Intel climbs out of the box

Chip giant Intel is juggling at least three separate initiatives from three divisions, all of which are trying to attack a managed hosting market. However, this strategy has left its partners scratching their heads.

How many ways can Intel host and manage your customers' Web sites? More ways than you might think.

The chip giant is juggling at least three separate initiatives from three divisions, all of which are trying to attack a managed hosting market that Forrester Research expects to exceed $10 billion by 2004.

"I don't think [Intel's efforts are] necessarily a bad thing," says Lee Rand, director of appliance marketing in Intel's Communication Products Group, which is recruiting partners to design data centers based on Intel's NetStructure product line. "[The different divisions in Intel] can all learn from each other."

But Intel's strategy has left its partners scratching their heads. Just last week, Intel put on hold the announcement of a NetStructure Resource Center in San Diego, saying plans were "up in the air." Nevertheless, the company went ahead with an e-Business Data Center Store for customers to download software that runs on NetStructure appliances.

Intel has cobbled together its NetStructure product line from acquisitions: WebTrends, which analyzes website traffic by studying log files, and Web mail vendor EmuMail. Both will offer products through the Intel store.

Making matters even more confusing, the Intel architecture group last week unveiled a joint solution center with Hewlett-Packard that's based on HP's NetServer rather than on Intel's NetStructure. The companies claim two customers and several partners, and are creating "recipes" of pretested hardware/software stacks that can be used for hosting. Early prototypes include Microsoft Exchange and a Windows 2000 cluster that runs SQL Server and SAP R/3.

HP will handle follow-up services for customers and says the relationship with Intel is exclusive. "Intel and HP engineers are working so well together that they eat in the same cafeteria," says HP e-services VP Nigel Ball.

Intel seems to be working well with everyone - on the outside, at least. Intel Online Services, which already runs several data centers around the world, is working with the company's partners to build data centers that may compete with its own. One Intel Online Services team helped design Veedix, a spin-off of Texas-based distributor M&A Technology that offers hosting and co-location services to school districts and Fortune 1000 customers.

"Intel did a great job and cut six to eight months off our timetable," says Veedix president Perry Henderson. "Thanks to Intel, we're a profitable company."

At the very least, Intel seems to be hedging its bets. While microprocessors remain Intel's No. 1 business, the company knows it needs to diversify its revenue stream beyond the maturing PC market.

Shares in major PC makers like Compaq Computer and Dell Computer have been in a downward spiral because of slowing market growth and falling hardware prices. As we went to press, Intel and Dell were trading near 52-week lows.

It's unclear whether Intel's Web-hosting initiative can restore the company's luster. The market for hosted and managed services, although nascent, already is crowded. Early giants include Exodus Communications, IBM and Qwest. Exodus was one of Wall Street's top-performing stocks in 1999, but analysts have grown increasingly skeptical of the company because it hasn't generated any quarterly profits. As a result, Exodus shares have fallen sharply in recent months.

One potential casualty, PSINet, is in the process of divesting itself of its interest in Web integrator Xpedior.

But not everyone is daunted by the competition. Sun Microsystems is betting on its pending acquisition of Cobalt Networks, and start-up Ensim is signing partners at a rapid pace.

Young Gun Ensim last week inked a partnership with ViaWest Internet Services, which offers hosting and co-location services to small and mid-sized businesses in four Western states. ViaWest president Roy Dimoff says turbulent times are the perfect time to sign good partners. "We're seeing good companies with good business plans that can't get venture money because of the downturn in the market, but you have to take a longer view," Dimoff says.

ViaWest has adopted Ensim's ServerXChange platform, which virtually subdivides servers into hosted spaces that protect customers from each other. Ensim offers e-commerce, streaming media, intranet collaboration plans, and Microsoft Exchange-compatible messaging, among other services, in conjunction with several platform providers. But ViaWest and Ensim are working with HP, which Ensim VP Vikram Mehta says has the advantage of spanning Linux, Unix and Windows NT.

"Our infrastructure will do to the hosting industry what switches and dialing capabilities did to the telephone," Mehta says.

Meet the new rivals, Intel.

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