ASP to SAAS to Clouds -- Oh my!

Remember ASPs — application service providers? How about SaaS, or software as a service? Or, to crib an IBM-birthed term, on-demand applications? Don't forget managed services. And cloud computing certainly is on your radar these days, whatever that means.

What each of these concepts has in common is the movement of applications off the desktop or server and out into the network — or in more poetic terms, the cloud. Each successive market opportunity (or maybe they're really all one in the same) has had strong appeal for service providers, who already own the network. So how hard could it be for those same service providers to deliver network-based apps, be they simple things such as e-mail and hosting or complex applications such as enterprise resource planning (ERP) or customer relationship management?

The answer is, it turns out, pretty hard. But that doesn't mean that carriers have — or should — give up on delivering software applications via their networks. It just means they have to be smarter and savvier, even as the types of services and apps that can be delivered via the network cloud are rapidly proliferating — from relatively simple messaging and security services to full-blown virtualized computing environments that can be “rented” by the month or hour.

“In the past 18 months or so, we've seen a slow but steady shift in the attitudes of larger carriers toward offering value-added services,” said Steve Crawford, vice president of marketing for vendor Jamcracker, whose own history spans the many phases of the SaaS market. “We've reached a tipping point where carriers are really asking themselves not if they should be doing this, but how they should be approaching it.”

Certainly, the shift toward IP networks has a lot to do with such renewed focus, which essentially blends networks and apps into a single whole. It's also a focus that places service providers — the network owners — potentially at the very epicenter of the cloud universe if they seize the opportunity.

And it's a potentially huge market that is up for grabs. According to IDC, by 2012 28% of all new business application purchases will be delivered via software-on-demand, representing about 5% of worldwide software spending. This summer, Merrill Lynch tried to put a forecast on the larger cloud computing market — encompassing SaaS, platform and infrastructure providers — and came up with a market opportunity just north of $100 billion by 2011.