Interpath, an application service provider (ASP) that remotely hosts business software, said Carolina Power and Bain will each invest $50 million of new equity to fund Interpath's rapid growth in the nascent ASP market. Once the deal closes, Bain will own 65 percent of Interpath and Carolina Power will own the remaining 35 percent, the companies said in a statement.
Founded two years ago, Interpath said it plans to use the funding primarily to expand its sales and marketing efforts both in the United States and overseas.
The move comes as competition continues to escalate with more companies joining the lucrative application-hosting market.
ASPs offer companies an alternative to buying expensive and--at times--complicated business software. ASP customers pay a monthly fee to have their software hosted and maintained by a service provider, which frees customers from dealing with software upgrades and technical problems. Typically, a customer pays for the software license up front and signs a three-year maintenance agreement with an ASP.
Interpath entered the market early alongside Corio and USinternetworking, but the market has since attracted attention from a wide range of companies, which have expanded the competitive landscape. PC hardware makers such as Gateway and Dell, as well as giant software makers SAP and Oracle, are all trying to get a piece of the action in a market analysts say could be worth $23 billion by 2003.
Interpath, which already hosts software from SAP, Microsoft, BroadVision and others, said it is currently working on inking deals in the area of customer relationship management (CRM) software, a fast-growing sector widely perceived as the next big hit in business software. While future software rental deals haven't been finalized, the company said it is currently talking to front office market leader Siebel Systems and Nortel Networks for its Clarify application unit.
Under today's deal, Carolina Power will retain the fiber optic network assets owned by Interpath and about 50 Interpath employees. The remaining 450 employees will be retained by the Bain-owned Interpath to service the company's application-hosting business.
The transaction is slated for completion within the next 60 days, the companies said.