Local Internet business Alta has been swallowed up by US-based ASP Interpath and is in the process of morphing itself into a national branch of a global conglomerate.
According to Alta CEO George Caravias, being brought into the Interpath parent fold will give Alta the leverage to expand its current offering within Australia. "It's not a major deviation from our current business lines," he says. "More likely it will round out the local capabilities, taking advantage of some of the things they do in the US. We'll continue to expand pretty much on the same business plan we had before, except that we've now got a big brother with $100 million in cash sitting behind us."
Caravias believes Alta's Australian customers will benefit from the combination of a successful local capability allied to the strength, stability and global presence of Interpath. "Being part of a larger international organisation gave us a lot more certainty about the future," he says. "Being such a capital-intensive business, having that depth helps an awful lot."
While the ASP market is globally acknowledged as a booming industry, with projections set at $US25 billion revenue by 2004, analysts are issuing stern warnings that many founding ASPs are doomed to failure.
Caravias however, takes a different view. "I certainly think there will be a lot of consolidation, but the ASPs that disappear are more likely to be bought by larger ASPs, in which case the service will pretty much continue uninterrupted."
"In application servicing, customers are pretty sticky. By the time you've gone to the trouble of putting your IT infrastructure on someone else's facilities and hooking up all the links you suddenly don't want to change. A company that has those kind of sticky relationships becomes very attractive for an acquisition. What's more likely to happen is that there'll be some big players that will get critical mass, they'll buy the smaller players that won't be able to keep up with capabilities. From a customer perspective, this will probably mean they'll get better service."
Caravias admits that the deal with Interpath is his way of making sure he is one of the big players. "With the Interpath transaction, Alta has become part of a large, well-funded organisation that gives it the ability to be even more effective in the Australian ASP market," he says.