High ASPirations

Aberdeen: application service providers' revenues to hit $16 billion by 2005

Boston  July 11, 2001  Constrained information technology budgets will help fuel growth in application service providers' revenues over the next four years, and ASPs will see their incomes rise from $3 billion in 2001 to $16.1 billion by 2005, according to a new report from technology consultancy Aberdeen Group.

For the report, "Worldwide ASP Spending Forecast and Analysis 2001­2005," Aberdeen Group looked at expected spending in 157 countries for critical application service provider (ASP) market segments, including enterprise research planning, human resources, financial and accounting, education and training, customer relationship management, e-commerce, communications and collaboration.

ASPs have endured customer acquisition challenges over the last six months, but market growth remains healthy, according to the report. Aberdeen predicts that ASP revenues will increase at a compound annual growth rate of 52.2 percent over the next five years, reaching roughly $16.1 billion by 2005.

"Growth in the ASP industry will remain robust through 2005," said David Wright, vice president of Aberdeen's private equity services division. "Our data clearly shows that, both domestically and internationally, many ASPs are gaining sales traction via strong ROI [return on investment] sales messages."

Aberdeen's forecasts indicate that the United States will remain the largest market for ASP services through 2005. Nevertheless, the consultancy's research indicated that Western Europe represents an emerging opportunity, with regional spending topping $4 billion by 2005. In Germany alone, aggressive adoption of the ASP model will support a $950 million dollar market by 2005.

"Despite the recent hype hangover suffered by the ASP industry, Aberdeen remains confident in the industry's long-term value proposition," said Lew Hollerbach, managing director for service providers communications infrastructure and services at Aberdeen. "Indeed, with IT [information technology] departments experiencing serious capital constraint, the ASP value proposition has never been more alluring."