Researcher Giga Information Group has slammed a recent ASP Industry Consortium survey on Europe claiming that it is inaccurate.

Speaking to delegates at GigaWorld IT Forum 2000, Giga analyst Pascal Matzke claimed the survey, carried out by consultancy Ovum, examines the wrong market.

He argued that the report includes traditional types of outsourcing, such as payroll processing and web hosting, rather than focusing on enterprise applications that have emerged from ASPs (application service providers) over the past 12 months.

Matzke also claimed that European ASPs, such as BT, SAP and Deutsche Telekom fail to adequately address the small and medium sized market which observers believe is the largest sector for such services.

He said: "[The European ASP players'] ability to deliver complete solutions to the midsize and small business market remains questionable."

He believes that because many of these vendors traditionally target large enterprises: "They lack the appropriate technology and managing the transition to a small and midsized business market would also require significant operational investments in marketing and sales."

The ASP Industry Consortium's survey claimed that two thirds of businesses in the UK and Germany expect to purchase ASP services over the next 18 months and that a third already use ASPs for payroll, website and email applications.

A spokesman for the consortium admitted that the survey respondents used a broad definition of ASPs and their offerings which may account for the high rate of usage.

But the report's author noted that the survey indicates that many businesses are using at least a prototype of an ASP model and that their remotely managed services are very likely to evolve into more refined ASP services.

Giga's Matzke also believes that the number of European ASPs will likely consolidate in the future. Unlike US vendors, European ASPs are mostly alliances between telcos and software vendors, such as SAP's partnership with BT and Deutsche Telekom, and this model is unsustainable, said Matzke.

"The missing skillsets on the part of the individual ASP partners is likely to lead to a wave of mergers and acquisitions in the European software and service provider market," he said.

According to Giga the European ASP market was low at $15m in 1999. But this is likely to increase to $1.5bn by 2001 if the existing offerings mature and customers gain a better understanding of the market, added Matzke.