The future is now

Sprint, WorldCom take steps toward data In the minds and business plans of many traditional carriers, data offerings - not voice - are the keys to future success. Last week, two of the dominant interexchange carriers made moves to help them gain footholds in these data markets.

Sprint announced the creation of a new business unit, Sprint e-Solutions. The unit itself does not address any new markets for the company. Rather, it is a combination of two existing divisions: Sprint Internet Services and Sprint Enterprise Network Services.

e-Solutions will handle many of Sprint's Web-based offerings such as network access, Web hosting, applications management and business and systems integration.

"Sprint e-Solutions is the cornerstone of Sprint's strategic shift from voice to a high-growth, data-driven and Internet-focused business," said Keith Paglusch, president of the unit.

Sprint has big aspirations for e-Solutions. Already up and running, the division has revenues of about $1 billion to $1.2 billion per year. By 2003, the company sees e-Solutions revenues increasing to $5 billion - a 500% jump. At that time, Sprint expects data to comprise fully half of its landline revenues.

To make this shift happen, the company is committing $2 billion in capital expenditures next year for e-Solutions products and services. Much of that money, Paglusch said, will be used to complete 11 domestic data centers by the end of next year.

This buildout of data centers is probably the important move the company can make to facilitate e-Solutions' success, said Carrie Lewis, an analyst with The Yankee Group.

"They're launching this with only two data centers.... If they're going to get customers on board, they're going to need more really quickly," she said.

In related news, WorldCom got a jump on what is sure to be a close relationship with Digex by entering into a joint channels and services agreement with the Web hosting powerhouse.

The agreement calls for WorldCom to add Digex's offerings to its own portfolio and offer them under the WorldCom name. For WorldCom, the deal adds an advanced suite of services to its current offerings, which now consist of little beyond basic hosting and co-location services.

In return, Digex's products will reach a wider market through the WorldCom sales team. Digex also will transition its data centers directly onto WorldCom's global IP network for use as its primary network. The move, which should be completed by mid-November, will allow Digex to deliver services with greater speed and reliability, according to the companies.

This agreement comes just two months after WorldCom announced plans to become majority owner of Digex through its acquisition of Intermedia, a deal set to close in the first quarter of 2001. When making that announcement, WorldCom executives said it was purchasing Intermedia for the purpose of gaining control of Digex. At the time, the company predicted that gaining control of Digex would speed its entrance into higher-end Web hosting by 12 to 18 months.

Normally, WorldCom would have expected to begin its work with Digex at the closing of the Intermedia acquisition. By signing this deal, however, the carrier gets a jump on the relationship by two to five months.

"This agreement gets us started earlier than if we waited for the close of the deal," said Ron McMurtrie, vice president of e-business at WorldCom.

Melanie Posey, Web hosting analyst at IDC, sees both announcements as attempts to appease investors who have turned cold on basic long-distance offerings - an influence that is forcing companies to commit to defined timelines and goals, instead of just talking about future plans.

"A lot of the stuff going on is Wall Street playing a role by kicking these companies in the pants to get going with their forward-looking strategies."