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C&W's $500m (£354m) five-year venture with Compaq and Microsoft, launched in September last year, failed to attract sufficient small to medium businesses to its remote access provision of Microsoft's Office productivity suite and Exchange e-mail service.
C&W's A-services division president Jeremy Thompson said, "While we believe in software as a service in the long term, we have not been getting the market traction and we've decided it would be prudent to close.
"Market awareness has been a big barrier and we were a bit premature in targeting the SME market," he said. He added that the company's ASP division has not closed the door on future software-as-a-service ventures, which he said is "the way forward".
At the launch of A-services, Compaq promised an investment of $200m for servers and the supporting network infrastructure over a five-year period, C&W set aside $300m to run the business. Apart from provision of the Windows 2000 operating system and Office and Exchange software, Microsoft's financial commitment was not stated.
Announcing the service, Compaq vice-president and general manager for the C&W alliance group Eduardo Pontoriero referred to the service as a business-in-a-box solution.
ASP/xSP Community chairman Simon Moores said, "Companies such as C&W and BT cut out the channel but they lack the essential trust that is bred through the channel. SMEs want a business relationship not a billing relationship."
Thompson said its services' customers were happy with return on investment and would be helped to find a new service provider or other solution.