IBM, BellSouth team up for hosting

IBM and BellSouth will jointly offer hosting and network services to companies in the southeastern part of the U.S., particularly small and medium-size businesses, the vendors announced Wednesday.

IBM will provide Web and application hosting services while BellSouth will take care of data networking services such as dedicated Internet access, metro Ethernet services, virtual private networking (VPN) and digital subscriber line (DSL) services.

As part of the deal, BellSouth is transferring the operation of its Miami and Atlanta data centers to IBM via a five-year leasing agreement, said Mark Kaish, BellSouth’s vice president of data product management.

“IBM will be putting its technology into those data centers to provide the full suite of services they are able to offer. BellSouth will work with them to deliver customers into those centers,” he said.

A particular emphasis will be placed on catering to small and medium-size companies, a market in which BellSouth has a strong position, he said.

“Small and medium-size companies are clearly seeing the trends for network and IT convergence but haven’t always been able to take advantage of them,” he said. “We see more and more that growth opportunity coming into play” to provide them with a complete bundle of network and hosting services, he said.

IBM and BellSouth will also be putting together service bundles for specific vertical industries, namely the financial, health care and public sector industries, which are focused on security and reliability in their hosting and network services, he said.

Also getting transferred to IBM are current BellSouth data center hosting clients, whose contracts will not be modified, he said. The process of transferring clients begins Tuesday.

BellSouth, which launched the Miami and Atlanta data centers in 2000, decided it would be better for it to focus on its core business, which is telecommunications and network services, and offload its hosting services on a partner that specializes in that area, he said.

“We’re both focused on our core competences. It’s a very complementary arrangement,” he said.

In addition to their joint marketing, sales and services activities, the companies will explore the possibility of jointly developing services in the areas of storage, voice applications, broadband services and wireless technology, he said.

IBM and BellSouth do well to focus on their areas of strength, and they stand to benefit from each other’s specialties, said Mike Lauricella, a Yankee Group analyst.

But the key to attracting business will be a careful design of the service packages they will offer, especially to small and medium-sized companies, which require simple and well-defined products with a tangible impact on increasing revenue and cutting expenses, Lauricella said.

Existing BellSouth clients stand to benefit from getting transferred over to IBM because Big Blue is in a better position to invest more in hosting services than BellSouth was, said Melanie Posey, an IDC analyst. “I don’t see any downsides to existing clients,” she said. “BellSouth customers getting transferred will now be able to get a broader range of services from IBM.”

As for the new best friends, “IBM gets a new important channel partner for its SMB [small and medium-sized business] strategy in the southeast, and BellSouth eases its way out of the Web hosting market, which isn’t its main market, so everyone gets something out of the deal,” Posey said.