An application service provider (ASP) is a business providing application software generally through the Web.^[1] ASPs that specialize in a particular application (such as a medical billing program) may be referred to as providing software as a service.

The ASP model

The application software resides on the vendor's system and is accessed by users through a communication protocol. Alternatively, the vendor may provide special purpose client software. Client software may interface with these systems through an application programming interface.

ASP characteristics include:

• ASP hosts the application^[2]
• ASP owns, operates and maintains the servers that support the application^[2]
• ASP delivers the application to customers via the Internet^[2] or a thin client
• ASP may bill on a per-use basis (on-demand outsourcing), a monthly/annual fee, or a per-labor hour basis

The advantages to this approach include:

• Application costs are scaled over multiple customers^[2]
• ASP may provide more application experience than the customer's staff^[2]
• ASP may provide application customization for the customer^[2]
• Application's version is likely to be kept up to date
• Experts manage the application for performance^[2]
• Experts research the application for new features^[2]

The disadvantages include:

• The customer must rely on the ASP for a critical business function, including security and performance^[2]
• The customer may have to accept the application as provided
• The customer may have to adapt to possible application changes
• Integration with other applications may be problematic