Consider a mid-sized automotive parts manufacturer in Bursa running its accounting, inventory, and sales tracking on three separate programs, spending two full days each month reconciling the data by hand before management reports can be prepared. The company wants to move to integrated enterprise software, but the numbers do not add up: server hardware, operating system and database licenses, ERP licenses, and installation fees from an authorized reseller combine into a figure well beyond the firm’s annual IT budget. This is a familiar dead end for a large share of small and medium-sized businesses in Turkey.
Over the past two years, a route around this dead end has been taking shape: renting software rather than buying it, and running it on a service provider’s infrastructure rather than on in-house servers. In technology circles this model goes by the name ASP, short for ‘application service provider.’ Instead of installing accounting or inventory software on its own machines, the client company accesses it over the internet through a browser or thin client; the server running the software sits in the provider’s data center. The company pays a monthly or annual subscription fee and avoids the large upfront investment.
The most visible advantage for SMEs is the reduction in startup cost. A traditional enterprise software project requires the company to first invest in server hardware, then in operating system and database licenses, and then in the ERP license itself. Taken together, these line items represent a significant capital outlay for a small firm. Under the ASP model, most of that fixed investment converts into a variable expense: a monthly subscription that scales with the number of modules or users. For companies with constrained cash flow, this difference directly shapes whether a project gets off the ground at all.
The second meaningful advantage is a lighter technical maintenance burden. A company running its own server must track software updates, set up backup routines, and stay prepared for hardware failures. The vast majority of SMEs in Turkey do not employ a full-time system administrator; these tasks fall either to an outside support contractor or, more often, to the accountant or office manager who already has a full plate. Under the ASP model, server management, backups, and updates become the service provider’s responsibility. The in-house team can focus entirely on using the software.
The spread of ADSL connections is steadily removing the main technical precondition for this model. Many SME offices that were still on dial-up connections two years ago now have fixed broadband, making internet-based software access genuinely practical. E-mail has moved to the center of business communication, and an internet connection is now treated as a basic utility in most offices, as unremarkable as electricity. Accessing an accounting or inventory program through a browser raises far fewer eyebrows than it would have a few years ago.
That said, the model carries limitations that deserve equal attention. Data security and confidentiality are legitimate concerns for SME managers: the company’s financial records, customer information, and inventory data now reside not on its own server but on a system owned by another business. Questions about how reliable the service provider is, who has access to the data, and how data will be returned when the contract ends all require clear answers. Turkey does not yet have a well-established legal framework or settled industry practice in this area, which makes careful review of contract terms essential. The risk that an internet outage will halt operations is also real; without a working connection, the software is simply unreachable.
SME managers evaluating this model should work through a short list of concrete questions before committing. Is the company’s current internet infrastructure reliable, and is the bandwidth sufficient for daily use by the whole team? Have the service provider’s references been checked, and are data backup procedures and access conditions written explicitly into the contract? When the monthly subscription cost is compared with the traditional installation alternative over a five-year horizon, is the ASP option genuinely more economical? If those questions yield satisfying answers, moving to enterprise software without a server investment is a realistic option. The economics of business technology are shifting, and companies without large infrastructure budgets no longer have to stand on the sidelines.
This article was originally written in Turkish by Gökhan MERCANOĞLU on January 9, 2006 and has been automatically translated into English and other languages using machine translation.