Application Hosting is sometimes called on-demand software

Since the costs have increased for specialized software, far exceeding the price range for a small to medium size business, the need for Application Hosting has increased. Through the use of ASP's the costs and complexities can be cut down instead of the users having to pay the huge costs involved in distributing the software to end users.

The majority of the upgrading issues have been done away with from the end firm; it is up to the application host to maintain up to date services, technical support, electronic and physical security, and the support for business continuity.

The clients for ASP services include government organizations, non-profit and membership organizations and businesses.

There are many types of application hosting businesses:

• Local ASP's deliver services to small businesses within a limited area.
• Enterprise ASP's deliver a broad spectrum solution.
• Functional or Specialist ASP's deliver single applications such as credit card processing.
• Vertical market ASP's deliver solution packages for customers in a specific field, such as medical transcription.

PayPal® is a great example of Volume ASP, which some refer to as the fifth type. Volume is a specialist that offers low cost package solutions via their own website. The high volume of PayPal® was one way to lower the unit cost per transaction.

Application software is on the vendor's system and is accessed by users through the web browsers using either HXTML or the special client software that was provided by the vendor.

Some of the features that are commonly associated with application hosting are the ASP bills on a per use basis, they own, operate and maintain their servers that support the software, they fully own the software, and they are the ones to make the information available to their customers over the internet.

There have been a wide range of applications available to the public using this model, from the Yahoo® Calendar to some Google Apps, and many others.