Exodus founder creates Net services start-up Jamcracker

K.B. Chandrasekhar isn't straying far with his latest venture.

As founder and chairman of Exodus, a Web hosting firm that specializes in hosting Web sites, data and software for companies and application service providers (ASPs), Chandrasekhar has watched the incredible growth in the market for outsourcing some of these functions for businesses.

Market research firm Dataquest has predicted that the ASP market will be worth nearly $23 billion by 2003.

With those kinds of dollars staring him in the face, Chandrasekhar plans to aggregate the best of those ASPs' Web-based applications and sell them as a package to medium-sized companies through a new start-up called Jamcracker.

Formed in July, Jamcracker today announced a $42 million first round of equity and debt funding, led by investments from Internet Capital Group and Fleet Equity Partners. Jamcracker, formerly known as VitalTone, will host its software and servers with Exodus.

Chandrasekhar will serve as chief executive of Jamcracker and continue as Exodus chairman. "I'm also an entrepreneur, so my hands are always ready," he said.

The company, which began offering commercial service today, will offer a variety of services, such as email, conferencing, Net access and network-based data backup, among others, but only via Web-based applications. Others, such as Agillion.com, have taken a similar approach.

Jamcracker, which currently offers services such as email from USA.net and Net access via iPass, is expected to announce as many as 25 ASP service partners, executives said.

Analysts believe the ASP industry is ripe for growth and Jamcracker could have found a good niche for itself.

"I like the model because smaller ASPs tend to carry their own (internally developed software) products, which are often limited in terms of depth and scope," said Harry Tse, an ASP industry analyst at The Yankee Group. "But if you line them up together, that makes it a much stronger offering. That's what Jamcracker's trying to do."

Jamcracker's plan, under which it will resell other ASPs' service while collecting just one bill from its customers, is only the latest example of the nascent ASP market quickly segmenting.

Many analysts believe the highly competitive ASP market will continue to splinter into specific niches, particularly with ASPs targeting certain vertical industries such as insurance, banking or healthcare. Some ASPs, such as Qwest Communications International's unit, already are doing just that as a way to carve out a portion of the booming business.

Co-founders of Jamcracker include Herald Chen, chief financial officer, and Mark Terbeek, vice president of corporate development.