Outsourcing: asp business and legal issues

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Application Service Providers (ASPs) combine hosting and access to application software into a single service. Companies access hardware and software maintained by an off-site provider. ASPs are an attractive choice for a variety of companies, large and small, that want an option to traditional software licenses and hardware purchases. Start up companies can avoid large expenditures for hardware and software and existing companies avoid expenditures for upgrades and the cost of maintaining an IT staff. Companies which seek rapid entry or rapid growth in e-commerce are able to access quickly necessary hardware and software. Before entering into an ASP service level agreement (typically 3 - 5 years) business and legal issues should be negotiated and agreed to in writing, including, at the very least, written agreements regarding the following:


Pricing Model. Choice of charge per use, monthly service charge or percent of revenue.

System Requirements. Define minimum functional service level requirements. Are there penalties or termination rights if requirements are not satisfied?

Other Software. Define what software is currently offered by the ASP and what other software will be available during the contract term.

Exit Strategy. Can software be moved in-house? Can data be converted to another system? What penalties will be charged for early termination?

Termination. What termination rights do the parties have if either is acquired?

References. Remember to check references and the background of ASP service partners.

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Well , i have only searched a few things about this topic as I had completely no knowledge about this . ASPs combine traditional outsourcing model with Internet to deliver customized software solutions with real time services. ASPs are a compelling alternative to buying packaged software and implementing it in house.Application Software Providers or ASPs, a new revolution for the business world, provide you with customized software solutions for your business processes, be it accounting, human resource management, or Enterprise Resource Planning (ERP), to name a few.