| Outsourcing is not new to the business world. A variation on the theme of outsourcing-known as application service providers or ASPs-is new. Although money managers have been able to connect to their applications and portfolio data via frame relay or leased lines for many years, these solutions required some sort of software residing on the desktop, which in most cases still required some level of maintenance.
Using the technological capabilities of the Internet, companies are able to take advantage of an inexpensive, nonproprietary means for desktop computers to communicate. Internet technologies have enabled organizations to reach out to their customers/suppliers across the world and have integrated seamlessly with internal business processes. These advances in Internet and Web capabilities, combined with the continued need for a company to focus on its core competency and not get bogged down with IT issues, have created the ASP business model.
The success of ASPs rests largely on the industry's ability to further define and regulate the model. The minimal implementation requirements, lower cost, and reduced time to market have spurred the growth of the model, but the current lack of standardization and best practices will slow its acceptance.
This TowerGroup Research Note focuses on defining ASPs, their benefits and risks, and how they should be evaluated. This Note also includes some pricing model information and a description of the ASP offerings of Princeton Financial Systems and SS&C Technologies.
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