High fliers
Exodus and WinStar top the charts as the fastest growing Network World 200 companies. [See the top 10 in revenue increases]
 It should come as no surprise that the two fastest growing NW200 companies hail from two of the most dynamic industry segments: the Internet and new world telecom.
Web hosting provider Exodus Communications earned top seed by growing a whopping 325% last year to $53 million, while broadband carrier WinStar Communications came in second by ratcheting revenue up 243% to $244 million.
Seven-year-old Exodus started as a computer consulting firm, then in 1995 remade itself into a server hosting and Internet connectivity company. A year later, it rolled those experiences together and created what it called Internet Data Centers, and in 1997 began offering managed services from the centers.
Today, Exodus has seven Internet Data Centers and four more on the drawing board. Customers' Web servers - some of them protected by biometric security, alarm systems and video surveillance - sit behind secured access routers that are connected to the Internet via multiple ISPs. Not only does this help protect the servers and safeguard against service outages, it puts the servers closer to public and private Internet exchange points.
But Exodus wants to be more than a collocation service provider. It wants to push into application hosting and managed services. "This year will be pivotal for the Internet and outsourcing services," says Ellen Hancock, a 29-year IBM veteran who in March 1998 joined Exodus as president and CEO. "We will see a shift from business-to-consumer to business-to-business services."
Managed services accounted for about 10% of Exodus' $53 million in 1998 revenue, says Steve Murry, research manager at International Data Corp. in Framingham, Mass. Exodus hopes to double its managed services revenue to about $10 million this year.
To help meet its goals, Hancock took the company public last year and acquired some key assets, such as Arca Systems, a security analysis firm. Arca provides consulting services that involve everything from developing security policies to providing intrusion detection and monitoring services.
And late last year Exodus struck a deal with Corio, an application hosting service provider, to sell access to PeopleSoft applications running in Exodus' data centers.
Exodus also moved to bolster its Web hosting business with the acquisition of American Information Systems. Exodus will turn the American offering into a fully managed service based on Exodus-owned and operated Web servers. Most of the Web sites will be hosted in Exodus' new Chicago data center, which is expected to open this quarter.
While Exodus has a solid plan, it is competing with heavyweights such as Intermedia Digex, Frontier Global Center, IBM Global Services (which is being acquired by AT&T) and GTE Internetworking's Genuity Web hosting division.
To keep pace, the company is bolstering its infrastructure, buying four 622M bit/sec OC-12 connections from Qwest to link its data centers, Hancock says. One of four pipes is already turned on, and the other three are expected to follow soon.
Turning up high-speed network links is a business WinStar has perfected.
The company's secret is using broadband wireless technology, what the company calls "wireless fiber," to overcome the thorny last-mile problem. While the term wireless fiber may be something of a stretch, the technology is enabling WinStar to speed the construction of a nationwide broadband network.
And its efforts seem to be paying off. Today, WinStar has 15,000 customers, 300,000 lines installed and access rights to 4,200 buildings. By the end of next year, the company anticipates supporting 8,000 buildings, says Bill Rouhana, founder and CEO of the New York-based carrier.
Rouhana started WinStar in 1993, leaving behind a 10-year career as a merchant banker. As a financier he funded entertainment and media companies, and in the late 1980s got involved with telecom concerns. It was that exposure that hooked him. "I saw that information and computer technology and the broadband networks were going to have to come together," Rouhana says.
The key to success, he believed, was widespread availability. That meant being able to install the network fast and at reasonable cost. Ultimately, it became clear that the only way to do that was to use some kind of wireless technology to avoid the expense and delay involved with digging up concrete to install last-mile broadband fiber links. In February 1994, WinStar purchased the answer: a license for radio frequencies in the 38-GHz range.
Now, five years later, WinStar is up in 30 major markets in the U.S. and a few cities overseas. By the end of next year, the company anticipates serving 60 domestic markets and, by 2004, the top 50 international markets, as well.
Domestically, the company has a nationwide fiber backbone that links switch locations in major markets. Each of those core switching centers houses a Lucent Class 5 central office switch and Internet, frame-relay and ATM gear.
The switching centers are, in turn, linked to WinStar hub sites around each city via fiber procured from local companies. The hubs are connected to buildings using wireless fiber. Customer traffic can be frame, cell, circuit or a combination.
Rouhana says each wireless channel can support up to 255M bit/sec, and in many places WinStar has up to 19 channels. "So in some places we could amalgamate 4G bit/sec into a building if we needed to," he says.
More typically, the company installs 45M bit/sec wireless links into a building, an installation that takes a few hours, instead of months, for fiber, and costs about a tenth as much.
"Our average customer uses about 20 lines, and that typically covers the cost of adding the building to the network from a capital point of view," Rouhana says. "So you can add a lot of buildings knowing you're going to recover your capital very quickly. Then you have lots of excess capacity left over. If that first customer is only using 20 lines out of a DS-3, that leaves 650 lines of capacity that you have fully paid for in the building."
This year, WinStar expects to spend $600 million on capital expenditures. Of that, about $100 million is earmarked for the backbone, $150 million will be spent on switch build outs, $100 million will be used for hub sites, and the balance will go into connecting buildings and developing support infrastructure.
Asked if the incumbent local carriers are treating WinStar fairly, Rouhana says: "They don't make it easy, nor would you expect them to. After all, we're taking business from them. But the stories of the RBOCs and their ability to be incompetent leads you to wonder if that incompetence is strategic or endemic to their business."
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