USi Names New COO

Former Scient Inc. CEO Stephen Mucchetti will fill the position.

With another quarter under its belt after emerging from bankruptcy in May 2002, USinternetworking Inc. is taking steps to further expand what its CEO characterized as a healthy business.

Tomorrow the Annapolis, Md., ASP will announce that it has appointed former Scient Inc. CEO Stephen Mucchetti as its new Chief Operating Officer.

The once ailing ASP, now a privately held company, is preparing itself to try to lead market growth for software-as-a-service when IT spending on software again picks up.

"He (Mucchetti) has experience in building multimillion dollar IT services companies. We want to be able to scale as we grow (and maintain) the quality of our service," said Andy Stern, chairman and CEO of USi.

In addition to his responsibility for overseeing USis day-to-day operations, Mucchetti will focus on enhancing USis service metrics and develop new operating strategies designed to wring more cost out of the operation of customers applications.

USi today is seeing modest growth running enterprise applications from vendors such as PeopleSoft, Ariba, BroadVision, Microsoft, Oracle and Siebel. It is in fact, the leading ASP for horizontal enterprise applications in terms of revenue, according to a recent International Data Corp. study.

USi generated revenues of $94 million in 2002, beating out competitors such as IBM Global Services, EDS, Computer Sciences Corp., Corio Inc. Oracle Inc. and others, according to Amy Mizoras, program manager for software pricing, licensing and delivery at IDC in Framingham, Mass.

"Companies like USi are competing more and more with the IBM Global Services of the world. They (IGS) play in the software as a service space, but they dont put a lot of effort behind their offerings. If they decided that was a space they wanted to play in — in more of a one-to-many fashion — then the USis of the world need to be ready for that. Theyd need the same level of sophistication that IGS can offer," said Mizoras, who is forecasting total US revenue for both horizontal and vertical ASP application services to be $1.4 billion this year.

The market for software-as-a-service is seeing some growth, as companies turn to ASPs when it comes time to upgrade their applications. "The entire software industry is growing at single digit growth rates, and the opportunity for providing software as a service is growing at double digits," said Mizoras.

USis Stern believes his companys growth is due to its ability to deliver greater business value for the software his customers have invested in. "We take ERP systems and run our clients payroll off of those. We can unlock more of the value they bought by running payroll off systems theyve already bought. With procurement, we can work with customers to change how the system works to drive a higher percentage of spending through that. With our clients eCommerce application, we know it isnt integrated into their back-end systems. We can make great changes in the value they get out of those systems," said Stern.

At the same time, Stern sees a thaw in IT spending decisions. "Our clients and prospects had been frozen in their decision making. Now people are comfortable they have enough visibility to start making decisions again," he said.

Despite the signs of an uptick, consolidation is still going on in the ASP industry. USi contributed to that with its acquisition earlier this year of InterPath. At the same time, service providers such as IGS and Accenture are expanding their offerings, Stern said.

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