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AT&T buys into the ASP market by acquiring Usi

By Denise Pappalardo , Network World , 09/18/2006
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AT&T announced today that it is acquiring USinternetworking for about $300 million in cash.

USinternetworking is a privately held application service provider founded in 1998, when the ASP model was first popularized. The company touted big customer wins, but the ASP concept never lived up to its initial hype.

USi has 150 business customers, including companies such as GMAC, Michelin, Sunoco and Yankee Candle. The company’s revenue totals about $100 million; it employs 700 people and has two data centers.

What prompted AT&T to make the deal?

“We have a great capability from a collocation standpoint with great managed services right up to the operating system level,” says Mike Antieri, senior vice president of business marketing at AT&T. “We had a void and we didn’t have a significant level of expertise to manage at the application level.”

Application management is USi’s core competency, and the company is customer-service oriented, he adds.

“We have had a ton of customers ask us to manage at the application layer. We went after that through partners because we didn’t have the key requisite skills in-house or at scale,” Antieri says.

AT&T says it will retain all of USi’s employees and has offered retention packages to all key executives in an effort to keep them on board. The carrier says it will operate USi as a wholly owned subsidiary that will be run by the company’s current chairman and CEO Andrew Stern. He will be CEO of the subsidiary post-acquisition.

This isn’t AT&T’s first foray into the ASP business. Back in 2000 AT&T introduced a hosting platform called EcoSystem for ASPs. That service is no longer available. But the service provider has not directly offered hosted application services or software as a service to customers, choosing instead to team with partners.

The deal is expected to close in the fourth quarter. AT&T sales representatives and sales channels are expected to start selling USi application-hosting services as soon as the deal closes.

 

 

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