Microsoft, Compaq dial up Digex

When it rains, it pours: In the latest whopper of a deal by technology companies trying to figure out how to go to market in the application service provider segment, Microsoft and Compaq Computer today said they will invest $100 million in Digex as part of a joint effort to develop new application hosting services.

The new application service provider (ASP) services from Digex (Nasdaq: DIGX) will — naturally — be based on Compaq servers and storage products and Microsoft (Nasdaq: MSFT) platforms. Microsoft and Compaq (NYSE: CPQ) said they will invest $50 million each; in return, they will receive Digex stock.

Digex, which also has worked closely with Sun Microsystems (Nasdaq: SUNW) as part of Sun’s ASP initiative, now will have a huge incentive to provide Microsoft-based services. The deal with Compaq and Microsoft includes an effort to re-engineer existing Windows applications for a hosted environment.

Mirroring language used by Sun’s SunTone program, Digex said it plans to provide a “dial-tone” level of service quality. Digex will create branded applications services that other ASPs can deploy, with Digex providing access to interfaces to security and billing information on the back end.

ASP revolution
Mark Shull, president and chief executive of Digex, said the investment from Microsoft and Compaq puts his company on “the leading edge of the ASP revolution.”

“The Compaq, Digex and Microsoft effort … (combines) skills in hardware, application platforms, operating systems, Web and business software, and managed hosting,” Shull said in a statement. “Together we intend to transform the way business is conducted over the Internet in a hosted environment.”

The pact between Microsoft, Compaq and Digex comes a day after Sun’s touting of the first set of ASPs — Digex being among them — to be certified under its SunTone program. Sun said it has certified nine ASPs under the program, including Corio — which this week received a $10 million investment from Microsoft — Digital Island, Exodus Communications, GlobalCenter and USinternetworking.

Digex’s new service offerings include the ASP Server Platform, which comprises Microsoft Windows 2000 running on high-end Compaq servers, with enhanced server resource monitoring, security and management tools. In addition, Digex will develop “ASP Application Platforms,” which are tested and re-engineered software packages for the Windows 2000 platform.

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