Outsourcing during an economic slowdown

It's hip to focus on outsourcing during an economic slowdown. But this tune isn't for everyone. Industry pundits, such as Mark D'Annolfo, an analyst at Deutsche Banc Alex.Brown, say businesses are eager to outsource costly IT operations to service providers and data-center experts. D'Annolfo predicts companies like EDS Corp. and FIServ will benefit greatly from the trend.

Naturally, data-center specialists like Exodus Communications are singing a similar tune. Exodus chairman and CEO Ellen Hancock, speaking last week in Toronto, predicted that Canadian businesses will need to outsource their Web sites to keep up with foreign competitors. Almost on cue, she mentioned that Exodus recently opened an Internet data center in Brampton, Ontario.

Savvy solutions providers are partnering with Exodus and other data-center providers. But watch where you step. Many data-center providers have yet to turn a profit. Digex and Exodus lost $142.9 million and $248 million last year. I'm not suggesting that these companies will go out of business. But heed this advice: Ignore the outsourcing noise and research potential partners' financial standings before signing on the dotted line. Otherwise, you could wind up like NorthPoint's partners and customers, which lost Internet service when the DSL provider went under.

• J.D. Edwards has hired an executive search firm to find the company a senior VP of consulting. CEO Ed McVaney concedes that J.D. Edwards has practically "neutered" (his words, not mine) its consulting practice in recent months. The company's services revenue fell 9 percent in its most recent quarter. McVaney expects the slot to be filled within a few weeks.
• Meanwhile, J.D. Edwards' alliance with iPlanet has quietly faded. McVaney's not sure what went wrong, but another source within J.D. Edwards says iPlanet's application server lacked core components offered by IBM's WebSphere and Microsoft's Commerce Server.
• IBM and Financial Fusion together are targeting the retail-banking sector. IBM Global Services will provide integration and consulting services for Financial Fusion's software. In return, Financial Fusion will push MQSeries, DB2 and WebSphere software, along with IBM's eServer hardware. The deal is interesting, because Financial Fusion is a wholly owned subsidiary of Sybase, which competes with DB2, among other IBM products.