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EDS takes on Net start-ups with fixed-price hosting

Feeling the heat from newer Internet services firms, the professional services giant is stepping up its efforts in the hosted Web site and application playing field.

    Feeling the heat from newer Internet services firms, professional services giant EDS is stepping up its efforts in the hosted Web site and application playing field.

    The Plano, Texas-based firm today said it will now offer fixed-priced packages of Web hosting and application hosting services for its customers. The new offering, called Web Computing services, will be unveiled at this week's Internet and Electronic Commerce show (iEC) in New York.

    "We see (the ASP market) as the direction," said Tom Ament, a vice president at EDS. "This is in some ways simply recognizing that there's a larger trend in the market that we're very well positioned to address."

    The company said it plans to earn about $100 million in new revenues by 2002 through Web Computing services.

    Analysts say it's high time EDS made more noise in the wide-open application services provider (ASP) market.

    "It's a smart move for EDS," said Susan Scrupski-Miranda, head analyst at IT Services Advisory. "It's an area that EDS has honed over time in terms of supporting large scale applications. I just wondered what took them so long.

    "EDS still has a long way to go to prove that they're a true Internet professional services alternative," she added. "They shouldn't try to be something that they're not, but make more noise (about) what they are."

    Like other traditional services and consulting firms, such as CSC, Andersen Consulting and Ernst & Young, EDS has been moving aggressively with its Internet initiatives to better compete against the newer, more nimble Internet services start-ups, including Scient, Viant, Proxicom and a slew of others. Such firms provide consulting services for a company's Web development, strategy and design. Some, including Breakaway Solutions and USWeb/CKS, also offer application hosting services.

    In recent weeks, the lucrative application hosting market has garnered major attention from a number of companies in the hardware, software, telecommunications and services industries. Software makers SAP, Oracle, Microsoft and PeopleSoft all have formed application hosting strategies, as have computer and chip companies such as Dell, Gateway and Intel.

    Market research firm Dataquest projects the application services provider (ASP) market could be worth nearly $23 billion by 2003.

    Gregory Gieber, a financial analyst at Brown Brothers Harriman, said the company's ASP move further illustrates promises made a year ago by CEO Dick Brown to turn EDS into a viable Internet services company.

    "It appears that Dick Brown has made sizable inroads into improving EDS," said Gieber. "The company is tapping...its potential as a Web enabler."

    Last quarter, the company, which beat Street estimates, said e-commerce contracts more than doubled in 1999. Still, traditional outsourcing deals accounted for most of the company's sales, which jumped 11 percent to $4.9 billion from $4.4 billion in the same period a year ago.

    EDS has the advantage of using its sheer size and large sales force to nab deals in the heavily touted ASP field, said Gieber.

    "(EDS) offers a global 2000 alternative to the Web hosting arrangement," added Scrupski-Miranda. "Why take a risk (with a smaller hosting firm)?"

    EDS said its new hosting services, available now, will be targeted at dot-com start-ups as well as Fortune 500 companies. The firm, which already hosts SAP software, said it will handle the implementation, management and maintenance of the software for customers.

    In the coming months, the company said it plans to partner with a number of software companies and hardware providers for its new hosting plan with a focus on business-to-business (B2B) software providers, which make software that enables companies to buy and sell goods and services from their partners, suppliers and customers over the Internet.

    The hosting services will be available to customers for a per-month, per-user fee ranging from $200 to $600, EDS said, which is typical of an ASP pricing model.

    Web Computing services will be offered from EDS' two business units: E.Solutions, its e-commerce business unit, and I.Solutions, the company's information technology unit.