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NETWORK WORLD NEWSLETTER: JEB BOLDING on
APPLICATION SERVICE PROVIDERS 01/23/02 Today's focus: Buying beyond your means Dear Wincenty Kaminski, In this issue: * USinternetworking files for bankruptcy protection * Links related to ASPs * Featured reader resource _______________________________________________________________ SERVICE PROVIDERS REAP REWARDS OF RIVERSOFT'S NETWORK MANAMGENT TOOL Learn how successfully integrating Next Generation Network Management tools can reduce network operational costs, guarantee SLAs, accelerate time-to-market for new services and more. Webinar from RiverSoft/Network World. http://nww1.com/go/0121river18b.html _______________________________________________________________ Today's focus: Buying beyond your means By Jeb Bolding USinternetworking earlier this month announced that it has filed for Chapter 11 bankruptcy protection. It joins an unfortunate list of other ASPs who also have begun bankruptcy protection proceedings, including FutureLink and Breakaway Solutions. No doubt, there are dozens of other ASPs with the same troubles, but did not have wide media play and so have quietly disappeared into anonymity. According to an article I read about USi's financial issues, Bain Capital Partners promised an investment if USi could erase $120 million off its existing debt. From what I've seen about this recent turn of events, it is assumed that two issues led to USi's situation: its huge investment in its multiple datacenters and the slow adoption rate of the ASP model. It appears that by erasing the bulk of its debt, USi will have the financial wherewithal to last through the economic downturn we're now experiencing. Existing investors jumped on this opportunity, and USi customers should not experience any loss of service during the restructuring period. All well and good. But does Chapter 11 and further investment really solve the problems that plagued USi and its unfortunate, bankrupt brethren? I'm not sure that it does. Has the behavior and value proposition for USi been re-evaulated and altered to accommodate new market opportunities? I mean, you know, I've been really eyeing the new flat panel iMacs that are on the market for $1,800. I would also really like a new Powerbook G4, which costs about $2,900. And those $2,400 Sony Picturebooks are really cool too. To top it off, though, I'd really like to have one of Sun's SunBlade 100s with an Intel daughterboard inside and a flat panel display - that would set me back about $3000. Finally, I'd have to network all these machines together so that I could get effective use of my Sprint Broadband connection (yes, I really do have that). Hmmm, I don't make enough money to afford all that. Maybe I should just buy it all and then declare bankruptcy. I understand that even with that bad mark, I can still get credit cards. So once I've bought all this, I could focus on my motorcycle needs. I've got a nice, but old, Honda VFR750...at heart, though, I'm a BMW rider and I'd really like to buy one of the new R1150GS that sell for about $15,000. Of course, I'll need some bags, heated grips (I live in Colorado after all), a new helmet, and updated body armor. I suppose that by now, you get the point. I could probably continue this process of buying beyond my means for quite a bit, never changing my behavior, and always being sunk in debt. Eventually, USi is going to have to do more than wipe out its debt and get more equity. If it doesn't change its business model, its behavior, and the way it manages its assets, then this cycle will be repeated soon again. The first things that I'd look at are the cost of its datacenters and how reliance upon them can be minimized. I'd also consider what hosted applications have been profitable so far and get rid of the dead weight that has no traction. I also would do some strategic research into the technology developments that are going to take place within the enterprise in the next 12 months and see how I, as a company, could address those implementation needs with my existing infrastructure, as well as investing in non-existent infrastructure that could be leveraged to sell into those strategic spaces. _______________________________________________________________ To contact Jeb Bolding: Jeb Bolding is senior consultant with Enterprise Management Associates in Boulder, Colo., an analyst and market research firm focusing exclusively on enterprise management. Bolding has 10 years of experience in the network systems industry, most recently with eCollege.com, an ASP for higher education, where he was director of product development. He can be reached at mailto:jbolding@enterprisemanagement.com. _______________________________________________________________ Get your wireless service from the carrier ranked #1 by Forbes magazine. Now get Unlimited Night & Weekend Minutes, plus up to $165 in savings when you activate on select calling plans and purchase a Nokia 3360 or 8260 from AT&T Wireless. To learn more go to http://nww1.com/go/ad207.html _______________________________________________________________ RELATED EDITORIAL LINKS USi files for Chapter 11 Network World Fusion, 01/07/02 http://www.nwfusion.com/news/2002/0107USI.html Breaking ASP news from Network World, updated daily: http://www.nwfusion.com/topics/asp.html Archive of the ASP newsletter: http://www.nwfusion.com/newsletters/asp/index.html ______________________________________________________________ FEATURED READER RESOURCE Network World Fusion's The Edge site Network World Fusion's The Edge is a resource devoted to the advances in service-provider networks that are shaking up the old telecom order. In classic Network World fashion, we focus on the hardware, software and services coming to market - but this time from the vendors targeting legacy carriers, new alternative local carriers, ISPs and application service providers. http://www.nwfusion.com/edge/index.html _______________________________________________________________ May We Send You a Free Print Subscription? You've got the technology snapshot of your choice delivered at your fingertips each day. Now, extend your knowledge by receiving 51 FREE issues to our print publication. Apply today at http://www.nwwsubscribe.com/nl _______________________________________________________________ SUBSCRIPTION SERVICES To subscribe or unsubscribe to any Network World e-mail newsletters, go to: http://www.nwwsubscribe.com/news/scripts/notprinteditnews.asp To unsubscribe from promotional e-mail go to: http://www.nwwsubscribe.com/ep To change your e-mail address, go to: http://www.nwwsubscribe.com/news/scripts/changeemail.asp Subscription questions? Contact Customer Service by replying to this message. Have editorial comments? Write Jeff Caruso, Newsletter Editor, at: mailto:jcaruso@nww.com For advertising information, write Jamie Kalbach, Director of Online Sales, at: mailto:jkalbach@nww.com Copyright Network World, Inc., 2002 ------------------------ This message was sent to: vkamins@enron.com
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