IT analyst Gartner has warned that eight out of 10 application service providers (ASPs) will not deliver the service level agreements (SLAs) promised to users. Gartner also warned users to keep an eye on the amount of additional fees paid to consultancies for migration and consultancy work after the contract is signed.
Elena Christopher, senior analyst for e-business services at Gartner, said most ASPs would fail to deliver crucial SLAs because they had not agreed performance targets with other suppliers involved in delivering different parts of the ASP service.
"How can ASPs deliver to the customer if they don't have SLAs with partners? As much as 85% of ASP contracts will not be able to meet the SLAs they sign up to," she said.
Christopher also warned companies to be aware of the hidden costs of using an ASP. She said ASPs get the majority of their revenue from charging users extra fees for consultancy and the migration of data. "ASPs are charging for data migration on a hourly basis. This could take from one to six months and defeat the cost element of using an ASP," she said.
But ASPs have hit back. Vistorm's David Angwin stressed the need for prospective users to carry out thorough financial checks on the durability of their ASP.
He denied that ASPs were charging users for unnecessary consultancy work. "Quite a lot of companies are looking to deploy pretty complex systems, such as ERP systems that require integration at the customer end. There has to be some consultancy," he said.
Christopher predicts steady growth for the ASP market. The standard pricing model is likely to remain a monthly flat-rate charge, although alternative charging models are emerging, she said.
This was first published in January 2001