Analyst Gartner has told companies not to consider internet service provider PSINet, and to look for an alternative ISP if they currently use the firm.
Last week, PSINet warned it would likely seek bankruptcy protection. It has already started offloading business divisions, selling its transactions unit to an investor group led by GTCR Golder Rauner for just under $300m and its stake in Decan Groupe to Getronics International for about $34m.
However, the ISP has warned that the funds generated are probably not enough to avoid filing for bankruptcy.
Gartner analyst Eric Paulak said: "In Gartner's opinion, using PSINet for any of its internet access or hosting services as it teeters on the brink of bankruptcy is a bad idea because many other providers give equal or better value.
"Gartner therefore recommends that enterprises not enter into any new agreements with PSINet until it has shown it can either avoid bankruptcy, or, failing that, makes clear its strategy to exit bankruptcy. "Gartner further recommends that enterprises with PSINet relationships begin looking at alternatives if they have not already done so."
PSINet's problems have been caused by an over-aggressive growth strategy as it tried to build a global network, get into point-of-sales services, enhance its ecommerce activities, launch itself as an application service provider and build a professional service business.
"It sounded like a good strategy, but it hasn't worked," said Paulak.
The strategy gave PSINet a number of industry firsts, such as 100 per cent web hosting guarantees, but also a poor reputation for customer support.
Paulak added: "Instead of creating an Internet Super Carrier, PSINet has created an overburdened aircraft carrier that has taken a long time to change course. PSINet offered good network quality and highly competitive pricing, but its rapid growth may have gotten in the way of effective sales and ongoing service support."
"Many of PSINet's lost customers reported they chose other providers because of slow or non-existent responses from PSINet. Existing customers also reported slow responses to change and upgrade requests," he said.
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