Managed service provider Totality Corp. on Monday acquired several substantial outsourcing contracts from bankrupt former rival Breakaway Solutions Inc. It takes the company a step closer to profitability at a time when patience is at an all-time low for service providers that have to run back to investors every few months just to keep the wind in their sails.
Although Totality didn't reveal how much it paid for 15 of Breakaway's customer contracts or the original value of those contracts, Totality will assume the responsibility of providing application- and infrastructure-management services for former Breakaway clients Sun Microsystems, Lightxchange, HigherMarkets, and others. These new clients join current Totality clients American Airlines, K-Mart's BlueLight.com, and Martha Stewart Living Omnimedia.
Breakaway's clients, as well as the infrastructure upon which the service provider hosted their IT systems, will complement Totality's growth objectives, says Michael Carrier, Totality's chief technology officer and acting CEO. "These acquisitions speed up the amount of time it will take for us to achieve profitability, which we've scheduled for next year." Carrier is optimistic about the strength of the managed-services market. "With so much revenue driven through Web-based systems, IT operational issues that affect revenue growth for even a quarter can make a CEO lose their job," he says.
Clients want their service providers to prove their economic viability, so Totality's acquisition of lucrative Breakaway contracts is a significant move, says Corey Ferengul, Meta Group senior program director of service management strategies. "Customers don't want their service provider going back to investors for cash infusions within the first year of their contract; they want to see growth plans," he says. Breakaway filed for bankruptcy protection in September after struggling to clearly define its place in the service provider market.