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Commentary: Purchase of GlobalCenter will change Exodus

The acquisition of Global Crossing's Web hosting arm, GlobalCenter, will accomplish two things for Exodus Communications: it will make the company larger and change its approach to Web hosting.

By Eric Paulak and Ted Chamberlin, Gartner Analysts

The acquisition of Global Crossing's Web hosting arm, GlobalCenter, will accomplish two things for Exodus Communications.

First, Exodus will grow larger by absorbing a major competitor. The deal will enable Exodus to continue to compete effectively in the Web hosting market, into which telecommunications giants such as WorldCom have moved aggressively as a way to provide value-added e-business services on top of their networks.

Second, the acquisition will change Exodus' approach to Web hosting. Purchasing GlobalCenter will affect Exodus in four key areas: services, network, brand recognition and the future.

See news story:
Exodus buys GlobalCenter to create Web hosting giant
Services: Up to now, Exodus has excelled at co-location by opening numerous, world-class data centers in many locations to better attract customers. These data centers all have a similar layout, staff plan, infrastructure and service capability, which enable Exodus to increase the volume of its business cost-effectively. Success will hinge on how quickly Exodus can fill those data centers with customers having similar service needs. At the same time, most Exodus customers understand the need to have other partners for design, content, applications, customized configurations and complex system integration. The acquisition of GlobalCenter will enable Exodus to offer more of those services.

Network: Exodus has a high-speed backbone between its data centers and extensive peering arrangements. Although Exodus has made many claims about the superiority of its network services over those of its competitors, Gartner clients have not confirmed such claims. Before this announcement, Exodus had no means of reacting in real time to congested network traffic. The acquisition of GlobalCenter, which includes access to Global Crossing's worldwide fiber-optic links, will give Exodus the ability to see into the network, and proactively monitor and reroute traffic. That in turn will enhance Exodus' network capability to help it compete with the large telephone companies and Internet service providers that are aggressively moving into co-location and Web hosting.

Brand: Exodus has the highest name recognition among Gartner's client base for Web hosting and maintains a high profile. Enterprises consider Exodus at least initially in most Web-hosting contracts that Gartner has seen, and Exodus professes a 40 percent win rate in those situations. Acquiring GlobalCenter will help Exodus maintain its leadership against fast-growing competitors.

Future: Enterprises will increasingly need application management. Today, Exodus supports only a few customers in this manner, but the additional skills and resources that GlobalCenter brings will help Exodus to develop that type of support for its largest big business customers.

Exodus's main challenge will be to maintain service quality, which can vary dramatically. Key functions depend heavily on skilled staff, such as technical support, customer service and account management.

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Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.