U S West buys into Internet-hosted apps: USi investment to complement existing offerings

U S West announced last week that it has invested $3.5 million in USinternetworking Inc. with the goal of bringing network-hosted applications to the residential and business markets by the third quarter. USi will provide the infrastructure for U S West's Web-hosted application services such as virtual private network, firewall and e-mail services. Start-up service provider USi is building an international Internet protocol infrastructure by linking four Internet data centers in North America, Europe and Asia.

USi's base business provides mid-market companies and government agencies with Web-enabled business process software. The company's goal is to make it easy to provide smaller businesses with software that is typically hard for them to acquire, install and maintain, said USi founder and CEO Christopher McCleary. "We are going to supply the application software and implement it with our own professional service unit for a flat monthly fee," he said.

USi's business model complements U S West's goal of providing Internet-hosted applications to customers. "We have stated our intention to deliver on network-based applications. This [investment] is a supporting strategy," said John Charters, U S West's vice president of Internet services.

In addition to the investment, U S West and USi are forging partnership agreements, McCleary said, whereby USi will be a customer in a wholesale capacity, and U S West will market some of USi's product offerings. As a result of the agreement, the companies will create general network applications, some of which might be based on each company's outside partnerships.

The two companies are involved in Web application hosting. USi wants to be an application provider, and U S West will add value to its network by offering these applications, said David Goodstein, senior analyst for telecom strategy at Forrester Research. "USi provides

U S West with a platform and a set of services U S West can sell as a retailer," he said. "USi is an innovative company providing [product to] a retailer. U S West gives them the [distribution] channel."