With Change, Iserv You Better

When Vic Shepherd took the job of CEO of Iserv in 2001, it was clear that the business had to change, and Shepherd had a clear idea about what had to change: everything.

by Alex Goldman ISP-Planet Managing Editor [April 1, 2004]

Being typecast in business is like being typecast in Hollywood—you get to enact the same drama again and again—except that business takes place in real life. Vic Shepherd, CEO of Grand Rapids, Mich.-based Iserv, arrived in 2001. "It was a big era of change," he notes.

Shepherd had been picked for the job because he'd "been involved in turnarounds" at various software companies, most recently at Chicago-based Systems Software Associates (SSA), which at the time recorded $250 million in annual revenue, and is now twice as large.

The mandate was to turn an unprofitable ISP into a profitable one. As he lists the changes the company implemented, it's clear that he re-examined everything the company was doing.

The business had been focused purely on Western Michigan. The company expanded to the cover the entire state, building its own network in important markets, and using aggregators in other markets.

The company's mix of subscribers was (roughly) 80 percent residential and 20 percent business. The company had 25,000 subscribers. Today, including subscribers gained through acquiring some local ISPs, the company has about 50,000 subscribers, of which about 60 percent are business and 40 percent are residential.

Growth involved much more than simply a bigger network. "We had to find a way to increase the number of subscribers while also upgrading our staff," says Shepherd.

That, in turn, required finding a way to do training, but without great expense. "We brought in mentoring managers. We don't go outside a lot for training," he says. "We are a very hands on management team, and we mentor all day long."

Costs had to be cut even as the network was growing. One obvious place to change was the website. "The website had been brochureware," says Shepherd. "Now you can sign up for products, use webmail, monitor spam control, and do product downloads."

The company added online support to the website, reducing the load on the call center, which also cut costs.

The company was willing to spend money on the billing software. It uses Portal Software, which produces a high quality but expensive product. Shepherd is pleased with it. "At 25,000 subscribers, it was overkill," he says. "At 50,000, it's right for us, and we've added products developed in-house that tie in to it."

One item that Iserv developed on its own is the company's proprietary anti-spam filter. Iserv also licenses Postini to augment its own efforts.

The company provides most of the other value-added services on the market as well. It has licensed QuikCAT's dialup accelerator since 2001, which is a long time ago, since QuikCAT was founded in October of 2000.

It provides content filtering courtesy of Cobion, a company that scans and categorizes the Web using a massive array of servers.

The company is looking at its VoIP options, but has not yet made a decision. Shepherd likes his options though—several VoIP providers are colocated in the company's data center.

The data center is another area where Shepherd brought strategic focus. The company had built an expensive data center, but it had been geared for small business webhosting. "We are focusing on going after large business customers," says Shepherd.

At the present time, the data center uses Linux, UNIX, and Microsoft, and employs engineers with Cisco, Microsoft, and Linux skills. "The data center has HP-UX, even some DEC stuff. We use mostly Linux and Microsoft to run the ISP. We use Oracle. The data center has multiple IBM AS-400s, Microsoft, and several flavors of Linux."

Shepherd also redesigned the company's dialup network. "We use a virtual POP concept," he says. "We have one physical POP. The uniqueness of how we deliver to our customers allows us to reduce our costs. Telco costs have fallen from 50 percent of revenue to 30 percent of revenue."

The bottom line is rapid growth without a ballooning staff. "We have double the subscribers, increased revenues, with about 70 percent of the employees that we used to have," says Shepherd. "And we deliver a better quality of service."

Service quality, Shepherd says, is all about network monitoring. "We have a very very good network management tool," he says. "We have by the hour and by the minute usage stats. We monitor each customer, and we monitor each rep in the call center. We see what problems customers have and how many calls are coming in. We see how many subscribers are gained and lost each day. We know our upstream costs and revenue. We watch our business."

Asked the keys to success, he makes it sound simple, but hard. "We believe that the business is simple," he says. "You need to offer a good QoS, and offer it cost effectively. There are a lot of good products out there, but it's how you implement and deliver them, period. You've got to make decisions. You cannot be paralyzed."

With all of that, his optimism is cautious. "We believe it's a survivable business," he says, "and one that you can grow with. We're looking for acquisitions that make strategic sense to us. Our DSL, business, and even dialup subscribers are growing. We do lose some customers but we also gain new subscription services to existing customers, and we gain new customers every month."

—End