CRN Interview: Corio CEO George Kadifa

As outsourcing gains momentum, hosting companies have been seeing an increase in revenue. Corio, for example, reported revenue of $68.7 million for its 2003 fiscal year, a 22 percent increase over the $56.1 million in sales it posted in 2002. The San Carlos, Calif.-based company's losses fell to $12.9 million for the year, compared with a $34.8 million loss in the previous year. Corio CEO George Kadifa outlined his plan for making the channel a stronger part of the hosting provider's overall go-to-market strategy in an interview with CRN Editor In Chief Michael Vizard.

CRN: How big is Corio's customer base, and what do you expect in terms of growth for 2004?

KADIFA: We have about 120 customers right now, so adoption is increasing significantly. In the last 90 to 120 days or so, we've seen a significant uptick in new customers and customer adoption. We have operational challenges like everyone else, but on an overall level I would summarize 2003 as a good year. My feeling is the market has stabilized. People, on the one hand, are not going to have major or massive increases in their budgets; however, they're making rational decisions. Basically, for every IT decision out there, 50 percent of those decisions are actually considering hosting service providers as part of their decisions, which is much higher than it used to be. It used to be in the 20 percent to 30 percent range. We expect that percentage to kind of keep moving upward, especially this year.

CRN: How many data centers does Corio have?

KADIFA: We have five operation centers in the company. Four are based in the U.S.--one is in Chicago, one is on the West Coast in the Bay area, a third one is in Phoenix and a fourth one is in Dallas. The fifth operation center is in Bangalore [India].

CRN: Why should channel partners look to partner with Corio vs. some other hosting provider?

KADIFA: We provide them with a menu of services that they can resell, not just one thing to do, which is to go and outsource something for us. For example, we've got a new service called Corio Development On Demand where we let people do application development. We have a full stack of technologies and services from the hardware levels to the software levels to the service levels.

CRN: How many channel partners does Corio have?

KADIFA: We have about 25 partners today. We'd like double the size of the relationship with them and bump that number up by another 25 partners or so. We want our partners to be with us on a recurring basis. We are devising solutions for them so that they have a recurring relationship with their own customers, too. What we're trying to do is project our business model to our partners.

CRN: Why do you think solution providers will want to host applications with Corio instead of do it themselves on behalf of their customers?

KADIFA: Frankly, there is no choice anymore in terms of leveraging someone who's done all the investments. It's very hard today to start from scratch with these things, especially when you're competing with other people who have capabilities that they deployed or have partnered with other companies like us. To start today from scratch is almost an impossible proposition for people. That's why the adoption is getting much higher in terms of working with companies like us.

CRN: At one point, service level agreements with hosting companies were not worth the paper they were written on because you couldn't measure things to force compliance. How is this issue being resolved?

KADIFA: What's happening is visibility. We have systems that track a service back to the customer. Similar to the Federal Express tracking system, you basically have packages sent from point A to point B, and you can establish how this package is progressing through. It's the same thing with our business. We give people visibility so they know exactly which systems are doing what for them.

CRN: Do you think the outsourcing trend will continue in 2004 as the economy turns, or was that really just a phenomenon of 2003 because everybody was in panic mode?

KADIFA: Actually, it's going to increase in 2004 for several reasons. Typically, people at the beginning of a recovery--which we're really in right now--have more stuff to do than they have resources to do. And they don't want to invest in significant resources on their own because it's the beginning of the recovery. They're not sure how sustained that recovery is going to be. We expect, based on these dynamics, that this trend actually will increase this year more than last year.

CRN: What impact will the move to on-demand computing models have on hosting providers such as Corio?

KADIFA: We already have a lot of on-demand economics and pricing offered throughout our products and services. So we feel this is very important and significant. It presents significant and dramatic value to our customers, so we're very diligent about on-demand.

CRN: Specifically, how does Corio differentiate its approach from that of IBM Global Services or EDS?

KADIFA: One is that we're very deep in specific enterprise applications. Two is we're very agile. We tend to be very quick in response. We tend to be extremely nonbureaucratic. What you see out there with larger entities is that you're not buying a service; you're buying the bureaucracy with it. And they price the bureaucracy as part of the service, which we don't. Our pricing reflects value instead of bureaucratic costs. We have a very flexible model. That's why the on-demand approach is the keystone of our capabilities. It allows variability in service levels based on business conditions. Outsourcing based on classic, static relationships doesn't work anymore.