Qwest Cyber.Solutions CEO Talks ASPs

BOSTON (06/12/2000) - This time last year Qwest Cyber.Solutions - the Qwest Communications International Inc. and KPMG Peat Marwick LLP application service provider (ASP) joint venture - was gearing for launch. Network World Senior Editor Denise Pappalardo recently talked with John Charters, president and CEO, about the company's first year and the condition of the ASP market.

NW: Have you seen any big changes in the market during your first year?

Charters: There hasn't been any cataclysmic event in the industry that has changed everything. But what has changed is there's a lot more of us. In one year we probably went from five to a thousand ASPs. I think there has been a change where when we all started out, we were all very product-focused: SAP, Oracle, People Soft, Ariba, whatever. I'd say 12 months later, we're much more industry- and sector-specific. Now you see specific health care ASPs or very specific sector-oriented or application-oriented ASPs.

NW: You mention a vertical approach. What are you focusing on now?

Charters: The health care, financial service and communications industries.

NW: Can one ASP offer multiple vertical industries complete application hosting services?

Charters: I think the answer generally is no. You have to tackle the component that you're capable of dealing with and then look to partner or acquire to create a completely vertical integrated solution. Clients still want one partner if they can get it, especially in this complex space.

NW: It sounds like we'll hear more news in regards to your teaming with or acquiring companies. True?

Charters: A little of both possibly. You'll see some work out of KPMG. They've got what they call their category killers, where they are picking at particular technology, such as call center technology. They look at how that technology will work within a health care or services or communications or financial environment. I think that's what you'll see.

NW: Why should users trust Qwest Cyber.Solutions to host their applications?

Charters: I compare and contrast myself with a small ASP who's got one-tenth the revenue and one-third the people. Who has experience in supporting multiple applications, in multiple customer environments, large and small? I've got a dot-com customer base and an enterprise customer base. If I'm a dot-com and I believe my business is going to explode next year, do I want to be with a guy that's just learning how to do it or somebody that's been doing it a long time?

What the industry needs is an establishment of some trust and credibility, because this is still pretty new.

People are still extremely difficult to find and even harder to retain. Whether we're talking about a dot-com or a huge Fortune 50 company, finding the people to run their back office infrastructure is extremely difficult.

NW: But isn't it difficult for you as well?

Charters: Here's the difference. Would you rather work in an IT department of some corporate, windowless back office where they move you to the outskirts of town and you're rarely part of the business? For many years [IT departments] were the last group to get [stock] options or got the smallest raises in the corporation, because it wasn't really viewed as strategic to the company. IT was viewed as a cost center.

That hasn't changed all that much. Certainly they are getting better salaries and they're getting options now. They are being viewed more importantly in the last couple of years because of the nature of IT in the corporate world. But we offer a better value proposition for IT employees because they are the product.

IT employees get very excited about being the product, not the cost center.

NW: How many customers do you have now? And what's the general make up of your customer base?

Charters: One hundred and forty customers. Some have anywhere from 10 seats to 5,000 seats. In terms of sizes of deals with each customer, we've had deals in the low thousands to the tens of millions.

NW: From a network perspective, are you only offering customers Qwest services or do they have choices?

Charters: We have one client that has lots of international sites and Qwest couldn't reach them all, so we used Qwest partners to reach all of their sites.

NW: But in general, you're recommending Qwest?

Charters: Yes. Because it's a homogeneous network.

NW: Are you guys planning an IPO any time soon?

Charters: Yeah, we talk about it a lot. But there hasn't been any decision made as to when.

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