AMR PREDICTS INCREASE IN ENTERPRISE ASP MARKET

July 28, 2000

COMMERCIAL NEWS

Boston, MASS. — AMR Research, Inc., a leading industry and market analysis firm specializing in e-business strategy and infrastructure, predicts that the Enterprise Application Service Provider (ASP) market will reach $4.7 billion by 2004, with a compound annual growth rate of 153 percent. According to the firm’s latest ASP research, outlined in its Report on Enterprise Applications, the strongest growth in the ASP market is expected to occur in the following categories: e-business relationship management, hosted business applications, small business applications, and trading exchanges, enterprise asset management, and product life cycle management.

“The ASP market has sped through a maturation process during the past year, and will continue to evolve over time,” said, Dave Boulanger, Service Director, E-Business Applications. “Most newer applications are now only being offered on a hosted basis. Combined with the increase in value-added services and application suites targeting specific verticals, hosted models present a viable alternative for mainstream companies to embrace leading technologies.”

AMR Research breaks down the ASP market into three major business segments: enterprise application service providers, e-commerce and web-hosting providers, and Business Process Outsourcing (BPO). The distinction between companies who sell, implement, integrate and maintain these software systems, and those that provide entire business process outsourcing will continue to shrink over time.

1999 was characterized by a number of marketing announcements and relatively immature business and pricing models. AMR Research coined it “the year of the early adopters.” Paving the way for the future ASP market, a number of significant trends were introduced last year including:

— Early adopters, comprised of dot-com startups, high-tech manufacturers and small to mid-size companies, emerged and an adoption curve was established.

— ASP providers began to segment based on target company size and requirements

— General go-to-market strategies focused on specific verticals, including aerospace & defense, automotive, chemicals and consumer packaged goods

— Business models were developed to focus on maximum value components

— Smaller players began to consolidate as partnership benefits were recognized

— Role of IT has changed to focus more time on business development

— Much ASP spending was done by e-business, sales and marketing departments in place of IT departments

AMR Research expects the BPO segment of the ASP market to be the next growth area for ASPs. BPOs act as third parties, supplying complete solutions, which reduce or eliminate the expense and overhead of entire departments, letting companies focus on their core competencies.

AMR Research expects that the distinction among traditional outsourcers, system integrators, application hosters, software vendors, and business process outsourcers will blur significantly in 2000 and beyond. By 2004, the firm predicts that the enterprise application service providers and the commerce and web-hosting providers will merge together and there will be little difference between these segments. In addition, many ASPs will begin adopting a more comprehensive application suite targeting vertical markets during the next year.

AMR Research’s Report on Enterprise Applications predicts that the ASP market will reach $4.7 billion by 2004, with a compound annual growth rate of 153 percent. The firm expects that the highest growth rates will occur in the e-business relationship management market, hosted business applications, small business applications, and trading exchanges. The future of the ASP market will be driven by the expected growth of the BPO segment.

AMR Research is a leading industry and market analysis firm providing independent advice on e-business strategy and infrastructure. Visit http://www.amrresearch.com for more information.

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