InformationWeek: The Business Value of Technology

SBC executives say the acquisition will let it offer one-stop shopping for network services, such as digital subscriber line, local access, and an Internet backbone, bundled with Sterling's E-business consulting services, Gentran middleware for integrating business systems, and outsourcing services.

Analysts question how the strategy will work. They point out that if the deal is approved by shareholders of both companies and regulators, Sterling will be run as a separate subsidiary. The companies have no plans to combine their sales forces and will instead exchange leads. Sterling will continue selling its wares until the two roll out unspecified services and software.

"SBC bought Sterling to roll out E-business capabilities to its customers, but how they plan to execute is still very unclear," says Jeanne Schaaf, a senior analyst at Forrester Research. But she notes that SBC already has a network; E-commerce services firms either have to buy one or partner with a carrier.

"I was surprised by the announcement because it doesn't seem like a great fit," says Jim Fey, director of strategic technologies at a $650 million insurance company on the West Coast. SBC and Sterling could fill what Fey perceives as a gap in their product lines by adding performance monitoring and managing services.

SBC says the deal will let it get into E-business quickly. "The alternative to an acquisition is to build a significant E-business presence on our own, which would be difficult, more expensive, and take years," says Richard Deitz, president of SBC's Global Markets group. Much will depend on how electronic data interchange pioneer Sterling addresses users' E-commerce and online trading exchange needs.