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AT&T to Acquire Managed Apps Player USi| September 12, 2006 | Internet/Managed Services - U.S. | Competitive Intelligence Report | Client Access | Analyst: Counse Broders
On September 12th AT&T Inc. announced that its subsidiary AT&T Corp. will acquire USinternetworking (USi) for approximately $300 million in cash and assumed debt, in a deal expected to close by the end of 2006. AT&T will gain access to USi's hosted software and eBusiness management services and consulting teams. Analytical Summary • Current Perspective: Slightly positive on AT&T’s acquisition of USi, a player with a long history in the managed apps space, because the move beefs up the company’s managed applications capability. • Vendor Importance: High to AT&T, as the company risked losing ground to competitors that have made acquisitions in the managed apps space already (such as IBM/Corio and Verizon Business/Totality). • Market Impact: High on the managed applications market, because this removes one of the few remaining (and longstanding) managed application players in the market. Recommended Competitor Actions • Competitors with managed application elements in their portfolio, such as NaviSite, will want to review their own competitive strategies carefully. This move means that the market will be more difficult for those companies looking to stand alone against global players that bring an array of products and services. • IBM should carefully review this merger’s impact on its own offerings, but it should find that, with its Corio acquisition last year, it is well-positioned to continue to compete. • Verizon Business took a step forward with its Totality acquisition from 2005, but it still does not have the range of offerings here that USi delivers. • While this will further consolidate the crucible for companies offering solutions to global enterprises, there remains a broad swath of mid-market customers catered to by the likes of Salesforce.com and others that have a no-license fee option and easy entry for clients, without the high fees and other integration pain points. Recommended End User / Customer Actions • Current customers of USi will find the acquisition could be useful but daunting. AT&T brings a deep array of solutions, including managed hosting, and a global network that could prove synergistically useful, yet its size may be off-putting to clients that have come to expect white glove treatment from the smaller USi. • Prospective managed applications clients should ensure that any contracts allow flexibility and make sure that client service requirements are well laid out, thus making certain there are no missed milestones when implementing a new app. In addition, they should make sure that any potential disruptions from the merger are compensated.
Purchase Full Report Online
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