The Net Economy – Far Forward – Is Exodus Poaching MSP Customers? – Hoster says its hands are clean, but others aren’t so sure
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Is Exodus Poaching MSP Customers?

Hoster says its hands are clean, but others aren’t so sure

July 23,2001

It’s the kind of story that managed service providers would rather not hear. An IT manager for a large enterprise is looking for an MSP for several services. To seal the deal, the MSP offers the manager a tour of the data center where the enterprise’s gear would be housed.

So far, so good � until the operator of the data center tries to steal that customer away from the MSP by saying it could deliver the same services the MSP was offering.

One IT manager says that’s exactly what happened on a tour of a data center facility used by the manager’s prospective MSP. The data center operator that made the poaching pitch was Exodus Communications.

“I strongly felt that Exodus was saying, ‘You don’t have to hire them to do all of these things when we can do them right here,’ ” says the IT manager, who requested anonymity. “They offered to do everything we had said the MSP could do.”

For the record, the MSP involved with this customer will not confirm the story, and Exodus denies knowledge of the story. But some analysts and MSPs say the story is not an isolated occurrence. In fact, rumors about Exodus’s attempts to poach customers were among the reasons that Coradiant chose not to use Exodus data centers, says Mike Gero, director of marketing and product management for that MSP.

“We didn’t want to run into the problems that other MSPs had, where Exodus tried to sell customers services on top of colocation,” Gero says. “We knew there was potential for channel conflict if there was any kind of handoff of our customer to the hosting partner.”

Chris Richter, director of product marketing at Exodus, says he has not heard the poaching rumors and adds that any such occurrence would be highly unusual. “We have very strong relationships with our MSP customers and would never condone or endorse that kind of practice,” he says.

Several MSPs contacted for this story said they think highly of their working relationships with Exodus. But market watchers note that hosting companies like Exodus are under more pressure to deliver services beyond housing equipment.

“Obviously, MSP service generates more revenue than colocation, so hosters will do what they can to become the most important vendor for that customer,” says Andrew Schroepfer, president of Tier One Research.

Some MSPs try to avoid competing with companies like Exodus for just these reasons. “We find it fundamentally critical not to compete with our business partners,” says Craig Tysdal, CEO of NetSolve. Another MSP, SiteLite, avoids this problem by handing over all of its services to Exodus for resale.

Mike Coffield, senior VP of channel marketing at Nuclio and president of the MSP Association, is not surprised to hear that hosters may be trying to poach MSP clients. “Exodus obviously needs revenue right now,” he says. Tysdal also isn’t surprised by the poaching rumors. “In complex relationships, these things happen,” he says. “If an MSP has a high revenue concentration with Exodus, and if Exodus’s business is declining, that can be a deadly combination.”

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