Application service providers (ASPs) and web services are becoming an increasingly popular alternative to selling software the traditional, “shrink-wrapped” way. This paper presents the results of an empirical study of the German ASP market. We surveyed a representative sample of companies traded on the German equivalent of Nasdaq. We asked questions about the companies’ expectations and practical experiences with ASP-based services. The results confirm that ASPs are definitely on the rise. However, several problems remain. Most potential customers are concerned about the confidential treatment of their data once it has been transferred to the ASP site. Quality of service and maintenance need to be agreed upon in advance, in contractual form. Finally, numerous potential customers have problems understanding the ASPs’ offerings in sufficient detail. A more transparent marketing, coupled with a more personalized sales approach, should be a major concern for the ASP industry as a whole. The results of our study should be of interest both to ASP companies, to help them improve their services, and to IT management as a whole to help them decide which (if any) of their enterprise functions would gain from using ASPs.