ASPs, Stat!

Dataquest: Application service providers set to take off in healthcare marketplace

Mountain View, CA  August 16, 2001  Although much of the hype around the application service providers (ASPs) has faded in the past year, ASP solutions continue to gain market viability in the healthcare marketplace, according to new findings by Dataquest.

The US healthcare ASP market is forecast to grow from $125 million in 2000 to more than $500 million in 2005. Healthcare organizations are beginning to better understand the value of ASP solutions as a viable part of their external services strategy, according to Dataquest, a unit of technology research firm Gartner.

"As suppliers begin bringing more sophisticated ASP solutions to the market, new segments of the healthcare industry that previously didn't consider utilization of IT [information technology] services will invest in ASP solutions," said Suresh Gunasekaran, senior analyst for Dataquest's IT services worldwide group. "Over the past two years, many of the major ASP suppliers have improved their solutions and developed a quality track record they can demonstrate to clients. For a traditionally risk-adverse industry, this standard operations experience is key."

Dataquest predicts that by 2005, more than 50 percent of the healthcare ASP market share will be owned by fewer than five companies. Because of tremendous market consolidation pressures, healthcare ASP suppliers will need to align offerings with solution partners to offer a comprehensive solutions portfolio, Dataquest asserts, adding that the dominant delivery model for ASP solutions will be bundling with other outsourcing and business services that encompass more than applications management.

Though Dataquest has forecast strong growth for this market, it asserts that successful suppliers must overcome significant barriers to achieve success in the healthcare industry. Suppliers must ensure adequate security of medical data and HIPAA-compliant privacy protection, offer necessary integration capabilities and have significant reference accounts in major segments of the healthcare industry, Dataquest states.

"The healthcare ASP marketplace will remain a highly fragmented market for the next 18 to 24 months," said Gunasekaran. "Healthcare ASP market leaders will understand that implementations in the next two years will be crucial, but strong application and infrastructure partnerships combined with a strong industry segment focus will yield the greatest results over the next five years."

Additional information is available in a Dataquest research brief, "Healthcare ASP Market Tops $500 Million in 2005," which examines the state of the healthcare ASP marketplace, assesses the future directions and presents market forecasts.