By Timothy Prickett Morgan Moving ahead in its decade-long strategy of transforming itself from a mainframe leasing company into a full-blown technology services powerhouse, Comdisco is in the midst of re-engineering its disaster recovery and business continuity facilities, which are located in the major metropolitan areas on the American east coast, west coast and in […]
By Timothy Prickett Morgan
Moving ahead in its decade-long strategy of transforming itself from a mainframe leasing company into a full-blown technology services powerhouse, Comdisco is in the midst of re-engineering its disaster recovery and business continuity facilities, which are located in the major metropolitan areas on the American east coast, west coast and in Comdisco’s stomping grounds in the Midwest outside of Chicago. Comdisco’s long term goal, like so many other services companies, is to leverage its expertise in Windows NT, storage area networking and other cutting edge technologies, and it will be refitting its disaster recovery centers with all the modern equipment to make it attractive to a whole new breed of customers. The reason why the company is focusing on services is simple: that’s where the money, or more precisely the profit, is. Nonetheless, Comdisco is still by and large a computer leasing company, with about 75% of its sales coming from operating and direct financing leases of high-tech equipment. According to Merrill Lynch, Comdisco has about $9bn in equipment under lease, but only about 16% of its portfolio is proprietary mainframe and midrange servers and associated peripherals, down from 46% in 1992. About 43% of Comdisco’s portfolio is now comprised of PCs and Unix servers, telecom and other office equipment; another 20% is for semiconductor manufacturing and testing equipment, with the remainder being locked up in medical and other capital-intensive gear. The continuity services business was established in 1980, four years after Comdisco was founded and has grown to be the second-biggest money maker after leasing. Part of that growth came from a 1996 deal with Computer Sciences Corp, whereby Comdisco bought CSC CompuSource, a disaster recovery unit of CSC. The Continuity Services division of Comdisco doesn’t just let companies rent time on servers in the event that their machines keel over and die. It provides full telephony, networking and trading floor facilities as well as data vaulting, remote transaction journaling, disk mirroring, data base shadowing and other high- availability solutions. Comdisco also provides item and check processing services for banks and other financial institutions, which have a legal obligation to post transactions or cut checks regardless of the state of their systems. For those who can’t get to a Continuity Services site, the company offers mobile data centers that it can take to them. In fiscal 1997 (ended in September of that year), continuity services accounted for $354m or 13% of Comdisco’s $2.8bn in revenues in fiscal 1997 (ended September). The continuity business grew by slightly over 22% in fiscal 1998 to $433m, but Comdisco’s other units grew almost as fast and continuity services still only account for about 13% of the company’s $3.2bn in revenue. Projections made by Merrill Lynch, which has the company’s stock rated at a long term accumulate, call for Comdisco’s continuity services business to break above $500m during fiscal 1999. That’s only a bit more than 16% growth, down from last year’s 22%. While that 16% growth for continuity services allows that division of Comdisco to retain its position as the fastest-growing part of the company, clearly in a services-crazed market such as the one we are entering as the millennium comes charging at us (Y2K services are under the Continuity Services umbrella at Comdisco) and companies everywhere are trying to figure out how to deploy Windows NT in production environments in reliable ways, Comdisco’s continuity services should be able to do better than Merrill Lynch thinks. The re-engineering of the division’s facilities is the first step in trying to grow continuity services beyond the expected 14% of revenue that Merrill Lynch has it pegged at for fiscal 1999. New technologies are changing the way our customers are using IT to support their business goals, says John Jackson, general manager at Continuity Services. As the leader in the continuity services industry, we have a responsibility to help companies cost- effectively protect their investments in those technologies and help them support anytime, anywhere computing. Our goal is to optimize our facilities infrastructure and maximize our delivery of integrated end-to-end continuity services. We will be better focused, more profitable, more nimble, and able to respond more quickly as a result. To that end, Comdisco is right now in the process of consolidating two facilities in Atlanta and Minneapolis and is in the first phase of a complete facility review process that the company expects will result in the addition of new facilities, resizing and upgrading of others and the closure of a few sites. For the moment, all Comdisco is saying for certain is that it is reviewing client requirements for more capacity in the Northeast. A key component of the continuity services reorganization will be what Comdisco calls data bunkers, which will be equipped with the most advanced recovery hardware and software available from IBM, EMC, Hitachi, Oracle and others. Comdisco also plans to install more than 100 of Compaq’s fastest ProLiant servers, using Pentium II Xeon chips, across the United States; it says it is the first such company to put in such a large block of Windows NT processing power to support disaster recovery clients. These recent re- engineering efforts complement other steps Comdisco has taken to bolster its continuity services. Last July, Comdisco took a 25% stake in Transwire Communications, a high-speed data network service provider based in New York City (which Comdisco is rumored to be thinking about purchasing), in an effort to boost its networking capabilities between Manhattan clients and its New Jersey recovery facility. Comdisco has committed up to $75m in the form of equity and lease financing as part of the deal, which gives Transwire access to Comdisco’s nationwide facilities for hosting its telecom equipment. And two weeks ago, Comdisco signed an alliance with Call Interactive, the 800 number interactive voice response services subsidiary of First Data Corp, to provide toll free telephone continuity services.