ISPCON: Growing Your Hosted Business Messaging Service

Want to make money from business customers? In order to profit, you must get this service right.

by Alex Goldman ISP-Planet Managing Editor [July 2, 2007]

The topic of this Wednesday morning session was succinctly summarized by Lisa Bickford, president of Rodeo, Calif.-based ISP InReach. "Many sessions here are saying you make money by addressing critical business needs, but they don't tell you how to do it. This session is about messaging, a critical business need."

Mike Dodson, technical director for worldwide strategic accounts at Sunnyvale, Calif.-based messaging appliance vendor Mirapoint, said that companies are outsourcing messaging for a large number of reasons. "Here's a list of buzzwords: spam, virus, malware, phishing, zombies, HIPAA, SOX, archiving, quarantine, IP leakage."

ISPs can reject spam before businesses receive it. ISPs can protect the inbox. But while protecting the inbox is the focus now, Dodson said, in the future, the focus may be on outgoing mail. "In outbound mail, the business issues are bigger. You're dealing with lawsuits and intellectual property."

Of course, in order to be trusted to handle these issues, you have to be a premium service. "You want to avoid being the commodity, low margin, high churn offering," Dodson said.

Upsell
Paul Engels, executive vice president of hosting turnkey specialist Hostopia, said that you want to encourage customers to spend more money, which is an obvious idea, but he also had some specific suggestions.

"E-mail can be a profit center even in the $5 to $10 per mailbox per month range. SMBs want enterprise class tools and will pay for them. So offer a graduated escalation of services. Sell bundles (bronze, silver, gold), and offer single sign on. End users are not technical. This is good. They expect you to be technical, and they expect transparent services."

Ravi Agarwal, CEO of Burlington, Mass.-based hosted Exchange provider groupSPARK, pointed out that the largest companies are not likely to outsource their IT operation, but might order dedicated servers or have complex needs that a specialist can help them with.

Know thyself
Rich Bader, CEO of Portland, Ore.-based business service provider EasyStreet, started by saying that he no longer calls his business an ISP. He's started calling it an MSP. He sees his business as providing service to tech savvy businesses. "We talk geek to geek. That's where the growth is."

Focusing on the premium business market means cutting back on residential and small business service. "SOHO customers look like residential customers to us and are just as likely to switch to Comcast. We're higher priced that the national providers."

Bader has a clear idea of what EasyStreet offers for that higher price. "We provide a single sales contact, support contact, and billing contact for services. There's no finger pointing in support."

When a customer has a problem, a human will answer the phone and help.

Billing has become a valuable service too (as we've always thought it should be: see Accurate Billing is a Value-Added Service). "We gather all billing information into one convenient, easy to read invoice, which is harder to do than it looks."

Staying ahead, staying alive
Being a premium service doesn't mean turning on a service and never changing it. Services, Bader said, need to be upgraded constantly. "Services are treadmills. What's good today won't be so good six months from know. Get to know your vendors, and check to make sure they keep up with the competition. Make sure that they serve the customers that you serve."

One service that may start to sell well is storage and compliance, helping companies survive e-discovery. Electronic discovery is a recent legal tool that The Economist magazine called the kind of deep and broad problem with America's legal system that tends to be ignored.

Questions
One attendee asked where the costs come from in Exchange hosting, and how much of the cost is the Microsoft license. Bader said, "we found that Microsoft is a large percentage of the price. Figuring it out is not easy. We decided we needed margins, not volume [so we charge a lot for it]." Bader added that his company's higher prices are justified by the fact that he has more live people per customer than the cheaper, larger competition, and offers real service and local technical support.

Responding to a later question about marketing, Bader said that it's important to track sales people because the data you get is always valuable. "Track number of calls versus number of deals closed. Sometimes you need to change the services you offer, and sometimes you need to change the training you give your employees."

Engels said that service providers should work on churn prevention and had a very good suggestion on how to do that. He said that if you sell a service but the customer doesn't activate it within 60 days, call them and help them use it. "Some people are shy, some are blinded by FUD. You need to know why they're not activating the service. Train your sales people to contact new customers after the sale."

This article cannot hope to cover everything that was discussed in the session, but we hope that this overview of it will provide some of the valuable ISPCON lessons that a growing business needs.

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