InformationWeek: The Business Value of Technology

NaviSite, which traditionally has provided network infrastructure and servers to application service providers, is itself beginning to offer hosted applications. As part of its relationship with Oracle, NaviSite will "rent" Oracle8i database licenses to its customers while retaining ownership of the licenses. This will let the company provide a cheaper solution to its customers, who otherwise would have to buy licenses directly from Oracle.

Some analysts are surprised by NaviSite's recent moves. "NaviSite's original strategy was going to be focusing on front-office applications rather than back-office applications," says Thomas Kucharvy, service director and lead analyst at Summit Strategies. Analysts also suggest that NaviSite should stick to providing the infrastructure for hosted applications, rather than hosting and managing them itself. Kucharvy points to the success of Qwest Communications Inc., which provides network and server farm infrastructures to support Oracle's hosted apps, while Oracle sells, manages, and configures the apps for customers. "If NaviSite pursued a deal similar to this one, it would leverage its infrastructure and better benefit the customer," Kucharvy says.

But NaviSite says its strategy is a perfect fit for the company, which just finished construction of a new data center in Andover, Mass., and will complete another one in San Jose, Calif., in November. The centers, designed to handle new customers, are equipped with Cisco networking equipment, redundant electrical supplies, and fiber-optic Internet connectivity.

Pricing for NaviSite's hosted Oracle database service, which is available now, hasn't been set.