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USi, AT&T team on application services

The companies plan to jointly sell and market application hosting services to small and midsize businesses.

USinternetworking today said it has teamed with AT&T to jointly sell and market application hosting services to small and midsize businesses, including dot-com start-ups.

As part of the agreement, Annapolis, Md.-based USi said AT&T will become the preferred provider to its clients for data networking requirements. In turn, AT&T said its sales channels will refer clients to USi for their application service provider (ASP) needs.

Under the ASP model, customers pay monthly to have their software hosted and maintained by a service provider. Users access the software through a Web browser via a leased telecommunications line or over the Internet. In most cases, the company pays for the software license up front and strikes a three-year maintenance agreement so it doesn't have to deal with upgrades or technical problems.

The USi-AT&T partnership comes on the heels of AT&T's recently launched ASP campaign. The telecommunications giant said it intends to partner with small ASPs in hopes of capturing the lion's share of their network traffic and boosting use of its own network services. The company said it would spend $250 million on infrastructure to support the new companies.

Financial terms of today's deal were not disclosed.

Market research firm Dataquest projects the ASP market could be worth nearly $23 billion by 2003. The market has spurred attention from a growing number of technology providers who have all thrown their hats into the nascent market. Software makers SAP, Oracle, J.D. Edwards, Microsoft and PeopleSoft all have formed ASP strategies, as have other companies such as Intel.

Last month, Microsoft plunked $10 million in USi rival Corio. As part of the deal, Corio will gain access to Microsoft's sales channel and host software from its partners.

USi and AT&T said services will be immediately available in Washington, D.C., Maryland and Northern Virginia. The companies said they plan to introduce the joint ASP hosting services to customers in additional U.S. markets throughout the year.