The importance of Loudcloud's merger with Frontera

It was a small merger, and if you weren't watching closely, you might have missed it. But Loudcloud's purchase of Frontera last month could spell an important revelation in the world of managed service providers and application service providers .

Loudcloud, the brainchild of Netscape guru Marc Andreessen, on Feb. 28 signed a deal to acquire privately owned Frontera for an undisclosed amount of Loudcloud stock. On the surface, the buyout might seem simply to be a merger of two struggling e-business service providers. But if you look deeper, you might see the beginnings of a much-needed integration between managed services and application services.

Under the deal, Loudcloud will have an opportunity to merge its Web infrastructure building and management services with Frontera's e-business applications services, which include still-emerging content management and customer service packages such as those made by BroadVision, Vignette, E.piphany and ATG. The combination of Loudcloud's infrastructure management service with Frontera's e-business applications offerings could help companies not only deploy those applications quickly, but manage them more effectively.

In the past, many corporations have been reluctant to " bet the ranch " on Web-oriented customer-facing applications because of concerns about scalability, performance and reliability. ASPs like Frontera made it easier to get these new applications deployed, but even with solid infrastructure partners, Frontera's long-term ability to manage those applications reliably was always a question mark.

Loudcloud, in the meantime, has been struggling mightily as the market for broad hosting and Internet infrastructure management services - a fiercely competitive arena to begin with - continues to shrink with the dot com bust and a crawling economy. Like other managed service providers, Loudcloud is recognizing that infrastructure management is important, but it takes mission-critical Web applications to turn managed Internet services into a profitable business.

With the merger of the two companies, Loudcloud will now be able to offer a targeted range of e-business applications servicesm - including tools for personalized Web marketing, B2B transactions and online customer service - along with the infrastructure required to manage and grow them. Essentially, Loudcloud is providing the means to run e-business applications, while Frontera's applications provide a powerful motive.

Like all mergers, however, the potential of a Loudcloud-Frontera combination is just that - potential. If Loudcloud simply harvests the Frontera customer base and tosses out the ASP business model, then the union of MSP and ASP will continue to remain elusive. Such mergers have failed to produce results in the past, and it could happen again.

But if Loudcloud can provide guaranteed performance and reliability service levels for promising applications such as BroadVision, Vignette and E.piphany, watch what happens. Many corporations that had considered those applications too costly to deploy - or too risky to rely on - may reconsider their views. And other vendors, including Loudcloud's competitors, may follow suit.

Senior Analyst Tim Wilson is with Enterprise Management Associates in Boulder, Colo., an analyst and market research firm focusing exclusively on all aspects of enterprise management. Wilson has over 10 years of experience in covering e-business and enterprise management issues, most recently with InternetWeek, where he was chief of reporters. He can be reached at twilson@enterprisemanagement.com.

Senior Analyst Tim Wilson is with Enterprise Management Associates in Boulder, Colo., an analyst and market research firm focusing exclusively on all aspects of enterprise management. Wilson has over 10 years of experience in covering e-business and enterprise management issues, most recently with InternetWeek, where he was chief of reporters. He can be reached by clicking here.

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