Whats Next For SiteSmith?

Now that SiteSmith's $1.36 billion merger with Metromedia Fiber Network has closed, the MSP is a grown up corporate citizen whose pitch is fiber.

SiteSmiths new managed service pitch is fiber.

Now that its $1.36 billion merger with Metromedia Fiber Network has closed, the MSP that used a billboard facing an important, data-center rich Sunnyvale exit on U.S. Highway 101 in Silicon Valley to promise corporate customers it would build sites that "kick ass," is now a grown up corporate citizen.

MFN is the first facilities-based service provider to acquire an MSP. While the specifics of the plan — beyond the obvious pitch to boost colocation revenue with managed services — were fuzzy at the time of acquisition, now everything is crystal clear: MFN plans to leverage SiteSmith to knock out IBM and Electronic Data Systems in the competition for Fortune 1000 customers.

"The fundamental change of SiteSmith becoming a part of Metromedia Fiber was the move from us being an hourly-based professional services company to being a single source, flat-fee outsourcer for larger organizations," says Richard Dym, MFN vice president of marketing, who formerly held that post at SiteSmith.

Analysts tracking the MSP evolution say MFN is the first in what may be a long line of service providers combining colocation and network management with Web site integration and maintenance. Tier 1 Research President Andrew Schoepfer calls this new business model an "eCOLOsystem," and believes that new outsourcers like MFN have a leg up on old-school players like IBM. So for customers, it comes down to choosing between better technology and a trustworthy brand.

"The real issue in the market right now is flight to safety," Schoepfer says. "Customers dont want to worry about selecting a provider knowing that IBM or EDS will be there tomorrow.

"MFN has a great fiber network, and their facilities, on average, will be better than your average telco."

So in the fight for Fortune 1000 and Global 2000 business, the likes of MFN have an advantage because they are bidding now for large outsourcing contracts that Schoepfer expects will be spread around among a number of providers in 2002. The contenders are divided into two camps. In one pack are the new outsourcers, which include eCOLOsystems like MFN, integrated service providers such as WorldCom and large hosters with managed offerings, like Exodus. In the other are the old-style players, including consultancies like Accenture and system integrators like IBM and EDS.

MFNs Dym is optimistic his company will get a piece of this business. MFN already sells services to enterprise customers that buy its fiber.

"If we have fiber into the corporate data center, we are going to make our managed services available also," he says. "Our advantage is fiber, it lets us compete with the EDSes and IBMs in the corporate data center world."

The new competitive stance increasingly pits MFN against former SiteSmith allies like Exodus. Historically, MSPs leased space in data centers to avoid building out their own facilities. SiteSmiths well-documented rift with Exodus is rooted in Exodus move into managed services and the companys desire to take that business away from SiteSmith. But MFN still has colocation leases with Exodus, which, Dym says, hangs on to every piece of business and thus tolerates them.

As SiteSmith begins to run with the big boys, the former MSP is also going through some corporate cultural changes. The dress code now has a more formal, East Coast feel and some of the perks that set SiteSmith apart — like 4 p.m. beer hour — are being reconsidered.

"We still do have beer taps [in our Silicon Valley offices], though I wouldnt be surprised if they go away," Dym says. "Insurance companies do not encourage that kind of activity, no matter how responsible you are about it."