FMC is among a growing group of businesses that want to stay focused on core competencies and leave the worries of networking to service providers. Forrester Research reports that 68% of companies it interviewed are working to extend business processes such as ordering, account status, and inventory management to trading partners via the Internet. But less than a quarter of those companies now use outside providers to help them. Within two years, though, Forrester predicts that 40% will turn to outsiders for help in building and managing extranets.

Many of those user companies will be Internet startups and midsize businesses that simply don't have enough time or money to build and manage their own extranets, says Gordon Reichard, president and CEO of Telenisus, which is just getting off the ground as an ESP. The company launched a managed firewall service in January and will roll out a managed VPN service this month. An application-hosting service will be available in May, and E-commerce transaction services will come later this year. Telenisus also plans to unveil partnerships with two unnamed network providers that can deliver access and transport services, says Reichard, who, before founding Telenisus, served as president of Ameritech Advanced Data Services.

"We're not building our own brick and mortar," Reichard says. "We're going to partner with others, but we'll be the single point of contact."

One of those smaller businesses that doesn't have the time, money, or inclination to develop its own extranet is iCarumba Inc. The Seattle Internet startup, which helps consumers diagnose problems with their vehicles and find nearby repair shops online, turned to hosting provider Digex Inc. when it set out to build an extranet linking consumers with repair shops, and repair shops with parts suppliers.

"We're in the business of writing software and providing services," says Ryan Donovan, chief technology officer at iCarumba. "We didn't want to have to build the extranet on our own."

The biggest focus of iCarumba was on Web hosting. It needed a service provider that could manage the hardware and software needed to host the iCarumba site. In addition, it wanted to buy Internet connectivity and security services from the same provider, and it wanted one service-level agreement to cover everything.

"Many of the hosting providers we looked at couldn't give us an end-to-end outsourced solution," Donovan says, adding that iCarumba would have had to bring in systems integrators. "The hosting providers were willing to do that for us, but when you add providers, the service-level agreement issues become complex. Digex came in and was able to provide everything under one service-level agreement," he says.

Digex rival GTE Internetworking says it, too, is looking seriously at what it will take to become an ESP. "During the past year, there's been a dramatic shift in the way our customers are approaching us," says Joel Whitman, VP of Internet strategy and planning at GTE Internetworking. "In the past, it was the IT or IS departments that would buy the raw materials like Internet access, hosting, and security, and assemble their own solutions. Now, people on the business side of the house are asking us to build an E-business for them."

While most ISPs and hosting providers say they want to become ESPs, few of them want to be in the application-hosting business-a piece that will be critical in any complete ESP offering. Most ISPs and hosting providers say they'll partner with ASPs, but won't offer application services on their own. The problem is that ASPs are some of the Web-hosting providers biggest clients. For companies such as Digex, GTE Internetworking, and others, getting into the applications business would mean stepping on their customers' toes.

In addition, many ISPs and hosting providers want to stick with what they know-providing infrastructure. For example, GTE Corp. late last year sold off its public key infrastructure hosting business, CyberTrust, in a move the company said would help it focus more on providing infrastructure. But that decision cost GTE Internetworking FMC's extranet business, so it remains to be seen whether ISPs and hosting companies can really become ESPs without adding applications to the mix.

PSINet is an exception among existing providers. Last month, the ISP said it's buying systems integrator Metamor Worldwide Inc. for nearly $1.7 billion. The deal means that PSINet will position itself not only as an ISP and Web-hosting provider, but also as an ASP. That could give the company a leg up when it comes to selling comprehensive managed extranet services.

In the end, extranet service providers could wind up revolutionizing the way companies buy communications services. "We look at this now and just call it outsourcing," Telenisus' Reichard says. "But if we're successful in developing this ESP model, five years from now, this is what all customers will expect and demand from service providers."