WorldCom to operate GEIS network
In a major strategic shift, GEIS, the biggest electronic data interchange player, will let WorldCom run its private network.
GEIS, a unit of General Electric, will focus on EDI services (electronic transactions sent computer-to-computer without human intervention), messaging gateways, extranets, electronic catalogues, and online marketplaces.
For WorldCom, GEIS represents another deal that guarantees a long-term service contract. In a similar arrangement last fall, WorldCom bought the former CompuServe network and America Online's network operations in return for a multiyear deal to provide network services to AOL.
"We believe the electronic commerce game is going to be won at the solutions level, not the transport level," GEIS spokesman John Berry said.
Separately, newcomer Sage Networks has acquired a former IBM Web hosting infrastructure in Washington, D.C. Sage also signed a long-term contract with KnowledgeLink Interactive, to host infoMarket and Newsstand, two former IBM services KnowledgeLink recently acquired. The deals also enable Sage to offer Lotus Notes, Domino, and enterprise hosting services.
E-commerce analyst Torrey Byles, president of Granada Research, termed the GEIS-WorldCom deal "a watershed event."
"They're going away from owning the network plumbing to selling value added services," Byles said, noting that EDI competitors Harbinger and Sterling Commerce already lease the networks used for their value added networks (VANs).
"The amount of investment you need to put into the network to stay competitive has grown tenfold," said Jim Macioce, GEIS vice president of operations. "WorldCom also brings economies of scale because of its size."
In three to five years, once the deal is fully implemented, GEIS will gain 658 new dial-up access points and 104 frame relay sites, tripling its points of presence worldwide. WorldCom will assume operating control of 22 GEIS network service centers but GEIS will retain 4 data centers where it implements e-commerce services.
WorldCom also will get GEIS network facilities in a number of areas where it currently has thin coverage, including China, Europe, and Latin America. WorldCom, parent of Internet backbone provider UUNet, also has enough capacity for GEIS to offer bandwidth-hungry applications like voice and video.
Under the agreement, 57 GEIS employees will be transferred to WorldCom, but no layoffs are planned. Financial terms of the deal, under which the transition will begin July 1, were not disclosed.
Prior to this agreement, GEIS has used WorldCom among the 20 network providers for its secure private network, both in the United States and in Great Britain.
Macioce said WorldCom's aggressive growth and planned investments in infrastructure gave it the bulk to handle the network needs of GEIS, which has more than 90,000 trading partners on its network and also operates the internal network for General Electric. Key elements include plans to spend $2.9 billion this year to build infrastructure and acquisitions of ISP UUNet and competitive access carriers MFS and Brooks Fiber.
But WorldCom's acquisitive growth has raised the hackles of others, including the European Union and the Justice Department , both of which are investigating WorldCom's proposed buyout of MCI Communications on antitrust grounds. (See related story)