Asp business and legal issues

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The Application Service Provider (ASP) model is booming. By some projections, the ASP market will reach $4.85 billion by 2003. Currently, the most popular software hosted by ASPs are enterprise resource planning (e.g., J.D. Edwards), e-business relationships, and supply chain applications. Most companies which perform ASP services will need to form relationships with other companies and should consider the following:


Choose your partners well. An ASP combines hosting, communications and application software. An ISP turned ASP needs software. A software company needs hosting and communications capabilities. An ASP targeted at a certain industry may need to acquire additional software or partner with an exchange.

Get your house in order. Whether a company forms a strategic alliance, acquires another company or wants to be acquired by another company, it needs to get its house in order. Unwritten or ill-defined stock option plans for current employees, computer code that has not been transferred from consultants or employees to the company, inadequate registration of domain names, service marks, copyrights and patents can prevent a new relationship from occurring or reduce a company’s leverage in negotiating a new relationship.

Choose the correct relationship. Cross-service level agreements between the alliance entities may be a preferable strategy to forming a separate entity such as a corporation or LLC. Whether the relationship exists by contract or a separate entity is formed, plan the “divorce” now. Buy-out agreements and ownership of computer code, copyrights and customer lists should be negotiated up front. Who will own what upon merger or break-up?

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There are many things to consider before establishing an asp .As in every module of business there have to be some legal issues every where . Define your business objectives and analyze how the ASP will help you streamline business applications and to what extent.Assess your current IT staff strength and their compatibility levels while working with an outside agency.Do a cost benefit analysis of using an ASP and whether you’re ASP helps you to concentrate and focus more on core business areas.