Pushing itself deeper into the ASP (application service provider) market, Nortel Networks this week agreed to buy privately held EPiCON for $US275 million in stock.
The agreement is part of Nortel's strategy to capitalise on the growing outsourcing market, Anil Khatod, president of Nortel's Internet Business Solutions, said.
"There are new revenue and network opportunities that Nortel must capitalize on," Khatod said. "We must support our customers in capitalising on getting dollars that are in the ASP market. We are in this market for the long haul."
Massachusetts-based EPiCON develops software that allows ASPs to install, manage and update software applications on thousands of computers from a central server. The company's software will be integrated into Nortel's newly announced Preside Managed Application Services Platform, which is an open system that supports multiple applications and is set for release soon.
EPiCON President and CEO Jack Sweeney said he was pleased with the deal for his company, which has 60 employees.
"It is the end vision of what we wanted to do, which was solve the problems around the desktop," Sweeney said. "(It is) important to reach the small and medium-sized businesses."
Nortel also has made agreements with iPlanet E-Commerce Solutions and BEA Systems to develop its platform for service providers. BEA provided Nortel with development support for the platform and is expected to continue providing sales, marketing and product development assistance.
ASP advocates argue that by leasing software applications rather than purchasing them, a business can save money on software, desktop hardware and tech support. A Gartner forecast has suggested that the ASP market could grow to $US23 billion by 2003, up from $900 million in 1998, according to Nortel.
Before Wednesday's acquisition announcement, Nortel owned 9 per cent of EPiCON. The purchase of EPiCON is expected to be closed by the third or fourth quarter of 2000, according to Nortel.