IBM-Corio Deal Makes ASPs Ripe For Picking

Other ASPs are expected to look for buyers in the wake of $182 million buyout
IBM's proposed $182 million purchase of application service provider Corio Inc., revealed last week, could mean the days of standalone ASPs are numbered. "There aren't many [independent ASPs] left standing," IDC analyst Amy Konary says.

Full-service IT vendors can combine software hosting with other services, such as integrating hosted software with on-site applications, Konary and others note. Sales of software-on-demand from service companies such as IBM will grow at a compound annual rate of 40.6% through 2008, while sales from independent ASPs will grow 16.6%, IDC says.

More ASPs may look for buyers in the wake of the deal. USinternetworking Inc. eventually will go public or seek an acquisition deal, although no moves are imminent, says Andrew Stern, CEO of the privately backed ASP. Others see IBM's Corio acquisition as an opportunity. NaviSite Inc. intends to "get the Corio customer list," believing customers won't be willing to move their service to a conglomerate like IBM, a spokesman says.

Hosting In Demand ChartCorio gives IBM access to key intellectual property for rapidly provisioning and deploying applications. "Customers now want access to new applications in minutes or hours, not weeks or months, and Corio excels at that," says Mike Riegel, IBM's director for On Demand strategy. Under the deal, IBM will pay $182 million in cash, or $2.82 per share, to Corio stockholders, who must approve the sale. IBM says it expects the transaction to close within 60 days.

Corio provides businesses with hosted access to enterprise applications from vendors such as Ariba, Oracle, SAP, and Siebel Systems. Its customers include Birkenstock, Toshiba, and Visa. Corio CEO George Kadifa will manage IBM's hosted software business.