Internet Services: Talk With An ISP
Many corporate resellers see ISPs as a threat because of their direct approach to selling Net services. But Bobby Pickering says both sides can benefit from a bit of team work
Intranet and extranet development is currently the top priority of most corporate IT departments. Creating Web sites and in- tranets, developing open standards-based groupware and email, and Java programming is all driving the channel into the embrace of the internet and network computing. If current trends continue it won?t be long before all hardware and software integration in the business market will involve internet connectivity.
Most corporate resellers have, by now, partnered with business-oriented internet service providers (ISPs), so that they can deliver leased line connectivity in conjunction with hardware, software and value-added activities. But there are still a lot of resellers dragging their feet ? and hand-in-hand with that channel reluctance to embrace new realities has been a disturbing trend for ISPs to start offering services direct to business customers alongside their connectivity sales.
Nearly every big ISP in the corporate market ? Uunet, BTNet and Xara Networks among them ? will tell you that the reason why they?re developing their own internet-related services is simply because their customers ask for these things in addition to basic bandwidth. The absence of internet-related expertise among computer resellers has compounded this trend for bread-and-butter value-added services to be sucked out of the channel. But as dealers move resources into these areas, many of the larger ISPs look like they could be convinced to move this business back into the channel.
In this regard it has been instructive to watch the channel policies of a leading corporate ISP in this case Uunet, over the past year. Twelve months ago, the Cambridge-based company was pulling internet-related value-adding services out of the channel by offering a referral fee scheme to dealers who passed on customers wanting big pipe connections ? basically giving dealers a cash lump sum for handing over control of a customer to the ISP. Uunet Pipex, as it was then known, would sell the services on top of the leased line or ISDN connection.
Today, everything?s been changed. The company now works in tandem with the channel, offering resellers in its Team Uunet Pipex programme a standard margin on the sale of its bandwidth, and deferring to the channel if its consultancy and technical services teams come into conflict with one of its reseller partners.
Denise Fellows, head of the recently formed Uunet consultancy division, says: ?We make a categorical assurance to our resellers that if we find we?re working on the same account as them, we will always defer to them. The channel will always take precedence.?
Fellows says that Uunet realises it can only maximise its market share by working with the channel. ?There?s a very big market out there ? some estimate 100,000 connections for businesses with a turnover of more than #1 million. We can?t reach them without resellers. And I always remind people that the market is big enough for all of us, so we don?t need to fight over it.?
Fellows joined Uunet last September from the Sema Group, where she was involved in telecoms and EDI systems consultancy. Her brief at Uunet is to pull all of the ISP?s value-added activities ? Web design, internet consultancy, managed gateway services, training and its electronic commerce bureau ? into one coherent unit, marketed separately from its connection sales channel. She predicts that there will be increasing scope for resellers to sell on some of the consultancy unit?s services as well.
Another business-focused ISP, Xara Networks, has also been involved in selling specialised services and products to corporates, mainly on a direct basis in the past, but increasingly through channel partners. The company was recently bought up by the ITG group to replace its Premier business service, which closed earlier this year.
Xara Networks sales and marketing manager Niall Corduroy says the company has been successful in the business market because of its technical focus, its solutions-oriented approach and its independence from the major telcos.
?We?ve been very focused,? he says. ?We don?t do dial-ups, we do nothing less than 64K leased lines. And we always deliver the bandwidth we say we will ? some suppliers? 2Mb lines are very variable in service. People doing high-volume information feeds, such as Dow Jones or mission critical information, want guaranteed service levels. They have a problem buying off a company with a priority on dial-up.?
Corduroy says independence from a big telco is also important. ?If we have a prospective site, we can use a variety of different providers ? BT and Energis here, and three providers for US transit. If one falls over, and you?re committed to that supplier for ownership reasons, then you have a problem. We have flexibility to choose the best options.?
Corduroy says Xara Networks wants to expand its reseller sales to reach parts of the market that its own salesmen can?t reach. ?We?re very aware of the contribution resellers can make. They have access to customers that it would cost us a lot to reach otherwise. We haven?t yet moved to an authorisation programme of our own, but we?d expect our reseller partners to be authorised by others, like Novell, Sun and Netscape.?
Xara Networks also offers a 15:10:10 margin on a leased line sale over the first three years. While this may seem generous, Corduroy points out that margin is not paid on the telco access, which is sold on at cost, but only on the transit and routing costs of the connection.
?It?s good value for the reseller, and we think that the 10 per cent in the second and third year is a profitable model that makes it worthwhile for them.? But it is value-added solutions that will attract many resellers to Xara Networks. The Radial product, for instance, allows them to target specific markets with a multisite virtual intranet package.
?It?s a sign of the market?s maturity that these things are emerging,? says Corduroy. ?The low-hanging fruit, the straightforward internet connection, has all been harvested. Radial opens up possibilities for customers, and resellers, to do new things. In this case, to aim at markets where remote access to intranets is required ? such as field sales teams.? Large resellers organisations might find that handy.
While ISPs are recognising that there?s a place for the channel in their sales the big telcos that have already moved into internet-related services ? not just access ? are also showing some concern about clashing head-on with computer resellers.
BT has always been a bit of a thorn in the side of corporate resellers. From its Syntegra dealer operation to its recently launched BT Intranet Services, the company has often set itself up in competition with corporate resellers.
At the Windows Show in February, however, the telco announced it will be developing a reseller channel strategy to help take it from a nine per cent to 20 per cent share of the corporate internet access market within a year. And on the back of that hefty slice of the leased line pie, it will sell on its high margin intranet and internet services. And not just directly, but through channels.
?There is a tremendous amount of joint development going on with Microsoft to extend and modify MCIS [the Normandy server software] to support closed user groups,? says BT business internet services marketing manager Neil Mellor. ?BT will be jointly branding these services with MCI and Microsoft, and selling this through their channels.? Microsoft is keen to work with BT, Mellor added, because it sees its core business evolving dramatically under the impact of the internet.
?Microsoft sees a fundamental shift in the way its business is working. It sees the software as resident on the network rather than as shrinkwrap products run on the network. That change could be perceived as a threat by some dealers, but a lot of dealers will see lots of potential opportunity there. They can provide services to complement that integration. It?s very much a vanilla infrastructure that will provide lots to build on.?
Mellor says the Microsoft/ BT initiative could provide opportunities for dealers to develop applications in much the same way that Lotus business partners were given similar scope through the Notes groupware framework.
So long as BTNet (or Concert) comes up with a decent reseller programme, there?s likely to be huge reseller interest in partnering with the company. Mellor says that it already deals with one or two big name resellers ? such as Relay Business Systems ? and about 16 Web design houses, many of which are moving on from corporate Web design to intranet design and implementation.
The simple fact is that the cachet of the BT name will open doors in corporates and multinationals. ?A survey recently asked corporates which companies they would like to work with, and BT and Microsoft came top of that list,? says Mellor.
?That?s the rationale behind the alliance. Now, with the MCI link-up and the Concert developments, we are moving towards a brand with global reach. Nobody else will be able to match it.?
Global domination, however, will not be achieved unless BT/ Concert works out a way of getting reseller troops to help it march into territories it would otherwise fail to colonise. And BT seems to have recognised that reality.