Hosting Firm Credits Storage

VeriCenter Inc., a provider of managed IT services, closed today on the purchase of another IT hosting firm, Agiliti Inc., a deal that was first announced in February. The news reflects the growing popularity of managed IT services, which usually include SAN and NAS.

"Storage is absolutely a big part of what we offer," says spokeswoman Jennifer Lozier. "We have SAN, NAS, LAN, a whole variety of things. Some customers are shutting down their data centers and moving data entirely to our facilities."

VeriCenter hosts customers' IT functions at its own facilities in Atlanta, Boston, Dallas, Denver, Houston, and with the addition of Agiliti, Minneapolis. The model mimics the application service provider (ASP) trend that rose -- and supposedly dwindled -- in the late 90s.

Nothing about VeriCenter is dwindling. The company claims it's been profitable for three years and earned $38.4 million in 2004, compared with $9.8 million in 2003. Much of this growth came when Houston-based VeriCenter bought the ASP facilities of Sprint Corp. (NYSE: FON) in January 2004, for which it allegedly paid less than $15 million.

Terms of VeriCenter's all-stock deal with Agiliti are undisclosed. The integration of the two companies has been completed, Lozier says.VeriCenter has roughly 250 employees, including about 50 it acquired with Agiliti, whose data center in the Midwest spans 10,000 square feet (see VeriCenter Buys Agiliti).

VeriCenter claims over 500 customers, including David Weekley Homes, International Speedway Corp., Kodak Polychrome Graphics, and Wild Oats Markets. Contracts start at three years and typically save companies upwards of 20 percent on operational and capital IT spending, Lozier claims.

VeriCenter has a relatively limited, if solid, list of official platform (and storage) suppliers, including Cisco Systems Inc. (Nasdaq: CSCO), Hewlett-Packard Co. (NYSE: HPQ), Sun Microsystems Inc. (Nasdaq: SUNW), and Veritas Software Corp. (Nasdaq: VRTS). IBM Corp. (NYSE: IBM), Microsoft Corp. (Nasdaq: MSFT), and Sprint also are allied as so-called industry partners.

To its advantage, VeriCenter has claimed a solid chunk of business for a growing firm. But unless it continues to expand exponentially, it faces competition from the likes of Electronic Data Systems Corp. (EDS) (NYSE: EDS) and IBM, along with a number of other providers, such as Savvis Communications Corp. (Nasdaq: SVVS). If the managed IT services market is indeed growing at more than 40 percent, which VeriCenter thinks it is, it may have to buy its way further into the segment to keep up.

Mary Jander, Site Editor, Byte and Switch0