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100 Million Reasons To Be An ASP

Written By: A. Turner
Published On: May 23 2000

100 Million Reasons To Be An ASP
A. Turner - May 23, 2000

Event Summary

On May 3, 2000, Interpath, Inc., a wholly owned subsidiary of Carolina Power and Light (NYSE: CPL, CP&L) announced it will change ownership and receive a $100 million equity investment in a spin-off deal between Boston-based Bain Capital (a $7 billion private equity fund) and CP&L.

A move designed to unlock the full-service Application Service Provider's (ASP) market value, CP&L and Bain will each invest $50 million for a total of $100 million of new equity to aggressively grow Interpath's ASP business. Bain will provide strategic and operational expertise to enable Interpath to leverage its position in the ASP marketplace. Upon completion of the transaction, Bain will own 65% and CP&L will own 35% of Interpath. CP&L will retain the fiber optic network assets owned by Interpath, about 50 employees and its 10% limited partnership interest in the BellSouth PCS business. The remaining 450 employees will be retained by the Bain-owned Interpath to service the company's ASP and Data Services operations.

Formed in January 1998, Interpath offers a variety of enterprise, e-commerce and messaging applications based on applications from Vignette, SAP, Microsoft, Netscape, and BroadVision. The full-service business addresses e-business and e-readiness consulting, design and development services, and 24x7 application management and hosting. Interpath will continue to support those applications via its Interpath Operation Center (IOC).

Market Impact

Over the past fifteen years, Bain has established a track record in the public equity capital markets, having completed IPOs for its portfolio companies exceeding $25 billion in market capitalization. Bain has experience investing in technology companies including Internet infrastructure, content and services companies. Recent technology and telecom investments include Double Click, eCredit.com, SEAT, USLEC, Therma-wave, Integrated Circuit Systems, Net Library, and many others.

Since the start of 2000, Interpath has been signing up customers at a rapid pace, continuing to gain traction in the enterprise ASP marketplace. New ASP agreements - including the deals with Sagent Technology, Ericsson, Centura, First Union Mortgage, MBNA, eIRAnet and mainstreetweek.com - have totaled more than $7 million in Q1 2000.

With market estimates ranging from 20 to 40 billion by 2003, ASP solution providers are steadily gaining momentum. The infusion of $100 million will help Interpath establish itself within the ASP market. Similar merger/acquisitions such as the recent purchase of Verio (39% stake holder in Agilera.com) by Japan's NTT Corporation indicate heavy infusions of capital to the ASP market. As companies begin to recognize reduced TCO (total cost of ownership) and enhanced return on investment the market will expand, thus fueling further ASP investments.

User Recommendations

As a provider of Vignette, SAP, Microsoft, Netscape and Broadvision products, Interpath may be worth investigating if your company is considering an outsourced solution. Of particular interest is how they intend to utilize the infusion of capital. Will they improve or increase existing support mechanisms? Will majority be spent on sales and marketing initiatives? What infrastructure resources are offered? Will they attempt to address all areas? This information may provide a formidable comparison tool when evaluating outsourced applications.

 
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