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Application service providers in Asia: Will they survive?

ASPs , Software , IT , Technology , Economy ,Application service Providers

Background and Overview:

Multinational enterprises have regarded a country’s policy toward foreign investment as either hindrance/facilitator of higher return on investment (ROI). Process of development in a given country, meanwhile, is seen as an important motor for the boom or failure of a project to be invested [Robinson, R. D., 1997]. Literatures in development and foreign investment would support such claim. As such, an astute investor should examine the policy toward foreign investment and the process of development in its potential host country.

Every country makes an implicit assumption about the effect of foreign investment when it establishes policies toward would-be investors. It is a norm that a government would invest on researches to examine the impact of foreign investment on certain aspects of their country’s development. Researchers range from information on the choices of technology made by foreign investors, on the wages that they pay, on their propensity to use imported inputs, on their willingness to export and on their alliances with local elites [Beckman, M. & Butler C., 2003]. Thus, investors on the same way should conduct thorough study of their potential country.

Companies investing in other countries have always been concerned about relations in the host countries. For many years the potential problem of expropriation was a significant concern to investors. In recent years, expropriation in the traditional sense has probably become less of a concern. However, other concerns have arisen to replace those of outright expropriation. The term "creeping expropriation" has sometimes been used to depict a process perceived by the investor as one in which the policies of the host country in effect strangle an enterprise and accomplish over time, in a de facto sense, an expropriation. A company is seen to have reached this point when it has virtually no control of its capital resources or its profitability because of rules, regulations or discriminatory policies [Robinson, R. D., 1997].

The Companies have tried and are trying to be aware of the potential risks they would face in a given host country environment. They developed business strategies to deal with this potential risks. It is because of the assumption that a business environment and the rules and practices governing business could be generally fairly stable, but with time they may change due to the interaction of economic, social and political forces [Beckman, M. & Butler C., 2003]. Thus, a need for broadened and meticulous assessment of business environment factors is necessary. The events that occurred in Iran at the onset of 1979 spawned the culture of investment in analysis before venturing into a project. With the overthrow of the Shah in Iran, subsequent negative experiences for many investing companies, especially those based in the United States pushed companies to be more cautious in investing. Companies are now hiring "experts," often people retired from the US Foreign Service or the Central Intelligence Agency, to make political and cultural assessments of countries as a part of the strategic planning and management process.

Understanding Asia and Its markets:

As a result, few multinationals would think of moving towards a new market in the United States or in any countries in Europe where they can make the most. In countries with open cultures, with abounding studies on businesses situations, reaching investment decisions would not be a challenge. In Asia, however, more detailed dossiers of information about its countries, industries, markets and consumers is needed before reaching such crucial investment decisions [Piazza, P. A., 2002]. The fact that multinationals were stepping onto a notoriously uneven playing field where the local teams have a well-earned reputation for being sharp operators, where the culture was totally different from any they had known, where they could not communicate with local workers, managers and owners and where operating practices were either vague or in secrecy, strategies are really important.

Marketing in Asia has generally been a weakness among multinationals. A survey by managing consultants McKinsey & Co. conducted in ten Asian countries in 2000 showed that while 75% of consumers in the United States are willing to pay for financial advices, less than a quarter would in Asia [Bartels, F. L. Freeman, N. J., 2004]. As such, researches assumed that management consulting, information technology, employee training, marketing, public relations, legal advice and research and development would not reach its peak in most Asian countries. The low appreciation for services is apparent among Asian consumers too. Thus, it is apparent that investor should identify the need of in a country and capitalize on that need.

However, with the advent of globalization, the need of multinational firms to set up excellent information systems to keep an eye on the local competitors also increases. L’Oreal, the shampoo, conditioners and hair coloring products of French group, for example, employs a tiring strategy. To maintain the company's pre-eminent place in the market, each day hundreds of packages arrive at the hair care division's headquarters which are located in Paris and so far proved to be very beneficial for all who wanted to avail this service. According to them, they have every new product or item available on the shelves for customers and each of which is regularly analyzed and tested to add to the information store about the content, the innovation and the packaging among others [Beckman, M. & Butler C. 2003]. With an excellent information system, costs of transport would be lessened. Traditionally, western firms have left the marketing side to their local partners but the need to build up their own databases on consumer tastes and buying habits, for example the bestselling international and local products, how prices vary and how likely are price wars, were seen as an economical input.

The recent Asian dot-com boom has also opened investment opportunities in the continent. Huge numbers of locally owned service sector firms spring up. Usually they were owned and run by young Asian entrepreneurs trained in the United States and other Western countries. Educated about the value of services, they took the philosophy back home, set up their new businesses and hoped for the best. They targeted selling services to the local offices of Western firms or Western firms in the West [Bartels, F. L. Freeman, N. J., 2004]. With the low-cost and high-grade skills of these small firms together with the speed of communications afforded by the Internet mean, application systems could be a boom. The author would weave a study that would either support or thwart this claim.


“An application service provider (ASP) is a business or services which provides computer-based services to customers over a network for availing customer response regarding the queries. Software offered using an ASP model is also sometimes called On-demand software. The most limited sense of this business is that of providing access to a particular application program (such as medical billing) using the most advanced standard protocol which inludes HTTP or Online outsourcing , the Wireless Networking Services and Mobile Networks of all types , the Braodband saga and the amzing services which ahs really mad e the whole world a global village and sea of the knowledege called the Internet Services Services “.

“ Ther Application Service Provider (ASP) applications are said to be the database & gateway services twhich inclusde 8XX, 411, E911, CNAM, LNP, and SS7 for their operations . As telephony services become integrated into computer and Internet applications, access to these services become increasingly important, especially if you plan to interact with the public telephony network or offer telephone service
It had to happen.With the advent of the application service provider (ASP), the cycle of computing trends has come full circle.The introduction of outsourced Web-based shared resource business applications has returned us to the bygone days of service bureaus and time-sharing.The computer applications have hanged from payroll to enterprise resource planning (ERP), and the communications have changed from private-line SNA or TTY dial-in to IP-based Internet, intranet and extranet access - a new age but the same old idea “

The need of ASPs was greatly felt due to the increasing costs of specialized software which weere very costly and exceeded the price range of small to medium sized businesses and they strated facing problems in order afford such costly softwares as the growing complexities of software have led to huge costs in distributing the software to end-users and thus the end users wrere lways at the stake to suffer such huge loss .with the help of ASPs, the complexities, problems and the hassle free costs of such software can be lowered besides improvement of services and remain in close contact with customers all times . In addition to this , the problems of upgrading have also been finished from the end-firm by placing the responsibility on the ASP to maintain up-to-date services as well as remain in close contact with the customers in order to solve their queries on urgent basis . The online 24 x 7 technical support, physical and electronic security and in-built support for business continuity and flexible working ha s really helped the Companies grow at massive rate besides improving there services in delivery to the customers at masive scale .

The Market is the main souirce of income and economic Development of any company , the more is the demand the more profit will pour on to the company and soon the compnay becomes a billion dollar company which reflects that the products and services offered remotley by any company are needed in the market .Similarly the importance of this marketplace can be reflected and assessed with its size the more bigger is the market the more service providers will be there to serve besides copeting with the co service providers ie the compnaies which are providing the services simmilar to the other companies . This also benefits to the buyers because the copmanies will concerntarte on the demand and to achieve this goal they will cut down their costs and will make them cheaper in order to attract more customers or buyers of services offered by certain companies besides improving the quality of services offered by varuious Application service providers , internet Service provivedrs and Wirless Communication service providers . . In early 2003, the estimates of the United States market were ranging from 1.5 to 4 billion dollars. Clients for ASP services included the businesses, the government organizations, non-profits, and membership organizations at a lrage Scale . The Application service providers in USA have on the move and that’s why all Aviation , billinh and banking , and administrative plus the security services are automated and the Apllication services providers are making the most in this digital world which has really become so closer that it has been called as Global village and the product of one country is avialable to all the world due to this interenet and Media .


In Common goal of enabling customers to outsource specific computer applications so they can focus on their core competencies, Application Service Providers may be regarded as the indirect descendants of the computer bureaus dating from the 1960s and 1970s. in other words , those Computer Bureaus were trying to fulfill the vision of computing as a utility or source , which was first proposed by John McCarthy in a speech at MIT in 1961.

Provider types:

There are several forms of ASP business. They Include :
• A specialist or functional Application Service Provider which delivers a single application, such as credit card payment processing or timesheet services;
• A vertical market ASP delivers a solution package for a specific customer type, such as a dental practice;
• An enterprise ASP delivers broad spectrum solutions;
• A local ASP delivers small business services within a limited area.

There are Some analysts identify a volume ASP as a fifth type because , basically a specialist ASP that offers a low cost packaged solution via their own Web site. The PayPal was an instance of this type, and their volume was one way to lower the unit cost of each transaction.The Other Solution Providers can be Westren Union Money transfer , Credit Card Processors , 1-link etc.
Beisdes this, some large multi-line companies (such as IBM), use ASP concepts as a particular business model that supports some specific customers.

The ASP model:

The application software sets on the vendor's system and can be accessed by users through a web browser using HTML or by special purpose client software provided by the vendor. The Custom client software can also be interface to these systems through XML APIs. These APIs can also be used where integration with in-house systems is required.
Common features associated with ASPs include:
•ASP fully owns and operates the software application(s)
•ASP owns, operates and maintains the servers that support the software
•ASP makes information available to customers via the Internet or a "thin client"
•ASP bills on a "per-use" basis or on a monthly/annual fee
The advantages to this approach include:
•Software integration issues are eliminated from the client site
•Software costs for the application are spread over a number of clients
•Vendors can build more application experience than the in-house staff
•Key software systems are kept up to date, available, and managed for performance by experts
•Improve the reliability, availability, scalability and security of internal IT systems
•A provider's service level agreement guarantees a certain level of service
•Access product and technology experts dedicated to available products
•Reduce internal IT costs to a predictable monthly fee.
•Redeploy IT staff and tools to focus on strategic technology projects that impact the enterprise's bottom line
Some inherent disadvantages include:
•The client must generally accept the application as provided since ASPs can only afford a customized solution for the largest clients
•The client may rely on the provider to provide a critical business function, thus limiting their control of that function and instead relying on the provider
•Changes in the ASP market may result in changes in the type or level of service available to clients
•Integration with the client's non-ASP systems may be problematic

If the Evaluating an Application Service Provider security when moving to an ASP infrastructure can come at a high cost, as such a firm must assess the level of risk associated with the ASP itself. Failure to properly account for such risk can lead to:
•Loss of control of corporate data
•Loss of control of corporate image
•Insufficient ASP security to counter risks
•Exposure of corporate data to other ASP customers
•Compromise of corporate data

There are also some other risks include failure to account for the financial future of the ASP in general, i.e. how stable a company are they and do they have the the available resources to continue business into the projected Future . due this Purpose , Cisco Systems has developed a comprehensive evaluation guideline. This guideline includes evaluating the scope of the ASPs service, the security of the program and the ASP's maturity with regard to security awareness. At last the guidelines indicate the importance of performing audits on the ASP with respect to:

•Port/Network service
•Application vulnerability
•ASP Personnel

Physical visits to the ASP to assess the formality of the organization will provide invaluable insight into the awareness of the firm.

Where as the ASPs may not have Intel and Microsoft cowering in terror, they do represent a significant concern for the Wintel consortium.The main beneficiary of ASPs is the midtier market. As the small businesses, outsourcing business application software and computing services to an ASP is cost-prohibitive so the business applications in this tier of the market are few and simple one for caarrying out the functions .Such small business can make do with a small LAN and a PC-based desktop and server environment, using the Web for WAN communication and perhaps outsourcing home page and e-mail operations to an ISP As the majority of large enterprises and Companies already have outsourced or are contemplating outsourcing internal IT operations to a third party and their Web applications to a content-host-based ISP Economics drives this market, but application control, security and legacy data force the high-end tier to adopt a dedicated operations in terms of environment rather than a shared multicompany environment.

This leaves the midtier market. Most enterprises in this market cannot afford to outsource IT operations. In addition, this tier needs applications that exist in the large enterprise, such as ERP and customer relationship management.These factors make midtier companies the natural market for the ASP In addition, the midtier market is the home territory of the IBM AS/400 and S/390, as well as Sun, HewlettPackard and Compaq/ DEC machines.These will be the computing platforms of the ASP, not Wintel, and the LAN-based servers will be downgraded to office application devices.Access to the ASP will be via the Web for extranet applications and a virtual private network (VPN) for Intranet applications.

Definitely ,The Business Of ASP is real and Factual as the most industry watchers see ASPs becoming a big business ibn future as the people want flexibility and quick resposne to queries . The International Data Corporation has predicted that the compound annual growth rate of ASPs will be 91%, going from zero in 1998 to $2 billion by 2003. keeping in view the above estimate seems low if comaperd with the predictions of some investment banking firms.
My firm's the renowned research organization indicates that ASP market estimates on a worldwide basis are accurate in the short term but inaccurate for the long term as the analysis .The midtier market - the target market for ASPs - is much larger overseas than in the U.S.As with all Web-based technological evolutions, the ASP business was started in the U.S at a large scale , but it became a booming business in Europe by 2001 and in Asia by 2003. Corporate conservatism will dictate the rate of adoption throughout the world, but due to prevalent economic conditions and competitive market pressure are likely to accelerate adoption.The worse the economic conditions or the greater the competitive environment, the greater the adoption rate.

Securing Security and Qualifying Quality :

If the Security quality and the Challenges are assessed ,the two biggest challenges to the success of the ASP model are Internet quality of service (QoS) and security. Technology vendors and infrastructure providers are the ones in the best position to resolve these issues. The environmental and Country Policies also play a vital role in this regard.

ASPs in Recent years:

Currently, in recent months the voice and data consolidation market has been at the center of a whirlwind of activity, yet this breathtaking pace of progress has confused prospective customers and created unrealistic expectations about the time frame for transitioning to packet zed networks. At this time, the information industry needs a rational, objective, and qualitative assessment of the viability of this market, for both the present and the future. Such an assessment is particularly critical because the progress of voice data consolidation will infact revolutionize the communications industry over the next 10 years and will bring excellent innovations In such effort an effort to help the industry gain this understanding, the International Engineering Consortium, in partnership with Communications Industry Researchers, Inc., is pleased to present The Future of Voice/Data Consolidation: Markets, Technologies, and Strategies. While the merits of a consolidated network for all its segments are
ASP s in Asian Countries :

In Asia , the Application Service Providers have developed significantly over the Years . They have really changed the Scenario of the emerging economies of the Asian Countries Specially , India , Malaysia , and china . Among these china and Malaysia has been ahead in Application Service Providers Race . While The India is working hard to get in touch with the IT revolution as compared tops other Countries such as Sri Lanka , Pakistan , Bangladesh or Singapore . The India has been considered the Largest It market as it is the Worlds Biggest Democracy .

The IT professionals of China are recognized worldwide . On the Other hand China has been the Asian Tiger in the Last 10 years and it is Electronic and Telecom Products has completely brought revolution in the Asian market. Besides it Automobile Industry which is yet an other achievement of China. Chinese businesses often become eclectic and unwieldy. Consider a typical Chinese shop in any Chinatown. It might be filled with a bizarre array of items — packets of seeds along with pairs of rubber gloves, children's toys and woks. Decisions on stock purchasing are driven not so much by customers' needs but with which suppliers the owner has personal connections. Thus, the range of stock is driven by supply rather than demand. A need to upscale such system opens opportunities for ASPs.

If we take the example of the Malaysia ,it is also a economic giant and made a great Progress in the IT Sector or Application Service Providing . Unlike China , most of the Industry from Tourism to aviation and from telecom to Government Functioning has been automated and IT is really booming Industry in Malaysia . In Malaysia, multinational corporations make higher rates of profit from their operations than from their world or home operations. A study by W. B. Redaway on United Kingdom investments abroad shows that Malaysia produces one of the highest rates of profitability in the world; 28.7% pre-tax profitability and 18.8% post-tax profitability. He reports that the average profitability of new investments during the first five years is minus 0.1% in rich countries as compared to 7% in poor countries. In other words the average new venture in a poor country is already realizing profits when it is still sustaining losses in a rich country. As such, western companies are in influx today in Malaysia. Those western firms bankable are targets for ASPs.

The Singapore is yet an other Country which really made the mark in the Asian Markets due to unlatching Services of IT and out sourcing . The Call centre Business and Outsourcing has been appreciated worldwide and The IT service Providers of Singapore are regarded the Best ASPs in Asian Market. They Have also got excellent Telecom Service Providers , Broad Band , Satellite Services and So which are the really demand of Asian Market . As the more the demand, the more will be Production and Supply. Cross-border joint ventures between are common among Indians. Singapore's Jhunjhnuwala family owns Singapore's Hind Development Group. The company had its start in 1997 when it acquired the Oberlin Imperial Hotel in Singapore from India's Oberoi family. Today, the Jhunjhnuwala family is involved in property development in Singapore, Hong Kong and Australia and running northern Indian food restaurants in Singapore. The family has around 50 members today in Singapore. Originally from India, they were based in Burma until the 1960s exodus when the Burmese government nationalized industry. Such glimpse of conducting businesses in India could open rooms for ASPs.

Pakistan is yet in Other Country which has really emerging as IT Partner in line with other Asian It Service Providers . The IT Sector in Pakistan has really improved . Now the Country has the automated every Consumer Billing , ID Cards , VISA and Passports and changed all the manual Services into Computerized and automated . The data can be accessed any where in the World regarding the Visa and Identity. Secondly the Telecom Services have also changed top a large Scale .
Furthermore, China, India and Malaysia are three of the emerging formidable economies in Asia. Based on ASEAN Finance and Macroeconomic Surveillance Unit (FMSU) Database (2003), China accounts for 3.4% of world GNP having $780 per capita income; Malaysia has its share of $4,198 per capita income while India’s per capita income is at $450. India is not a major player in the global trading system because its share of total global trade is less than 1 per cent. Nonetheless, India’s population base of over 1.07 billion and an expanding middle class of around 300 million to 340 million ensures that it receives attention from its major trading partners in Europe and North America particularly United States and Canada [Yahya, F., 2005].

Challenges to Applications Service Providers :

The Application Service Providers in Asia has been doing a lot in the Field but they have been facing many problems regarding the available skilled Work force and Their Proper Planning the Detailed analysis of their problems can be assessed in following terms:

1.Work Force : The Human Resource is the key to grow at massive role in any environment of the Asian countries where the technical Human resource is scarce especially in India and China. The Applications service Providers faces several difficulties in searching the Proper Human Resource for their Company in order to be able to attract more Customers for their Services . The Service Providers has to concentrate on the Training of the hired Staff and a sufficient amount is to invested in the shaping of the Fresh appointments .As the times goes by the need of the proper need of human resources is increasing days by day . Now a days the agencies are selling their human resources to the companies in need of the human resources . They test and train the human resources according their categories and make available at the disposal of the companies who are strongly need the workers to carry out their business at fast track as well as keep discovering new locations and expanding their operations. The companies who mainly need the workforce are mostly Banks . Oil companies , IT companies ,Chemical company’s textile and garments companies . They recruit the staff on yearly and half-yearly basis in order to expand their operations and branches in the various cities countries and provinces . They need proper and experienced staff to carry out their business at fast track as well as be well versed in IT sector and customer services . The recent addition of human resource Hunters is the Call Centre Business which is really booming industry and needs skilled and trained Call centre Agents to sell their products worldwide . Which has really opened doors to the people of Asia to avail this new opportunity of getting their workforce involved in this business . Though this service is limited to the Urban Cities only yet it ahs started expanding to small town as the time goes by and It services are expanding to smaller towns .

2.Language Problems : It is irony to state that in Asian Countries multi Languages are spoken which are very difficult to understand for the Western application Service Providers such as Microsoft and Google etc who use the local Human resource for interaction with the clients in the Asia in order to market their Products. As the English is mostly limited to the Urban areas of the Asian countries such as India , Pakistan and Bangladesh but the ASPs face huge difficulty in Communication with the Local Customers in China and Malaysia where more 90% speak their native languages . So the ASPs invest a lot of amount on hiring Local staff and integrating local Languages Software in their Services so as to be able tackle with the problem of Language. Google , Msn, Yahoo and AOL has already done a lot in this regard where as HSBC bank , standard Chartered Bank and Citi bank have also appointed the Local staff for their products marketing . The Language has also helped in the booming industry of Call centre because they required native accent or neutral accent English fluent speakers to do business deal with the Customers worldwide and sell their produces online which is said to be Tele-sales .The English has emerged the only medium of communication between the world wide countries to carry out business and other contracts . The importance of English cannot be ruled out due to its ever-increasing need and requirements if any company goes global.

3.Advertising and Marketing: The advertisement is the key feature to market the Products of Service Provider. But if the advertisement is in Foreign Language then it will be available to the People who are at home at the language but if the same advertisement is in Local Language, it will find great response from the Public for the Company Profile and Services specially IT company. Thus the Advertisement in Local Languages will help a lot as compared to in international Language such as English . The advertisement is also said to be the tool with which the companies grows . The more advertisement any company does for its products the more customers are attracted towards its products and services . In recent years the advertisement has been the only source to market your products worldwide thorough Internet marketing, media print and electronic as they have developed at the massive scale . The electronic media has also developed with the improvement of wireless networks and main source of information regarding the product updates , new products and new services offered by the various companies worldwide . The advertisement and marketing are the really source of maximizing the sales of the company and making it popular worldwide due to advertising its innovative products in the market. The markets are available for the companies who are marketed well by the advertisers. The more marketed the more sales will be for the companies .

4.Environment and Policies: The Certain countries of Asia have certain Policies for Investment specially the foreign investments . The India has been Hub of Business in terms foreign Investments and The Second Largest market in Software after its Film Industry . The It sector Policies are congenial for the foreign ASPs but they purchase Licensees form the Companies and Rely on their Local talent which has really boosted their IT Sector . Similarly in China the IT sector has to be established in proper manner as their is huge market of electronics and auto Industry which is the Countries most authentic Industry for Economic development . Bu they are running towards the IT revolution Application Services which will be beneficial for both ASPs and the Companies in Search of ASPS for automating their Business and Outsourcing . The Malaysia has been also the hub of electronics and Tourism. Its tourism and electronics industry are the Country’ main economy supporters.

The environment and the policies of the government are so important before initiating its operation by any Service provider company . The environment is assessed on the basis of origin , Language , needs and requirements and moreover the integrated terms and society . The product markets are also analyzed by the know how of the products and requirements mean the demand . If the demand is high the company will survive and if the demand is low then the company will have to strive hard for its survival .in this condition the company will gravely need the introductory campaign through advertisement and marketing./ similarly the government policies and laws are also applicable for the smooth operations of any company in Asian markets . If any company violates the laws and policies may find difficulties in future .
Published: 2007-03-23
Author: Abdul Rahman Malik

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