(Reuters) - Internet communications company Qwest Communications International Inc. has agreed to manage Hewlett-Packard Co.'s system for supplying business software to customers via the Web, in a deal worth up to $1.5 billion, the companies said Wednesday.
Qwest said it expected the deal to provide it with about $200 million in revenue during the first year of operation, and up to $1.5 billion over the life of the three-year pact.
In a joint statement, the companies said they would offer Web-based software delivery services that store key business data for large corporate customers in Qwest's network of data centers, in a bid to assure rapid software response times.
These ``Web hosting'' facilities are directly connected to Qwest's high-capacity telecommunications network, giving customers direct, high-speed access to their information.
The deal comes a day after Intel Corp., the world's leading computer chip maker, introduced its own plan to diversify into the Internet hosting business by opening the first in a string of data centers expected to cost more than $1 billion.
Ann Livermore, president and CEO of H-P's Enterprise Computing unit, said, ``H-P and Qwest will provide businesses of all sizes with a cost-effective, outsourcing storage e-service for their mission-critical applications, allowing them to focus on the core business operations.''
The plan is part of a growing industry shift to manage software on behalf of corporate customers, in effect renting the programs out as monthly subscriber services and relieving customers of the need to keep large in-house technical staffs.
Separately, Qwest, based in Denver, said it had begun a major expansion of its CyberCenter operations -- the company's network of data centers -- that will add seven new centers by the end of 2000 to meet the growing customer demand for its software hosting, electronic commerce and Web-hosting services.
The Qwest data centers will rely on H-P's SureStore E line of data storage hardware and software management equipment, the two companies said.
Palo Alto, Calif.,-based H-P will also co-market Qwest's storage services as part of its ``e-services'' portfolio for businesses, the world's No. 2 largest maker of computer products said. E-services is H-P's catchphrase for a host of Internet services it is gearing up to offer in competition with rivals such as IBM and Sun Microsystems Inc. . The two plan to offer an Internet-based storage system with customer data back-up and recovery, storage utilities for Internet Service Providers (ISPs), disaster recovery services, and comprehensive services for storing data used to run customers' most critical business operations.
The companies will begin offering these services in the fourth quarter of 1999, they said.
Qwest said it plans to expand its existing Burbank and Sunnyvale, Calif. data centers and add seven CyberCenters in Atlanta, Chicago, Dallas, Detroit, Philadelphia, Tampa, Fla. and Sterling, Va.
The capacity of the Qwest data center network will be 630,000 terabytes, or trillions of bytes, of data storage capacity to host business applications from software providers such as Microsoft Corp., Oracle Corp., SAP America and Siebel Systems Inc.
The 630,000 terabytes are roughly 60 times the size of the entire printed collection of the U.S. Library of Congress, which is estimated to contain about 10 terabytes of data.
Hewlett-Packard shares closed at $95.125 Tuesday on the New York Stock Exchange. Qwest ended the day at $29.03 on the Nasdaq stock market.