Application Service Provider (ASP) is an external unit that controls and disperses software applications using the internet over a network.

ASP helps in reducing the costs and various complexities associated with software distribution and maintenance.

Application Service Provider

How does an application service provider work?

ASP is a company or a third party that delivers software applications and related services through a network to multiple users using a rental transaction pricing model.

This network is not exactly the internet. Instead, it is an outsourcing contract established on the user-based transaction price. 

Users of small or medium business organizations and individual users lease these applications.

With the help of ASP, users can save their work on the remote server and execute their daily work in the web-based interface because the software is hosted somewhere on the internet.

The application service provider includes service providers, independent software suppliers, and network providers.

The application service provider operates software applications and handles the servers that are supporting the software.

Gives information to end-users through the internet and allocates bills monthly or yearly per user.

A general example of the application service provider is the use of yahoo mail, Gmail, google sheets, google docs. These are free ASP applications.

With the help of a web browser with necessary plug-ins, users can access yahoo mail hosted by Yahoo, google mail hosted by Google.

Different kinds of ASPs

There are different kinds of Application Service Provider (ASPs). Some of them are:

Enterprise ASPs: these are designed for complex businesses to suit their intense requirements.

Regional ASPs: these are suitable for smaller businesses that cover small geographic locations.

Specialist ASPs: they are designed to cater to specific requirements such as accounting, human resources, and payroll, and so on.

Vertical market ASPs: they are industry-specific designed to cover the overall needs of the same. It identifies the trending requirements of the industry and answers the same.

Volume Business ASPs: provides a set of applications for which the customers pay in advance and are well aware of the services that fall in the brackets of the packages designed.

application service provider

HP, SAP, and Qwest are the leading application service providers.

Why is Application Service Provider important?

We all are living in a dynamic world. Now, all the criteria, priorities, demands, and needs keep on changing. So we have to be very advance in years.

Because of these things, our system becomes complex, such as applications, software, etc. They increase the financial burden on the companies. So it is better to lease the applications and software instead of owning them.

  • ASP allows you to reduce the cost of organization
  • It Allows you to choose the modules of good processing abilities with low cost
  • It helps to maintain software and hardware easily
  • It makes easy use of software for organization by upgrading automatically and with technical support

Disadvantages of ASP

  • In a single occupant condition, applications acquired by one client are closed from the other customer’s application. Hence costs will not reduce as ASPs accept more customers.
  • ASP offers virtual servers instead of dedicated servers for many customers. That leads to security issues.

How does ASP different from SaaS?

  • Saas provides the same feature to all users whereas ASP provides customized solution for single user
  • In Saas, the solution is managed, maintained, and supported by the provider. That means the provider has all the control. In ASP user has the control on the solution and he can demand the service that he wants
  • Service level agreement is common to all users in Saas. But in ASP service level agreement is distinctive to user
  • The solution is always based on the internet in Saas. In ASP solution is need not be based on internet
  • Users can buy the software from a third-party retailer in ASP, but in SaaS, users cannot buy the software from a third-party retailer.

Get more definitions about application service provider (ASP) and other ERP-related terms here.


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