Changes at Exodus Under Scrutiny

Data hosting pioneer Exodus Communications Inc. is at a crossroads and trying to go in two directions at once.

Data hosting pioneer Exodus Communications Inc. is at a crossroads and trying to go in two directions at once.

The company, best known for its popular—but unprofitable—hosting business, is trying hard to break into higher-margin managed services despite fierce competition and lukewarm customer response.

The moves come as the Santa Clara, Calif., company contends with executive shifts and plummeting stock prices.

And while the turmoil has some users questioning the companys commitment to its core business, Exodus officials maintain that many of the changes being undertaken are necessary to the companys future.

Despite customer reservations, "well continue to extend our application management capabilities, well move into wireless, were going to help our customers more with legacy-to-Web integration services with middleware partnerships," said Senior Vice President of Strategy Peter Fortenbaugh.

Exodus last week lost President and Chief Operating Officer Don Casey, Chief Financial Officer Marshall Case and Chief Marketing Officer Beverly Brown. The company then rehired former CFO Dick Stoltz.

Despite the executive exodus, the shake-up was handled well by CEO Ellen Hancock, many Wall Street analysts said. Some of Exodus capital expenditure growth happened too fast, Hancock said at a press conference last week. Perhaps more troubling is how the shake-up is affecting Exodus product direction and outward appearance to IT managers.

Marc Vigod, president of VLM Inc., in Belle Mead, N.J., said he left Exodus recently when the company wouldnt accommodate his pricing needs and didnt protect his servers.

When Vigod removed his equipment, "I was surprised to see half the data center empty. A year or so ago, it was busting at the seams," he said.

While removing VLMs equipment, Vigod said, an Exodus security guard remarked to him that more customers were seen leaving than entering recently.

Fortenbaugh said that users do sometimes leave—"Theres no question that those examples are real"—but denied that such examples are the norm.

Of Exodus total revenue, just over 60 percent comes from hosting; the rest is from professional services. And while 36 percent comes from managed services, according to Fortenbaugh, most customers interviewed by eWeek said they buy only one or two of Exodus managed services.

Many handle their custom management needs in-house; others trust it only in the hands of specialists. Inc. is a Chicago company that runs With content updated frequently, Emusic is comfortable having Exodus do its basic hosting and network management but not much beyond that, said Vice President of Technology Mark Plunkett.

"I probably wouldnt feel comfortable handing over the setup of Web servers. Our environment changes rapidly. I dont know if itd be possible for [them] to keep up," Plunkett said.

A bigger issue facing Exodus, Fortenbaugh said, is competition from large systems integrators such as IBM and Electronic Data Systems Corp., as well as telecommunications superpowers such as AT&T Corp. and WorldCom Inc. and management service providers Loudcloud Inc. and SiteLite Inc., both of which are Exodus technology partners.