Telcos Rush to Stake Claim in ASP Market

SAN MATEO (01/28/2000) - AFTER STANDING by while upstarts scoop up clients and industry mind share, major telecom providers are pushing their way into the ASP (application service provider) market by vying to be the platform of choice for application outsourcers.

As telecom companies join the ranks of ASP vendors seeking the right model to offer services, telcos and their heavy-hitting partners may make the idea of data center outsourcing more palatable to larger customers.

AT&T Corp. last week crowded into the burgeoning ASP space, lining up a load of partners and arranging its networking assets in what it called an "ecosystem," or a platform for ASPs to offer services. The network services were punched up with data center components from IBM, Cisco Systems, EMC, Hewlett-Packard, and Sun Microsystems.

AT&T's competitors are also gearing up for a run at the ASP market. Sprint will soon reveal partners to bolster its colocation facilities, a company official said. The company has also teamed with Deloitte Consulting to offer hosted applications for large enterprises.

Cable & Wireless recently joined up and invested $500 million to build an ASP infrastructure. The two plan to build 20 data centers and leverage the IP backbone C&W purchased from MCI WorldCom to offer application hosting for small and medium-sized businesses.

According to some analysts, bringing in a big brand name to back up your ASP offerings can ease the concerns of companies considering the leap to outsourcing.

"Everybody wants a piece of the action, and there are battles going on at every level in the ASP market," said Bill Martorelli, vice president of services and sourcing at the Hurwitz Group, in Framingham, Mass.

A new breed of telecom carriers, such as Qwest, have a dual ASP strategy similar to Sprint's. Qwest hosts the ASP applications of providers such Oracle.

At the same time, Qwest joined with KPMG to launch a joint venture -- Qwest Cyber.Solutions -- to function as an ASP rather than a platform provider.

Meanwhile, other telecom companies such as Exodus, which is a pure hosting service with clients such as Corio and Oracle, said that AT&T's entrance into the market validates its strategy. Exodus plans to continue to provide infrastructure to the ASP market rather than compete with its ASP customers.

"There is a lot of misconception as to what an ASP is, but we have no plans to be an ASP. We are an enabler of ASP infrastructure," said Arif Razvi, director of worldwide alliance programs at Santa Clara, Calif.-based Exodus.

AT&T backers contend that the telco's reach gives it the advantage of flexibility in deployment.

"The big difference I see is that AT&T has built a completely distributed system. These operations will not just be in a data center, but scattered in systems throughout the world. The intention is to be far more distributed than a data center approach," said Kevin Lewis, senior director of marketing and strategy at Waltham, Mass.-based InfoLibria, one of AT&T's partners in the effort to deliver content to users.

AT&T's entry may help to "crystallize this whole ASP movement," said Eugene Lee, vice president of marketing at Cisco Systems, which is also bracing itself for the projected ASP boom. "It will accelerate ASPs' ability to get to market quickly and develop differentiated services."

Although these vendors' efforts will certainly provide the data center infrastructure, the thorny issue of who owns the customer relationship remains.

"This is just the latest in a long series. It's hard to say who has the hearts and minds of customers," Hurwitz Group's Martorelli said. "But in some cases, latching on to the cache of another supplier will help. AT&T is not known for their prowess in providing these kinds of solutions, but everybody's got a lot to learn in this market."

Margret Johnston, a correspondent for the IDG News Service, an InfoWorld affiliate, contributed to this article.

AT&T's ASP play

* Partners include Cisco Systems, EMC, Hewlett-Packard, IBM, and Sun Microsystems* AT&T put $250 million in networking investments and built 26 data centers to support the effort* AT&T Labs, InfoLibria, Inktomi, and Novell will provide caching and optimal server selection capabilities* EMC will provide enterprise storage systems and software* IBM will put its business partner networks, including ASP Prime, behind the effort* AT&T will use Sun's SunTone to identify applications that fit its ASP model

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