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.
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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