An Economic Model to Study Dependencies between Independent Software Vendors and Application Service Providers

Authors:
Nadège Marchand;H.-Arno Jacobsen
Affiliations:
Laboratoire G.A.T.E, CNRS-UMR, B.P. 167, 69131 Ecully Cedex, France marchand@gate.cnrs.fr;Department of Electrical and Computer Engineering and Department of Computer Science, University of Toronto, Canada jacobsen@eecg.toronto.edu
Venue:
Electronic Commerce Research
Year:
2001

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Abstract

Application outsourcing refers to the emerging trend of deploying applications over the Internet, rather than installing them in the local environment. This shifts the burden of installing, maintaining, and upgrading an application from the application user to the remote Application Service Provider (ASP). The ASP takes over all server administration and application management tasks. This deployment model allows applications to be distributed on a highly differentiable basis. This is in contrast to the traditional license-based software distribution model, where a customer receives “all-or-nothing” of the product and must manage the application on its own. To better understand dependencies between these two distribution models we propose an economic model to study the effects of actions of an independent software vendor on the profitability of an application service provider.