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    The Beast of the Aggregate

    By
    Paula Musich
    -
    June 4, 2001
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      Services remain a bright spot in an otherwise tepid period of IT spending, but the way services deals are developing is changing the face of the providers themselves.

      IT spending on services is expected to grow at 17 percent per year between last year and 2004, making up 45.2 percent of all IT spending worldwide—and reaching $1.34 trillion by 2005, according to a Gartner Dataquest forecast. That makes services the largest and fastest-growing segment of the IT market worldwide, according to Jennifer Beck, an analyst at Gartner Dataquest, in Lowell, Mass.

      At the same time, the huge growth opportunity, brought about in no small part by the Internet, has resulted in a proliferation of competitors to the services old guard and has put an emphasis on services aggregation and unified SLAs (service-level agreements).

      Witness Totality Corp., a relatively new kid on the services block that is pushing to turn up the heat in e-business services. The provider spent last week touting a series of multimillion- dollar deals with blue-chip customers, as well as new alliances and technology.

      But its the way Totality does business thats reflective of the new trends in services. Less than 2 years old, Totality bills itself as an application and infrastructure management provider. Its among the new service players that make up one-third of all providers in the field. The other two-thirds are evenly split between existing service providers sporting “e-makeovers” or offspring that resulted from spinoffs of parent companies or mergers and acquisitions, according to Beck.

      Totality, in fact, spans two breeds of service providers: MSPs (managed service providers) and MIPs (managed infrastructure providers). The San Francisco startup handles designing, deploying and managing e-business sites—especially more complex deployments of 50 servers or more. Last week, Totality announced eight multimillion-dollar outsourcing deals, with American Airlines Inc., Martha Stewart Living Omnimedia Inc., BridgeSpan Inc., OurHouse Inc., BlueLight.com LLC (Kmart Corp.s online division), JC Whitney Inc., Translucis USAs Three Deep product set and Mr. Stock Inc.

      As an MIP, Totality will work with any data center, and it will operate as the prime contractor working with systems integrators for customers looking to outsource the development of e-business applications, according to Sharmila Shahani, the companys vice president of business development.

      By pulling together multiple service providers and offering a single SLA, contract and invoice, Totality is also at the forefront of a shift in the service provider space toward a new IT service aggregation model.

      “With MSPs in the last year, the services aggregator trend gained traction,” said Michele Cantara, a Gartner Dataquest analyst. “IT will settle on a fewer number of vendors to deal with, and we will see more things being sole-sourced.”

      Under such a model, partnerships between service providers will require “much more than a corporate handshake,” Cantara said. Integration must filter down to the field-engagement level, and integrated service offerings have to be “packaged into repeatable engagements,” she said.

      Totality is attempting to create such a package with its new partner, Conxion Corp., a global managed hosting provider based in Santa Clara, Calif. The two last week announced their alliance to integrate and resell each others services. The partnership calls for Conxion to control and deliver Internet infrastructure from the network fiber to the operating system on managed servers. For its part, Totality will control the application and infrastructure platform—including any software component supported in a clients e-business system. No matter who sells the combined services offering, customers will receive a single SLA and a single bill under the agreement.

      Infrastructure support services, whether provided for hardware by a hosting or data center provider or for software by an MIP or MSP, are poised to grow significantly over the next two years. Gartner Dataquest, based in Stamford, Conn., next month will publish the results of a study of IT spending plans on infrastructure support services that shows a majority of respondents expect to increase hardware support services spending by 17.5 percent over the next two years. An even larger majority expects to increase software support spending by 34.8 percent in the next two years, according to Gartner Dataquest analyst Eric Rocco.

      Totality officials maintained that the combined services offerings deliver value to customers by speeding deployment of e-business initiatives and by reducing the costs associated with such efforts. Some of the drivers behind the growth of e-services are a need for fast, flexible e-business solutions where technology choices take a back seat to service provider selection.

      One of Totalitys new customers, OurHouse, agreed that cost is a major motivation to outsource certain functions but that its still important to work directly with each service provider, rather than with an aggregator.

      “If you go back to the assumption that youll outsource everything thats noncore or a noncompetitive asset, that makes sense, provided that you can find an alternative [service provider] that can provide that at a lower cost than you can,” said Tim Britt, chief technology officer of OurHouse, in Evanston, Ill. “A lot of services have evolved to where they can do it more cheaply. But thats only happening now. That wasnt true two years ago. Now the prices are falling rapidly, which makes it possible to increasingly outsource managed services. But if you work directly with the service provider, you can have more influence over how responsive they are, and you can make SLAs more specific to your needs.”

      Paula Musich
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