Loudcloud Strives to Expand

Plans new technology delivery model, alliance with consulting company

Amid widespread criticism that its business model is too narrow to succeed— and in the wake of a lukewarm initial public stock offering— Loudcloud Inc. will try to expand its audience with new MSP offerings due early next month.

Loudcloud is expected to announce a technology delivery model, an integration component to its Opsware suite and an alliance with consulting company Accenture, said sources close to the Sunnyvale, Calif., company run by Netscape Communications Corp. co-founders Marc Andreessen and Ben Horowitz.

According to the sources, the delivery model will look more like a traditional enterprise service provider relationship than Loudclouds current model, which meets users halfway at the customers hosting company. Meanwhile, an Opsware integration module will help link customers back-end applications, databases and networks with Loudclouds, they said.

Customers reacted positively to Loudclouds ambitions but were hesitant about being the first to use it. "I think thats a very smart move. As we grow our infrastructure, I can definitely see that we have a need for that type of thing," said Michael Mo, founder and CEO of Wish.com, in Campbell, Calif. Wish.com has been a Loudcloud managed hosting customer since January 2000, but as for whether the company will subscribe to new services, Mo said, "It depends on how much theyre going to charge me and what kind of service theyre going to provide."

"I think the hard part is starting. Now they need to put their service where their mouth is," said Adriaan Bouten, vice president of IT and business development for USAToday.com, whose company signed up Loudcloud as its hosting company earlier this month. The organization chose Loudcloud partially because USAToday.coms back end is "very standard," Bouten said.

"If I had very unique needs, I probably would not have selected them," he said. Still, Bouten said, a potential consequence is having to compromise when USAToday.com someday wants to implement a service that Loudcloud doesnt support.

"Loudcloud is desperate. Theyre making an announcement to an area thats not going to solve the problem," said Corey Ferengul, a Chicago-based analyst with Meta Group Inc. "The MSP [management service provider] model makes all sorts of sense, but Loudcloud is pushing back into the enterprise when theyve never established themselves outside the enterprise."

"You grew up in the Web world; whats your knowledge of legacy systems?" asked David Tapper, an analyst at International Data Corp., in Framingham, Mass. "I think theyre out there figuring out what theyre doing. Theyre going off on a hunting mission."

Meanwhile, few details are available about Loudclouds Accenture relationship. Loudcloud officials declined to comment on unannounced products or services.