The GartnerGroup has predicted that 60% of the current 480 retail application service providers (ASPs) will have failed by the end of the year. Reasons cited for the consolidation include bankruptcy, lack of venture capital, mergers and traditional competition.
Gartner estimates that by 2004, only 20 of the 480 ASPs will remain as enterprise-class, full-service retail ASPs, and less than 100 will offer successful point and product solutions, sharing what will grow into a $25.3 billion industry in 2004.
The research company describes the industry shift towards the ASP market - currently valued at $3.6 billion - as a "gold rush" for vendors, "most of which have no idea of what it will take to survive for the longer term".
"Today`s dot-com collapses will pale in comparison to the effect that the pending ASP meltdown will have on organisations that use these ASPs," says Audrey Apfel, VP and research director at Gartner.
"When dot-coms collapse, they implode and have little effect on their customers and other industries. The ASP consolidation will have a domino effect, affecting business systems like ERP [enterprise resource planning] and accounting systems for companies that have outsourced these functions to ASPs. Then, those failures can quickly spread the damage along supply chains."
Apfel believes the failure of Pandesic "is only the tip of the iceberg. We expect many other major ASP brands will fail during the coming months."
Gartner has developed a six-layer ASP model that provides a tool for helping to understand where the winners and losers will come from.
"Many of today`s ASPs make the mistake of trying to do everything, including owning the data centre. We believe this is a critical mistake and not a sustainable strategy in most cases. The successful ASPs will focus on no more than two layers of our model," comments Apfel.
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