As the company adds another service to its suite of ISP products, the company's president and CEO elucidates a deceptively simple business strategy.

by Alex Goldman ISP-Planet Managing Editor [January 6, 2006]

The ISP business changes as the internet changes. When people talk about Web 2.0 and net neutrality, they're talking about the nuts and bolts of the business, about the products that ISPs deliver and the tools that ISPs use to deliver those products.

Change isn't easy. Bill Ford said as much at ISPCON several years ago. He told us that the business had changed faster than his company's billing software. He understood what changes needed to be made, but it might take more resources than he had.

In April of 2004, Toronto-based Tucows acquired Boardtown and Bill Ford. In June of 2004, Tucows announced a revamped billing system, Platypus 5.0.

Tucows had already released its own blog software in May, 2004.

The critical deal
In December of 2005, Tucows announced the acquisition of Critical Path's hosted messaging customer base.

At ISP-Planet, we feel the deal resolves potential channel conflict issues for San Francisco-based Critical Path. Tucows acquires Critical Path's hosted customers, and becomes one of Critical Path's largest software customers. Critical Path now sells only software and has no hosted customers of its own.

One nifty bonus for Tucows: the staff it acquired are based in Toronto. "We closed the deal yesterday [January 3, 2006]," says Elliot Noss, CEO and president of Tucows. "It's a five minute drive from here to there. I went over there and spent the afternoon without thinking twice about it."

So did Tucows do the deal because of this convenience? "No, we would have done the deal in any event," says Noss. "But it does make it much easier. We'll move them to our offices as soon as practical." And commute times will hardly change at all.

In the podcast describing the acquisition, Noss says that messaging is key to the ISP business. It's the most important application. And it's not getting easier.

We ask him to elaborate. "E-mail, the application, has been becoming more complex over the years. Now you have to provide anti-spam and storage (in addition to webmail and IMAP and anti-virus). Looking forward 12 to 24 months, you want to deliver e-mail to mobile devices," he says.

It will be too complex for many ISPs, but perfect for Tucows, Noss says. "What we do best is deliver to service providers in a way that captures their specific needs."

So Tucows is building expertise to deliver critical applications to service providers. It's got billing and messaging, which are obviously the two most important, and also does domain names and blogging.

So what's next?
What other applications would Tucows like to deliver? Noss isn't ready to talk about that; he's still working on the Critical Path acquisition. We suggest instant messaging and VoIP. "I want us to do a way better job with what we're doing now," he says.

In fact, Tucows isn't necessarily focused on acquiring the services it provides. "We can leave it to other companies to deliver the best service, and if a supplier of ours doesn't do a great job, we can find a new supplier."

So the acquisition of Boardtown is an exception rather than the rule. "In billing, it's different," Noss admits. "There, we want to be the best in the world."

So Tucows' strategy is the same as every company on the internet: work with best of breed providers to deliver top notch solutions. All it requires is execution. Such a simple strategy.

The big picture
Challenged to talk in broader terms, Noss drops back to his ISPCON speech (see Common Sense in Selling Services), talking about Intuit's Quicken software. He says that ISPs have not figured out how to sell services without the industry jargon, that Intuit's innovation was to sell accounting software without accounting jargon.

ISP services are packaged, priced, and sold according to the business structure of the provider rather than according to the needs of the consumer (this is especially true of webhosting). "We think that we need to change the way we deliver services," says Noss. "We need to make it easier for people to do business with us, and easier for end users to do business with our customers."

Here's a specific example: Tucows has just added a service it can deliver to its ISP customers. "Adding a new service means adding new user names and passwords. It's overhead that creates friction and reduces the number of transactions."

Isn't this a problem that will be solved with standards groups, who will create single sign on? "In one word: no! OASIS, the Liberty Alliance, they've had lots of time. We have to solve our own problems. Of course, we are as standards based as possible, but these are problems that have been around for a long time, and I'm tired of waiting for others to solve them."

Our conclusion now is the same as our conclusion when we heard Noss speak at ISPCON: "In theory, all of this is common sense. In reality, it's a full time job for the head of a company."

—End