Department of Information Systems and Computing, Centre for Strategic Information Systems, Brunel University, Uxbridge, Middlesex, UK

Correspondence: W L Currie, Warwick Business School, University of Warwick, Coventry, CV4 7AL, UK. Tel: +44 247652 4306; E-mail: wendy.currie@wbs.ac.uk

Abstract

How value is created for the customer from e-business is a topic of much concern in academic and practitioner circles. In the light of the dot.com downturn, numerous e-business firms ceased to exist. This paper reports the findings from an ongoing research study on the development and decline of the application service provider (ASP) industry. Having witnessed the decline of the first wave of ASPs, with many failing to convince small and medium businesses (SMBs) of the value of adopting an ASP solution, the second wave calls for a more rigorous approach that clearly identifies the key performance areas and indicators of the ASP business model. Applying the constructs of strategic positioning, product/service portfolio, and value proposition, this paper represents the findings from 215 responses to a questionnaire survey on how potential and existing ASP customers evaluate the benefits and risks of ASP. The findings suggest that, if the ASP model is to succeed, vendors will need to carefully identify customer requirements and avoid the pitfalls that beset the first wave of the ASP model, which was largely based upon a technology push strategy.