CSC Branches Into Managed Hosting

In a bid to push its way into the managed hosting business, IT outsourcing firm Computer Sciences Corp. (CSC) Tuesday contracted for fiber-optic infrastructure from Metromedia Fiber Network (MFN).

MFN has made its name rolling out dark fiber in key domestic and international metropolitan areas. CSC will use MFN’s fiber to connect clients to its data centers in cities across North America and Europe.

Managed hosting and Web services are viewed as a potential gold mine by many companies. Even Microsoft Corp. has put the majority of its chits in that spot with its .Net initiative, aimed at replacing shrink-wrapped software with leased, Web-based applications.

CSC is a relative latecomer to the game. Unlike Microsoft, which has a far-flung Internet infrastructure already in place, CSC has to build its infrastructure from the ground up. That’s where MFN comes in. The deal instantly gives CSC a fiber-optic infrastructure that will enable it to deliver services — like real-time data recovery and back-up, online storage and other bandwidth-intensive applications — over private metro-area networks.

“CSC needs high-speed, robust and scalable bandwidth for interconnection of its data and hosting centers, campuses and key customer locations,” said Harold Hickman, vice president, Network Engineering Services, CSC’s Global Infrastructure Services group. “The MFN solution for metro-area fiber connectivity fits well into our global IP network architecture and strengthens our ability to deliver extremely reliable and secure communication facilities to our clients.”

CSC said the initial installations will be in Houston, Texas, where the company focuses on the energy and energy services business.

The company first announced its intentions to enter the managed hosting business last year. Its strategy was to target medium to large companies and e-business start-ups sharing space on a single processor, as well as large enterprises and e-business portals requiring custom architected services or dedicated processors.

The company has since refocused its strategy. “Currently we are working with exchanges, predominantly those that are backed by traditional players,” a company spokesperson told InternetNews Tuesday. “We’re focused predominatly on traditional brick and mortars as they e-enable their business models.”

But CSC has yet to make a splash in the hosting space, a highly competitive industry with players including powerful telcos like Sprint, Verizon, Qwest and Worldcom, as well as companies like Exodus Communications, Digex and Digital Island.

“The marketplace, while not necessarily saturated, is certainly crowded,” said Carrie Lewis, an analyst with The Yankee Group. “The supply curve is much higher than what the demand is.”

Noting that many companies have already committed significant amounts to building out their hosting offerings, Lewis added, “Any player just entering the Web hosting market today is definitely behind the eight ball.”

Still, Lewis said there are opportunities in the marketplace for companies which play their cards intelligently.

“The pricing pressure is just beginning,” she said, adding that Exodus raised its prices by 10 percent in March. She said a company which can quickly ramp up its offering while remaining price competitive could make a space for itself.

She said Digital Island provides another model for creating a space in the hosting industry. While most of the major players in the industry that have managed to find traction have horizontal markets, Digital Island has tightly focused on the financial industry.

“They’re doing well in the marketplace,” Lewis said.

“It’s always a good strategy to have a very specific target market,” she added. “I’m finding that a lot of the new players — for instance telcos — they’re struggling to determine who the target market is going to be.”

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