Application service provider

An application service provider (ASP) is a business providing application software generally through the Web. 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
 * ASP owns, operates and maintains the servers that support the application
 * ASP delivers the application to customers via the Internet 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
 * ASP may provide more application experience than the customer's staff
 * ASP may provide application customization for the customer
 * Application's version is likely to be kept up to date
 * Experts manage the application for performance
 * Experts research the application for new features

The disadvantages include:
 * The customer must rely on the ASP for a critical business function, including security and performance
 * 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