The companies committed $500 million over the next five years for the application service provider (ASP) project, which will host applications or data for small and medium-sized businesses.
ASPs, or application service providers, are companies that host software applications for customers--so customers don't have to buy and manage the software themselves. Customers typically access their hosted data or programs over the Internet.
Spending on services offered by ASPs is projected to reach $150.4 million worldwide this year, according to market research company International Data Corporation (IDC).
As part of today's agreement, Compaq said it will provide much of the server and storage hardware, as well as services staff, systems integration work and managed services. U.K.-based Cable & Wireless will take the lead setting up the hosting centers and be the sole owner of the ASP business in the partnership.
Today's news follows a similar $500 million deal made in May between computing giant Hewlett-Packard and Qwest Communications to host German software maker SAP's business management software. As reported, Qwest plans to set up seven "CyberCenters" running SAP's R/3 corporate software, or software that automates a company's financials, human resources and manufacturing needs, on HP computers. Chip giant Intel also recently made its move into the application hosting and services space.
In a conference call held earlier today, Compaq and Cable & Wireless chief executives detailed plans for the ASP agreement. Cable & Wireless CEO Graham Wallace said the company is currently in the process of upgrading its application hosting centers worldwide to provide the additional capacity to support business applications as well as build up its applications management personnel.
Executives said they're still finalizing details for the first service they will deliver come Jan. 1, the date the companies said they will begin offering specific product packages targeting small and medium businesses in the United States and Europe. Wallace said they will make some announcements next month in terms of how the services will be launched and what the exact product launches will be.
The companies said they'll expand their joint services into the Asia-Pacific region throughout 2000.
Although the ASP venture will be 100 percent owned by Cable & Wireless, both companies have agreed in a revenues sharing model. Further details on revenues recognition were not disclosed.
In addition to the $200 million investment made by Compaq in this agreement, the company also said it will spend approximately $10 million per year over the next five years on marketing and development to sell the service.
Pricing for the bundled hardware, software and services will be charged in a typical ASP pricing model on a per seat, per month basis. Executives said specific pricing will be announced in time for the product launch.
While software vendors have not been chosen yet as partners for this ASP agreement, executives named Siebel Systems, Microsoft and Oracle as potential partners.
Compaq increasingly is putting more emphasis on Internet appliances, in essence, simplified PCs designed for internetworking environments. The Houston, Texas-based PC maker last week introduced the iPaq, an Internet device capable of accessing data and programs hosted by application service providers.