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A Winning Combination: Software-as-Services Plus Business Consulting and Process Services
By Laurie McCabe
January 30, 2004

The continuing consolidation trend among ASPs who specialize in application outsourcing brings BlueStar Solutions back into the ASPnews Top 20 Providers list this month. BlueStar left the list early last year at a time when confidence in the ASP model was at its lowest nadir, and the company moved to focus on its outsourcing credentials.

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Nowadays the ASP label is losing its negative connotations, swept along by a resurgence of interest in on-demand services, utility computing and Web services. BlueStar’s existing hosted SAP offerings directly target that newly revived market, and after its acquisition of Agilera this month, the company has become one of the largest pureplay providers of hosted enterprise applications, claiming a combined hosted user base of 60,000.

The addition of Agilera, which itself rejoined the Top 20 last year after buying messaging ASP United Messaging, significantly broadens BlueStar’s offerings. Most Agilera customers run either JD Edwards or Lawson Software business applications, whereas BlueStar has until now exclusively offered SAP software. It’s interesting to note that the timing of the acquisition coincides with SAP’s announcement of its SAP Business One software, targeting small and medium-sized businesses. Perhaps BlueStar sees some synergy between Agilera’s customer base and this new SAP offering.

More Acquisitions on the Horizon?
Will the continued consolidation among enterprise ASPs bring other once-familiar names into the Top 20 in the coming months? BlueStar now joins Corio, Surebridge and USinternetworking in having made significant acquisitions recently. One name that’s consistently remained just outside the Top 20 is netASPx, another Lawson Software specialist. Could it become either an acquirer or a target?

Some other players have already been snapped up, although not in deals large enough to bring them onto our Top 20 list. In February, JD Edwards partner Prentice Technologies was acquired by technology outsourcer Fortrust Solutions.

In March, venture-funded startup OpSource acquired the managed services division of professional services group EYT, formerly the ASP and outsourcing unit of one-time systems integrator Ernst & Young.

No Rest for NaviSite
Our confidence in re-admitting Navisite to the Top 30 Enablers list last month was reaffirmed when it announced the acquisition of rival managed hosting provider Conxion. Will further consolidation affect this list, too?

One company that hasn’t ever made the list is Worldcom. The company’s new CEO, Michael Capellas, recently announced a new strategy centered on providing IP infrastructure for Internet and Web services. Unfortunately, a similar strategy did no good for rival telecom company Cable & Wireless, ultimately leading to that company’s demotion out of the Top 30 last year. This doesn’t imply that a merger of C&W; with Worldcom is on the cards, but it does suggest Worldcom had better find a buyer before it, too, succumbs to a similar meltdown.


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