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Application service providers (ASP) or software as a service providers (SaaS) are companies that provide software or other computer-based services over the Internet from a data center. ASP is sometimes known as software on demand. There are five basic types of application service providers (ASP): local, functional, vertical market, enterprise, and volume. Local ASPs deliver services to small businesses within a limited geographic area. Functional ASPs provide a single application to regional, national or international businesses. Application service providers in this category include credit card payment processing services and payroll services. Vertical market ASPs provide integrated software or business services to specific market segments such as the medical profession. Enterprise ASPs that deliver broader, industry-wide solutions are also available. Finally, volume ASPs provide relatively low-cost, turnkey solutions through their own web sites.

Application service providers (ASP) own and operate specialized software which they install and maintain on their own servers. ASP customers then access tools and services through a Web browser and Internet connection, or a thin client and vendor-supplied software. Both approaches eliminate software-maintenance issues on the customer’s end and ensure that business-critical systems are managed by information technology (IT) professionals. In some cases, application service providers (ASP) require customers to sign a service agreement to guarantee a defined level of service. Such agreements can help ASP customers reduce their IT expenses to a monthly fee, but pose risks such as the loss or theft of corporate data. Unlike traditional ASPs, software as a service (SaaS) providers may use a multi-tenant architecture in which multiple customers run the same software, but with different data.

When selecting application service providers (ASP), businesses need to consider the way in which customers access the software, the manner in which customer service issues are resolved, and security of the data behind passwords and firewalls. The security of the connection between the ASP and the user is also an important consideration. Normally, encryption and virtual private networks (VPN) are used. Businesses that want to select application service providers (ASP) should also determine how applications are served, how the ASP handles redundancy, and how the ASP handles specific hardware and software problems. Disaster management, ownership of data, and the movement of data between existing application and a new ASP are also important considerations.


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