ASP may be said to stand for application service provider. This is a term commonly used in the information technology industry to refer to a company that relies on a network to supply computer-related services to clients or customers. A software product that relies on ASP models may be described as software-as-a-service (SaaS) or On-demand software. At its most basic, the ASP business could be the process of allowing the clients to access a specific application program based on a certain protocol. One common protocol is HTTP.

Companies that act as ASPs thrive because certain small- to medium-sized client companies may not be able to afford the costs of specialized software applications (due to the increasing prices of such software products.) Also, end users such as these client companies may not be able to absorb the total costs of distribution of specialized software applications should the ASPs simply sell the product to them outright. With ASPs on the ball, client companies can be able to use the SaaS without having to significantly add on to their current expenses, or attempt to figure out how such software works in great technical detail.

The ASP is a specialized service then, which is responsible for keeping its software applications as advanced as possible, providing round-the-clock technical support to client companies, assuring the electronic and physical security of their software applications, and essentially allowing the client companies to be assured of the continuity of operations while still staying flexible enough to handle challenges in the future. ASPs are categorized as: a local ASP that is responsible for providing small business support over a well-defined location; an enterprise ASP that is tasked with broad spectrum services; a vertical market ASP which is known for customizing solutions for the specific industry of the client (such as medical billing); and a functional (or specialist) ASP which handles solitary applications (an example of which is timesheet services.)

A service level agreement is a formal legally-binding contract between a client company (namely, the small- to medium-sized businesses that hire the ASP) and the ASP itself. Like all service level agreements, it aims to smoothen relations between client and service provider by clarifying all issues related to hiring the ASP, provision of services by the ASP to the client company, payment of the ASP, and future relations between the two based on how the current transaction proceeded.

It is not only regular businesses which rely on ASPs nowadays. Even non-profit organizations, community organizations, and government agencies rely on ASP support too, rather than establish their own systems. The rule of thumb here is, if hiring the ASP can help reduce complexity of the business operations and lower total costs, then hiring the ASP is a good thing. If, however, hiring the ASP would compromise the operations of such organizations in some way (such as breaching existing and future security systems, or creating havoc with the budget provided by superiors) then the organization may choose instead to create an in-house department concerned with SaaS functions. The nice thing about ASP service level agreements is that they help create a benchmark by which future ASP transactions can be measured against and judged.

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