collaboration, and transactions applications)

Assuming that you are at least considering outsourcing some aspect of your business, the questions to ask are:

How do you go about figuring out whether or not to use an ASP. How do you choose an ASP? How should you approach outsourcing a part of your business to an ASP? What do you need to do in order to explore this option?

The first step is to determine which applications you can or should outsource to an ASP. Typically, companies outsource software applications that require a high level of availability or technical expertise that the company doesn't have or doesn't wish to maintain in-house as a core competency.

The next step is to analyze your business needs. Are security and reliability of paramount importance, or are ease-of-use and 24/7 support more important? ASPs vary widely in terms of service-level agreements and customer support. Some offer fully integrated, turn-key solutions, while others do not. Some applications were designed to grow with your company, while others are not as scalable.

You should also consider how your employees will access the ASP. Most ASP services have surprisingly simple minimum requirements in order to take advantage of their services. Usually, a Java-enabled Web browser is all that is required. Any device that supports a Web browser--including a laptop, PDA or set-top box-has the ability to access ASP services. This could well be a selling point for small businesses that don't already have a significant investment in computer technology or in-house expertise.

When evaluating whether or not outsourcing to an ASP might prove useful to your business, the thing to do is test-drive the service. Interestingly enough, the average small business has some enticing options for doing just that.

You can test-drive the ASP concept by visiting one of several new ASP offerings just coming to market. Some offer free service because they're in their initial test runs. Others are free because they are subsidized by banner ads. And some offer their services for free to operations with up to five employees. And often if it isn't a free service, the provider will offer some sort of limited-duration free-trial period so you can evaluate the service first-hand.

If you are interested in getting your feet wet and want to start exploring some of the ASP-hosted services available, here are a couple of examples to check out. The first is good outsourcing for a specific or limited set of business functions (in this case time- and expense-tracking and invoicing), and the other is an example of an office productivity suite delivered ASP-style. So surf on over to one of the following sites and take a test drive:

OpenAir.com offers integrated time- and expense-tracking and invoicing services that are easy to use, secure, and that can help streamline your business administration.

ThinkFree offers up ThinkFree Office, a suite of office programs. You get a Microsoft Office-compatible word processor, spreadsheet, presentation, address book, e-mail client, and file manager.

The above two examples are by no means a comprehensive representation of what's available out there, but they do let you experience actually using an ASP-delivered service at little or no risk. And that's the key thing to keep in mind--all the cost savings in the world won't be justified if your outsourced application is unusable or unstable. That's why you need to spend some hands-on time with an ASP (preferably serving an application similar to the one(s) you are considering outsourcing) before committing to an ASP-based solution. Next time we'll look at specific categories of services.

Contributing Editor Don Fitzwater is a principal partner in Interface Solutions, a Minneapolis consulting firm.