Digex Looks To Reinvent Itself For Enterprise

Executives at Digex, which is majority owned by WorldCom, said the carrier's woes will not impact service to Digex or to its customers. Earlier this month, WorldCom's CEO John Sidgmore also said Digex will not be affected by WorldCom's financial problems.

In an interview with CRN just days before WorldCom revealed it had hidden $3.8 billion in expenses, Martha Gilbertson, vice president of product management at Digex, said the company is an "aggressive stand-alone company with its own management in place."

A few fissures, however, have since surfaced at the managed hosting company. Digex's board ousted CEO Mike Shull this month and 86 employees, or 7 percent of its workforce, were let go.

Yet Gilbertson reaffirmed that it was business as usual at Digex, which is pushing upstream with services such as Smart Continuity, Digex's business-continuity and disaster-recovery service.

In addition to mirroring, the service includes an offering that splits up a customer's Web operations infrastructure between multiple data centers.

American Century, a direct-marketed mutual fund family, is mirroring its online account access and transaction business on each coast in Digex data centers, Gilbertson said.

"Many customers are approaching us about disaster-recovery and business-continuity [services," she said. "In the evaluation stage, they are looking at how much data they can afford to lose, how quickly they need to be back up, and processing and what they can afford, given the size of their company and the risks associated with going down."

The business-continuity offerings are a glimpse of the types of services Digex plans to introduce as it reshapes itself as an enterprise hosting provider, she said.

Partly due to WorldCom's influence, Digex is undergoing a managed-services evolution that moves the company beyond hosting intranets, e-mail and basic commerce sites and into enterprise services such as transaction processing, high-availability clustering, SAN, IT applications support, content management, data mining and portals. Digex will maintain more basic services but will continue to become more of an enterprise player, Gilbertson said.

Digex also plans to engage more systems integrators to help with code and application-specific support. The company currently has informal relationships with KPMG and Deloitte and Touche.

"We are seeking regional players to help with enterprise applications integration, but it is going to take a significant investment from both sides to develop the relationship, back-office processes and go-to-market strategy," she said.

Analysts said Digex's enterprise play is a sign of the times as just about every company in the managed-hosting space is tweaking its go-to-market strategy.

Loudcloud, for example, sold off its managed hosting business to reinvent itself as an IT operations management software vendor. Other vendors, such as Intel, opted to exit the hosting business entirely, citing lack of demand and a dismal outlook for that market.

With so many players exiting hosting, Digex stands a better chance of survival, analysts said.

In terms of market share, Digex is third behind IBM and EDS, said Andrew Schroper, president of Tier 1 Research.

While only 3 percent of enterprises outsourced their IT infrastructure in 2001, the revenue generated from this was $5.8 billion, he said.

"Even if that percentage only goes up to 3.5 [percent, that will still be a $1 billion increase in the market," Schroper said.

Melanie Posie, an analyst at IDC, said demand is low, but managed hosting providers are taking this downtime as a chance to re-position themselves. "All these announcements we're seeing about new services and new directions isn't in response to overwhelming customer demand," she said. "Everyone's holding tight and cutting budgets. This is more future positioning so when the market takes off they are poised to offer additional services."