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Firms back up promise to keep businesses running

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In the wake of the Sept. 11 terrorist attacks, SunGard Data Systems is experiencing a new and sorrowful kind of disaster recovery.

The company has three employees missing and presumed dead in the rubble of the World Trade Center. They were in the towers that morning making routine calls on customers. To help the families of these employees recover from this disaster, SunGard has set up a relief fund.

"Finances are the last thing these people need to worry about now," said SunGards Dave Palermo, VP-marketing for recovery services.

As company employees dealt with the loss of co-workers, SunGards recovery services division sprung into action, just like the teams at IBM Corp., Comdisco Inc. and other disaster recovery businesses, which faced an astonishing disasterlarger than any hurricane, tornado or fire to date.

"Its far and away the largest [single incident]," said Rich Maganini, Comdiscos director-corporate communications. Its also a disaster that will likely have a long-term effect on the disaster recovery business and how these companies market their services.

Disaster declarations

Comdisco has 35 customers in the vicinity of the World Trade Center. The company had 90 "declarations," the term for the activation of a disaster recovery contract. (By contrast, Comdisco had 32 declarations during Hurricane Floyd.) Many businesses sign several contracts to cover various computer systems and services, such as data recovery, replacement equipment and the immediate availability of work sites.

The declarations came fast and furious on Sept. 11. The first for Comdisco arrived at 9:08 a.m., just 20 minutes after the first airliner slammed into the towers. Despite the scope of the attack and its aftermath, the early consensus is that the disaster recovery teams have performed remarkably well.

Comdisco, for instance, had the New York Board of Trade up and running again within days. "The New York Board of Trade opened a commodities trading floor within one of our facilities [in Queens, N.Y.], trading cocoa and sugar out on the floor," Maganini said.

Randi Purchia, AMR Research Inc.s research director-financial services, said, "It appears that SunGard and the others have done a remarkable job of making this all work."

Gartner Group VP-Research Director Donna Scott agreed. "So far, theyre doing a great job," she said. "Theyre not missing a step."

Lions share of revenue

Disasters bring this business into the spotlight and tend to make the market grow. It was a $2 billion industry in 2000, according to Scott, dominated by three companies who control the lions share of the revenues: IBM ($600 million), Comdisco ($440 million) and SunGard ($410 million).

But because its a relatively mature market and because federal regulations require that financial services providers must have disaster recovery plans, Scott doesnt expect the market to grow markedly. She said the market could grow 13% to 20% next year, up from the previously forecast 10% to 13%.

It is difficult to draw a conclusion about Wall Streets assessment of this market, because the biggest players have businesses beyond disaster recovery. IBM and SunGard saw their share prices rise slightly between Sept. 10 and Sept. 24. Comdisco, which is in bankruptcy proceedings, saw its share price rise initially, but by Sept. 24 it was down 17%, to 53 cents per share. Currently, Hewlett-Packard Co. has the leading bid to buy Comdiscos disaster recovery practice, but others, including SunGard, may be inclined to place bids in the wake of the companys performance after the attacks, industry observers said.

Despite the markets initial lukewarm reaction, it seems clear that there is room for growth. More than 60% of IT managers surveyed by Gartner said their companies didnt have a basic continuity plan to mitigate the effects of a disaster.

Despite what may be a growing appetite for disaster recovery services, marketing the successes of the Sept. 11 aftermath will prove a delicate task. The companies have been so preoccupied with their downtown Manhattan customers that marketing hasnt yet become a concern.

Theres clearly a thirst for information about disaster recovery. One week after the terrorist attacks, Gartner held a teleconference on the topic. More than 100 people listened in as analysts and representatives from Comdisco, IBM and SunGard discussed the disaster recovery lessons of Sept. 11.

The most harrowing lesson? "Your scenario has to plan for loss of life," Scott said.

The disaster recovery business finds it hard to escape the sense that it is an industry capitalizing on the misfortune of others, and that complicates the marketing of its services. Immediately after the attacks, SunGard ceased its telemarketing.

A key to marketing these services, Palermo said, is not "looking like youre ambulance chasing.

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