Application service providers (commonly referred to as ASP's) have quickly sprouted onto the web hosting scene in effort to provide businesses with new and innovative services. The term ASP should not be confused with Microsoft Corporations software application.

The number of applications provided through the ASP model is growing. Accordingly, there is a growing business of companies developing software for the ASP marketplace. What sorts of applications are being developed? As remotely-hosted applications can provide cost-effective access for businesses to unique software, many of the applications are designed to be of occasional use in terms of use. Others are geared towards using group connectivity provided by through the Internet to provide an application that is flexible.

ASP's have created software programs to handle various business functions as materials management, human resources, financial management, and e-commerce transaction services.

The variety of solutions provided by ASP's is vast. Many ASP's are doing great business in meeting operational needs of companies across different industries and business functions. There are a number of technical and business issues currently addressed by ASP's to develop and enhance system applications.

A major advantage for businesses in seeking ASP services is that they provide an opportunity to reduce costs and increase efficiencies. Companies can have access to a wider-range of software products with the possibility of paying less than an outright purchase through usage charges. This allows businesses to access applications that can service particular business needs so companies can focus on their core operations. Furthermore, ASP's are developing new software that can provide business solutions to operating issues not previously addressed through PC-based software. ASP's also remove many of the technical administrative and maintenance issues associated with software by providing real-time upgrades, remote hosting, remote dial in customer support and overall software management.

Web hosting companies are involved in the development of applications – however, many of the hosting companies serve to provide network management and serve the application remotely to users. In providing ASP-related services, these companies are essentially AIP's (application infrastructure providers.)

For mainframe web hosting applications, ASP service providers are pioneering a new way to host and maintain business applications.