Definition

application service provider (ASP)

An application service provider (ASP) is a company that offers individuals or enterprises access to applications and related services over the internet. The term has largely been replaced by software as a service (SaaS) provider, although in some parts of the world, companies use the two labels interchangeably.

Once referred to as "apps-on-tap," ASP services became an important alternative, not only for individuals and smaller companies with low budgets for information technology, but also for larger companies exploring the idea of outsourcing their information technology (IT) infrastructure around the turn of the century. Early ASPs focused on delivering specialized applications that were expensive to install and maintain. Essentially, the model required the ASP customer to purchase the software and then pay a provider to host it. 

In 1999, Hewlett-Packard, SAP, and Qwest formed the Application Service Provider Industry Consortium, one of the first major alliances for providing ASP services. They planned to make SAP's popular R/3 applications available at "cybercenters" that would serve the applications to other companies. Around the same time, Microsoft allowed some companies to offer its BackOffice products, including SQL Server, Exchange and Windows NT Server on a rental, pay-as-you-use basis.

ASPs were forecast to provide applications and services to small enterprises and individuals on a pay-per-use or yearly license basis. In the meantime, larger corporations essentially provided their own ASP service in-house, moving applications off personal computers and putting them on a special kind of application server that was designed to work with thin client workstations. This allowed an enterprise to reassert the central control over application cost and usage that corporations formerly had in the period prior to the advent of the personal computer (PC). 

Difference between ASP and SaaS delivery models

In an ASP delivery model, the customer typically purchases software and pays an ASP to host and maintain it. In contrast, SaaS vendors manage the software they have developed on their own.

Traditional ASPs used a single-tenant architecture and software clients had to be installed on the end users' computers. In contrast, SaaS providers use a multi-tenant architecture that allows an application to be accessed through a web browser and serve multiple users and businesses. 

Customers who still need providers that will host specific, customized applications or off-the-shelf applications in a secure data center, may still choose to look for an application service provider. 

ASP is also an abbreviation for Active Server Page.

This was last updated in February 2019

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