Houston-based enterprise-class managed hosting provider VeriCenter announced on Tuesday that it has acquired a large portion of Sprint’s managed hosting business, including data centers in Boston, Atlanta, Dallas, and Denver.
In addition to taking over four of Sprint’s remaining seven data centers, VeriCenter is acquiring a large segment of Sprint’s E|Solutions managed hosting clients and the DellHost operations, which Sprint ran for the past two years.
“Sprint had an outstanding customer base, an outstanding group of people, superb datacenter facilities and really had the makings for a fabulous managed hosting business. They determined it was not strategic, and our business is about nothing but providing enterprise class managed hosting business,” VeriCenter CEO Gray Hall told ASPnews.
Most importantly, this acquisition fit VeriCenter’s goals of expanding into other regions while remaining profitable, a status which the company had attained in February 2002.
“From the beginning, our strategy was to build toward profitability in one region before expanding into multiple regions,” hall said. “Having done that by early 2002, we then started looking for opportunities to expand into other regions. Once we determined in our due diligence that it would give us the opportunity to expand into at least one new region, we became very focused and pursued the opportunity aggressively. There aren’t many opportunities in the sector to make a move like that and remain in the black.”
In order to reach its goal of profitability, VeriCenter spent considerable effort getting the business model humming and working out the business processes that result in quality service, Hall said. “It’s hard to do that without reaching profitability, because profitability is a function of consistency and tight operational processes.”
Sprint announced in June 2003 that they were exiting the managed hosting business. British provider Cable & Wireless began withdrawing from the U.S. market in November 2002, and continued to divest itself of assets throughout 2003.
VeriCenter, though smaller in size than most of the other bidders for Sprint’s assets, was able to persuade Sprint that its exclusive focus on providing enterprise-class managed service, and the degree to which it had perfected the business model in its Houston datacenter, would enable VeriCenter to provide Sprint customers with superior quality service, Hall said.
“To their credit, Sprint’s number one goal in this process was to make sure that the customers get taken care of by a provider that is capable of providing the level of quality service that they would want to provide to their own customers. They had a very rigorous process of evaluating competitors. The entire process took six months, from their announcement on June 10 to the closing of the transaction on December 19,” Hall said.
The acquisition quadruples VeriCenter’s annual revenue to more than $45 million, and gives the company a significant presence in four new markets. In addition, it increases critical mass in terms of customer accounts, people, facilities, business processes and technology capabilities, making VeriCenter more prepared to compete against national providers like Digex, NaviSite, and Data Return, Hall said.
VeriCenter provides enterprise-class managed hosting services to more than 400 businesses in industry sectors such as energy, entertainment, software, professional services and federal government agencies.
“When a $7 billion dollar fragmented industry consolidates, there emerges great opportunity for companies such as VeriCenter,” said Andrew Schroepfer, President and Founder of IT and telecom research firm Tier1 Research. “The acquisition of the assets from Sprint is a great example of taking advantage of this opportunity. The transaction catapults VeriCenter from a regional to a national player positioning them in the top tier of managed hosting providers.”