By: OpenSRS Team on November 23rd, 2006
Posted in: Announcements
Tags: Holiday Hours
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We at Tucows would like to wish our American friends a safe and happy Thanksgiving!
(I'm in Boston myself, helping my mother-in-law with the Turkey. See you folks on Monday!)
It was standing room only for this session. In what has become an ISPCON tradition, Mike Cassidy (site) (blog) a marketing consultant for service providers, presented the hottest products and services for 2007.
Mike’s Advice:
- not every VAS is applicable to every type of ISP
- establish your role, take advantage of your role, but never abuse it
- know your customer base
- create communication channels
- increase your bottom line with new services
- survey your customer base quarterly
- stay current on new product/services available
Opportunity for support services:
For those ISP who market to home network owners and intenders, consider wireless print server capability, parental controls, automatic backup and central storage. Broadband adoption leads to home networks. Understanding the appetite for broadband, the market for consumer support services will continue to grow.
On the small business side there’s an opportunity gap for support. Consumers are supported by the likes of Dell and the Geek Squad. Large enterprise customers are serviced by tier 1 ISPs. There are 80 million SMBs worldwide. According to Gartner, IT spending by SMBs will outpace large enterprises in 2007.
Mike advised ISPs to create long-term contracts with SMBs and use support/IT guys as a sales channel. Many providers are providing incentives for IT staff to sell product in the field. Onsite support is profitable value-added service. Geeks on Call (and the like) cannot handle networks, security and support. It presents a great customer loyalty builder and allows ISPs to charge over cost. People pay plumbers and mechanics $100/hour to fix things, they’ll pay you for support.
The trends:
Software as a service (SaaS), Web 2.0, Office 2.0 – whatever you want to call it is here. With it come new opportunities for email, web mail, CRM, ecommerce, billing, CMS workflow, human resources, SEM… the list goes on. What’s different is SaaS is now a proven business model – Salesforce.com and SugarCRM are a couple of examples. Business customers are becoming accustomed to outsourcing all of their IT.
Storage and/or backup of personal content (photos, videos, movies and music) for the consumer market. People have a small fortune on their computers in music purchased from iTunes. Losing your music sucks. Not to mention all your digital pictures and home movies. According to Parks and Associates, 84% of consumer have digital pictures on their PC.
Home and SMB security and surveillance. The product offerings may be new, but the concept certainly isn’t. There are a few products floating around out there that allow users to keep an eye on the kids, the elderly, the vacation home, and everything. The elder care market alone is huge. Cameras use wireless or homeplug connections. Some services are offering SMS/email alerts from systems; video clip to phone options and door/window sensors. Bell South and Adelphia, for example, have been offering security and surveillance solutions for almost a year.
Digital/Connected Home/Networking/Automation. The home appliances of the 21st century are here – they are smart devices that simplify, automate and inform. Internet products are being used to control specific home applications like lighting, entertainment, home monitoring, PCs are more. Today’s digital homes open vast possibilities for new consumer solutions.
Advertising. There are now products available for most ISPs to share in online advertising revenues. Some are intrusive, some are not. As ISPs, you are the conduit to the holy grail in the online advertising world – “behavioural” and “contextual” marketing. ISPs have never been cut into the pie, until very recently.
VoIP. From Mike’s presentation: “new converged infrastructres that allow voice and data to be transported over a single network are changing the face of business communications. By adbandoning expensive circuit switches and leaded lines and linking voice and data servies together on IP networks, business can realize cost savings. Rather than implementing IP telephony in-house, many businesses prefer to have their voice services managed by a qualified service provider who have the expertise to handle its complex nature. Interest in out-tasking managed business voice services is steadily increasing as organizations take note of the cost and operations benefits. Service providers can provision, monitor, maintain, and troubleshoot business voice infrastructures.”
VoIP is creating a huge distruption in telecom as conventional PBXs are approaching end-of-life. The opportunity is to make the small business customer comfortable and make it work for them. The SMB VoIp is starting to hear but decision markers still don’t know which providers to turn to.
I've long been impressed by the success of Dreamhost's affiliate marketing program, so when I had a chance at ISPCON to talk to Josh and Dallas – co-founders of Dreamhost – I had to ask about the program. They gave some really candid insights. Enjoy!
(If you are reading the feed you won't see the embedded video, so click here to see it.)
Dane Jasper, CEO, Sonic.net
Jonathan Snyder, president, CEO and director, KeyOn Communications
Dan Hoffman, president and CEO, M5 Networks
Rich Bader, president and CEO, EasyStreet Online Services
Moderator: Paul Stapleton, managing director, DH Capital LLC.
What is your go-to-market plan? How are you reaching your customer base?
Jasper: We deliver products at a commodity price-point that appeal to “prosumer” customers who are recommenders. We also take very good care of our customers. Good customer service surprises and impresses end-users and that leads to more customers.
Snyder: Since no-one knows who KeyOn is, we are very gorrila in our approach. Our focus is on agents and resellers. We also do things in our communities through our customer base. If you provide a good, reliable service you customers are best sales force. We keep it very simple. Our product is a mass product, the core of the strategy is to keep very localized and augment with a local presence in the market, which a lot of the incumbents don’t have.
Hoffman: It is easier to build an identity in a community rather than create a brand nationally. We use public relations to try and get to influencers when they make decisions. We target key tech publications thru PR and it is very cost-effective. Our sales teams are selling trust. That trust is first created by a sales person who is honest, candid and knowledgeable. I agree with the comments about deliverying great service so you have references.
Bader: We look to our customers to generate leads, especially in the consumer business. When we switched our focus to the enterprise market we had to do more to cultivate our own leads and relationships. IT managers are hard to reach so sponsored events and try to find them. We host seminars, events and work with community organizations. We try and plant our positioning in minds but not do a hard sell. We do find they calling us. We also have a direct sales force.
Where are you spending money and making investments?
Jasper: We need to invest in all sectors of our business. A large portion of our revenue is DSL products and the regulatory uncertainty is a little scary. So we’re investing in diversification while also entrenching deeper. We’re expecting growth and investing resources in partnerships.
Snyder: These days that capital is being spent on break-fix and making networks more reliable. We’re really staying core to the network focus and spending where we have to increase reliability. We’re acquiring businesses and adding to our network footprint.
Hoffman – Our focus is business and the phones have to run reliability. It is horrible to have phones down across the client base. After our investment in reliability, we’re looking at sales and marketing expansion. Spend a lot on people and knowledge management. Because we’re in New York, recruiting costs and labour costs going up. We’re opening up in Chicago and Boston. Our focus is technology we need to move ahead of curve by focusing on vertical industries and build technology around our core phone system.
Bader: Recently invested about in our facilities and expanded our data centre to improve curb appeal. Our customers come and visit the data centre and it looks like a special place. Now we’re working to fill the data centre – by end of next year our new expanded space should be full. Also placing investment on scaling system and processes. Our customers are looking for us to reliably manage their gear. Change control and management is a lot of what needs to be done. We’re investing in systems to help customers set up and provision, enlarge and maintain. We’re becoming more of an IT shop.
How is the wind blowing?
Jasper: We’re very optimistic, but concernsed about the regulatory environment. The technology is maturing and the access space is growing rapidly.
Snyder: Telecom is coming back – equipment costs are coming down and there’s an appetite for these products all over again. That makes it exciting and challenging because there are other things on the horizon you have to pay attention to. Each of us has an amazing focus on our respective business. Our business focus is that it is the product that makes us successful.
Bader: So many companies are technology and product oriented instead focused on customer. Ask the customer what services they want and have enough variability in the people to be able to deliver the services they want.
Jasper: Customers understand technology better and IT awareness has risen. It makes selling easier.
Snyder: We see drafting – as big companies create awareness of broadband and wireless, we benefit because now it is a product you can’t live without.
What’s your best idea for someone entering the ISP business today?
Jasper: Today, people need to develop an understanding of various sectors, the silos that Internet Service has become – hosting, VOIP, Internet Service and Access. People need to understand what’s happened and ook at economics of today. Look at what the market place looks like and the benefits of tech changes and ebay-driven equipment marketing. Tech costs a fraction of what it did 5 years ago. It is a little bit difficult sometimes. Many of us started out as Internet providers in the mid-90s. Spent so much time dealing with challenges now is the time to set aside assumptions.
Bader: Explore key trends and then apply them to your expertise. For example the SaaS trend means IT technology is more important to every organization. Most struggle and can’t rely on themsleves. Hosting services is one of the answers. Find a customer base, find a platform and a way to deliver service. Another trend is open source, every VAR is scared to death of open source. We know how to make money with free software and deploy for client. Take advantage of open source. The big boys are investing heavily. It is a big opportunity.
Hoffman: Picking up on SaaS; access is a new business relative to most business. All bandwidth is not created equal. Offer differentiated bandwidth products; from a provider that does a good job optimizing for VOIP, network performance. It is not anywhere on the market and is a huge opportunity.
Snyder: We see incredible, insatiable use of our access. Our bandwidth costs are rising. Usage patterns have fundamentally changed. There’s perpetual streaming. It is growing and a huge opportunity to provide services to the end consumer who is going to use that bandwidth.
Bader: You gotta figure out how to take advantage of the assets you’ve got and move them forward. That’s what this show is all about. If your goal is to maximize value and grow business; this show is where to figure out what to do next.
Here’s the low-down on the session from the show guide:
The web hosting industry is undergoing a shift. For the past decade, web hosts and ISPs have focused on marketing technology features such as storage space and bandwidth. But increasingly, service providers are emphasizing their ability to support end-user-centric functions such as messaging and collaboration. Hosted applications and software as a service (SaaS), give web hosts unprecedented opportunities to enhance profitability and improve the rate of customer retention. With these opportunities come marketing, implementation and legal issues.
Isabel Wang identified trends and David Snead provided legal advice. Unfortunately, the session didn’t touch marketing or implementation.
The rise of ecosystems (where developers work seamlessly together through open APIs – for example the 400+ third-party products on SalesForce.com’s AppExchange) present opportunities for web hosting companies to offer a range of third-party products without expending resources on technology integration. These third-party products can improve customer experience and can reduce churn.
Of course, setting up this kind of relationship presents some legal challenges. David provided some questions to consider:
- Who owns what?
- What is the ultimate goal?
- How will new inventions and derivative works be owned?
- Does money count more than work?
- Who owns customers?
- Do non-compete/non-solicitations work?
*******
Isabel called out new business models in hosting like Amazon S3 storage and EC2 utility computing and ServePath’s grid hosting sold per RAM/hour. She raised some interesting questions. According to Tier 1 Research, Internet traffic doubles each year. If that is the case, will bandwidth overselling be sustainable in the long run? Is the traditional bandwidth + disk space combination the most profitable way to monetize your data centre and hardware investments? Socialtext, for example, charges $95/month for a 10GB wiki.
David suggested service providers ponder these questions when considering a new business model:
- Do your current contracts work in the context of a new business model or offering?
- Do you need an SLA to guarantee 100% uptime?
- How will you police conduct?
- Does the new offering put you in conflict with your vendors, i.e bandwidth providers?
*******
Personalization and data aggregation is another area of emerging opportunities where hosting companies are making progress, said Isabel. She cited the automated recommendations based on browsing activity (a la Amazon) and called our FreshBooks a service that lets you benchmark by comparing your financial performance to the industry average. Some of her ideas, to applying these concepts to the hosting business – provide tagging capabilities so users can classify their website; allow customers to create wishlist or rate equipment within their accounts.
David called out the privacy issues that can result from capturing personal data and marketing to people based on their web habits. Data aggration makes hosts information providers. While it is a great business opportunity, web hosting companies need to think about their business is in a different way. They need do lots of front-end analysis and homework, or they may end up in hot water. Consider privacy from the viewpoint of the customer. What is the expectation of privacy? What is the end-user’s expectation of privacy?
*******
The shift to managing data versus infrastructure means that customers will expect your SaaS to work, and their data to be safe. As hosting evolves, customers will hold their service provider responsible for generating incremental business, according research from Tier 1. The implications – the closer you are to customer data, the higher your potential profit. However, the expectations of customer are rising. Redundancy is taken for granted, hosting providers will face greater responsibility for record keeping, and hardware failure could mean bigger trouble than lost revenue.
Meeting customer expectation, says David, is the key issue in limiting legal liability. Data back-up and transparency and owning up to problems are crucial. Your legal documents need to be designed around your business. Work with lawyers who understand your business, the risks and your tolerance for risk. By adding new value-added services, web hosts and ISPs start to manipulate data and therefore assume responsibility for data.
*******
The recap, the shift in web hosting services means:
- New contract issues
- Data retention is high risk
- Conduit status may be affected
- Pay attention to intellectual property
