ASPs combine software, hardware and networking technologies to offer a service-based application as opposed to a corporate-owned, corporate-run application. These offerings include enterprise resource planning (ERP) and collaboration tools as well as mail hosting and e-commerce applications.

Under the ASP model, the service provider owns all or part of the infrastructure on which these applications reside (some ASPs partner with other service providers for some pieces of the infrastructure) and coordinates the various hardware purchases, software licensing or development, and network connections that are necessary.

Customers rent the services from the ASP on a per-user, per-month basis. ASPs share costs among many customers, allowing for a much lower cost structure than traditional solutions. The popularity of ASPs is currently on the rise since corporate managers worldwide appreciate the cost savings they generate. Why spend the time and money involved in purchasing and installing an application you know you'll outgrow in six to 12 months when you can rent it?

Instead of expanding information technology (IT) divisions to build and maintain new business systems, many corporations now entirely outsource their new application requirements to ASPs. These providers bear the burden of building, implementing and distributing customized applications, mainly databases, to internal and external corporate audiences.

The ASP model thus substantially reduces many of the tasks associated with maintaining traditional client-server applications. Generally, the application vendor will handle all application deployment and system maintenance tasks, including backup and recovery, upgrades, network management, and user additions and deletions.

The most popular ASP solutions being adopted today include solutions for human resources payroll and benefits management. ASPs also have thrived by offering existing corporate collaborative software such as Microsoft Exchange, Project and the Office productivity suite.

ASPs hence differ from conventional Web hosting outfits since they offer integrated, proprietary platforms rather than base Internet services. The professional solutions they provide are not a hodge-podge of assorted Internet services and protocols. They are a highly developed, applications that are backed up by the broadest bandwidth and customer care systems available.

Because ASPs employ professional staff to develop state-of-the-art software and networking facilities, employing their services can become expensive.

Most ASPs charge their premier corporate clients hundreds if not thousands of dollars per month. The cost for application development is usually determined on a per diem basis, but is usually as costly.

Application Service Providers are therefore the most serious of Internet Presence Providers (IPPs), and should only be considered by enterprises needing to integrate and rationalize their IT operations.