Xevo Raises Round, Strengthens Ties With ASP Players

Xevo, Marlborough supplier of management software and services for application service providers (ASPs), has raised $20 million in second-round financing for product development and hiring staff.

“This sets us in really good shape,” said Rick Hronicek, Xevo’s CEO. “At some point next year we’ll be looking at a third round.”

Xevo will use the money to start filling its sales and services offices in the United States and Europe. To date, the 3-year-old company has focused on product development and therefore a majority of its 70 employees are engineers and software developers.

The backing was led by corporate investors, Cisco Systems (a previous product partner), KPMG Consulting and Portal Software. Prism Venture Partners, Catalyst Health and Technology Partners, which took part in Xevo’s first-round financing of $4.2 million last July, also participated.

In addition to raising capital, Xevo is happy about its source. While it’s slightly unusual to have three corporate investors in a second round, strengthening ties with Cisco, KPMG and Portal will likely help business. For example, Xevo is the only ASP infrastructure and services firm that KPMG, an international consulting giant, has a stake in.

Phil Garland, a KPMG senior vice president in charge outsourcing, said the company’s investment in Xevo underscores its belief that delivering and managing software over the Internet will be a huge business. International Data Corporation projects that the ASP market will grow from $300 million in 1999 to $7.7 billion in 2004, an annual average growth rate of 92 percent.

“Our work with Xevo provides KPMG Consulting with a strong presence in the ASP infrastructure market,” Garland said.

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