Managed Hosted Service in USA

More Visualisation trials: This shows the distribution of sales of a Managed Hosted Service by six service providers. In the drop down you will see companies 1-6 and a Control. Control is the distribution of businesses in the Continental USA.


The sample data are 552,000 US Organisations, excluding Micro-Business. Use the zoom facility it is very cool, hopefully we will get it down to City level on this sort of public interface; In our client systems we are there already and can map down to street/building level.

Visualisations role in data presentation

We are more and more experimenting with visualisation tool kits to find ways of representing the huge data sets we are working with.

Here is a small data set of 203, presented with Many Eyes; part of the IBM visualisation project. It represents a raw count of the IP services consumed in 5 major London office blocks including Tower 42 in Old Broad Street and CityPoint 1 Ropemaker Place.






This was part of a project we undertook earlier in the Year for a company on that list who wanted to take some business off of their competitors.

CWs Pilgrim continues to progress

We have promised to keep you abreast of what John Pluthero and his team of re-Energisers are doing at the revitalised Cable & Wireless.

On arriving at C&W The Pilgrim's shocking mantra was "Only sell to profitable customers!", with instructions to the whole business to start shedding those customers who didn’t add solid value to C&W's bottom line.

What he saw clearly in C&W was the need to manage the revenue of each and every customer, and if the customer isn't profitable, they have to come off the books.

More importantly the new management team accepted something fundamental; It's not about the number of broadband subscribers you can boast or the cool new Linux hosting service; running a successful Telco' is about increased profit and improved execution.

And, there is no doubt this is paying off. Cable & Wireless announced half year figures this week and showed a jump in earnings of 29% EBITDA (Earnings Before Interest, Tax, Deductions and Amortisation), alongside a reduction in turnover of some 10%.

This turnaround has earnt Pilgrim a kick upstairs with the notice that John Pluthero is taking the reigns of global operations with immediate effect, announced at the same time. Former chief of International, Harris Jones, heads back to the pavilion with a reported £4.6m stuffed in his back pocket.

NB: BackChannels ongoing analysis of ISP market share amongst major corporate accounts shows C&W continues to have very low, in fact negligible customer churn in amongst their major accounts, we’ll let you know if this rolls over into international for them.

NextGen Network roll out threatens ISP Major Accounts

BackChannels latest research shows that 77% of Telco' major accounts buy their Internet access from other providers and this rockets to nearly 90% for hosted Internet services such as web hosting, collocation, managed email and DNS services.

It appears that a 'network as a utility' mentality has developed in the purchase of Internet services, and that represents a significant threat to Big Telco's core revenue streams.

Customers see technology migration as an opportunity to tender out, and due to the flexible nature of IP this 'utility' mentality in the acquisition of Internet services is slowly starting to effect customer attitudes to Private IP infrastructure.

As the telecommunications industry progresses towards all IP Next Generation Networks (NGNs) new threats to their position are arising all the time; VoIP, Streaming media, Web 2.0, Software as a Service, Google… All are becoming more & more stable and running over super cheap bandwidth that business now buy like electricity.

So, as providers of private data networks race to transition to IP based infrastructure, they need to have strategy and tactics in place to manage the process.

Over the next few months BackChannel will launch a series of new sales management and business support systems that will help the successful migration process.

Tiscali buys out PIPEX Consumer Business

This weeks announcement that PIPEX is to sell off it's consumer business to Tiscali for £210m ($420m) will be no surprise to those who are following the increasing desperate consolidation of consumer Internet access.

A surprise to some, and relief to it's many business customers is that PIPEX plans to continue as a provider of Business DSL. Assuming that the deal is along the lines of the Bulldog customer account transfer this looks like being a result for PIPEX, having paid £109($218) each for Bulldogs customers they have sold them on for in excess of £400($800) each.

As media and the mobile operators are driving the price of consumer Internet down to "not free, but just about" . PIPEXs move back to higher value business services comes at just the right time.

Only question is what will happen to the Hoff, will he stop dyeing his hair maybe buy a Lexus and a nice suit?

Google and Postini Senior Execs Talk about the Acquisition

It's worth a trip printing off the charts below and heading over to ZDNets Blog to listen to Dave Girourd, vice president and general manager, Google Enterprise, and CEO, Postini Scott Petry, founder, CTO and exec VP of product development, talk about the thinking behind the acquisition and the integration of Postini.





It gets a bit nerdy in places but is worth listening to get a view of how the combined company plans to interoperate with other alternative application vendors such as the Mozilla Foundation, and to make the experience for the serious business user, well 'more serious'.

Google to acquire Postini leading US Mail security vendor

Breaking news in the informartion security area is that Google is to acquire the US leading email security vendor Postini .

In April this year Postini and Google announced a strategic tie up for the consumer oriented Gmail.

Now (July 9th) it is announced Google will acquire Postini for $625 million in cash, subject to working capital and other adjustments, and Postini will become a wholly-owned subsidiary of Google.

Dave Girouard, Vice President and General Manager of Google Enterprise. said "The response to Google Apps has been tremendous, with more than 1,000 small businesses signing up for the service every day. At the same time, large businesses have been reluctant to move to hosted applications due to issues of security and corporate compliance. By adding Postini products to Google's technology, businesses no longer have to choose -- employees get the intuitive products they want, and the company achieves the security and assurance it needs,"

CEO Eric Schmidt commenting on the addition of Postini to the Google Apps portfolio said "With this transaction, we're reinforcing our commitment to delivering compelling hosted applications to businesses of all sizes. With the addition of Postini, our apps are not just simple and appealing to users -- they can also streamline the complex information security mandates within these organizations,"

The news comes as this sector hits hypergrowth. As second quarter of 2007 saw a hockey stick in the adoption of managed hosted mail security, it also saw Googles arch rival Microsoft growing deployments of the Exchange Hosted Services Portfolio based around their strong Frontbridge solution.

This strategic move by Google looks to have slipped them ahead of the game;

Here is the market share data for use of these services amongst some of the worlds largest corporates. The FTSE350 and the Fortune 1000.





As you will see, we left the old names on but here for completeness...

Postini = Google, Frontbridge = Microsoft, BlackSpider = Websense and Messagelabs well there still Messagelabs.

Notes on the potential auction of Virgin Media

On the 2nd July it came out that Carlyle Group had made an offer of about $11bn for Virgin Media $11bn for Virgin Media

On the 4th of July it was reported that Virgin Medias bankers inc' Goldman Sachs were preparing detailed financial presentations for other prospective suitors amongst the Private Equity community.

We've often commented on the similarities between the ISP businesses of Virgin Media and BSkyB, NTLTelewest and EasyNet respectively.

Both these companies are in the UK 'top ten' business Internet market shares Each has about 3% share of the UK businesses with a turnover up to £125m ($250m).

The chart below profiles each companies Internet Access customers (amongst a representative sample of 80,000 in January 2007) as I mentioned before each company has near enough 3% share overall.



NTL Telewest, which claims to offer service coverage to 85% of UK business, is an established and interesting ISP, one that has managed to retain a leadng position in the UK ISP marketdespite suffering from the failing strength of the NTL consumer brand.

As the second largest provider fixed line telephone services and having already sunk an estimated £13bn into its NGN/All IP infrastructure. Perhaps a move into the hands of a private equity firm might see a resurgence in it's fortunes.

Protecting legacy customer revenues

BackChannel is offering a major account profiling service, which allows service providers to gain a complete overview of the Public Internet services brought by their largest strategic accounts on a country buy country, or worldwide basis.

The worlds’ largest Telco operators have thousands of major accounts that generate billions of $ in revenue from a mixture of fixed & mobile telephony and legacy private data services.

These legacy accounts are the corporate crown jewels of the business providing some with up to 70% of their turnover.

Big Telco’ around the world have become experts at weaving themselves into the fabric of these customers strategic private telecommunications infrastructure; not so their public facing IP infrastructure.

BackChannels latest research shows that 77% of major accounts buy their Internet access from other providers and this rockets to nearly 90% for other Internet services such as web hosting, collocation, managed email and DNS services.

A ‘network as a utility’ mentality has developed in the purchase of public Internet services, and that represents a significant threat to these core revenue streams.

Customers see technology migration as an opportunity to tender out, and due to the flexible nature of IP this ‘utility’ mentality in the acquisition of Internet services is slowly starting to effect customer attitudes to Private IP infrastructure.

As the telecommunications industry progresses towards all IP Next Generation Networks (NGNs) new threats to their position are arising all the time; VoIP, Streaming media, Web 2.0, Software as a Service, Google… All are becoming more & more stable and running over super cheap bandwidth that business now buy like electricity.

Messagelabs: Jolly Hockeysticks

Hosted Email Security Services hit an inflection point at the beginning of June 2007 with a sudden uptick in installations across the board in the UK.

For those of you not completely familiar with this service it is an "In the network service" where inbound email is redirected to a 3rd party data centre where the email is scanned for SPAM, Viruses and then returned all clean and shiney.

Whilst it is not to be confused with email hosting by a service provider, many of the large email hosting providers like Cobweb offer the service as an option.

The largest gainer was Messagelabs, whose extensive partnerships with the likes of Verizon, Star, HP and IBM has added greatly to their global market reach; as shown by their strong gains in the USA over the last 12 months.

Amongst FTSE 350 companies the increase is most noticeable, use of hosted mail security services jumped 80% from 135 companies to 244 in 12 months.



Microsoft made the fastest market entry amongst these major UK corporates; having launched in Europe in early 2006, Microsoft gained 5% share from a standing start. Seeing the future Microsoft acquired Frontbridge in 2005 and have been marketing it under their Managed Hosted Exchange brand..

BackChannel released our first Hosted Email Security market in June 2006. We now measuring the actual use of these services by FTSE, DAX, CAC and Fortune 1000 companies around the world, amongst 68,000 businesses in the UK, and plan to extend this to other regions in the near future.

Note: In this blog we're talking explicitly about hosted email security but for those of you interested in the whole subject of email hygene here is a link to the Gartner Magic Quadrant report for 2006.

Cable & Wireless: Breaking up is not so hard to do

Over the weekend the Observer broke another story about the potential break up of the UKs No.1 Alternative Telco.

CW has been operating separate Consumer, National and International business strategies for some years and the break up would not be unthinkable.

Focus on high value customers core operations and improving utilisation of assets worked well for the International business, the UKs more generalist operation was seen as holding them back.

Now the UK operation is taking a more business like approach; i.e. selling the right products to the right customers and making a profit on each one.

So, maybe it is time to give the UK their head and let them run things.

Who won the battle for Bulldog: C&W of course!

Having sold off the Bulldog customer base to PIPEX earlier in the year, Cable & Wireless are likely to be having there cake and eating it too. As they appear to be on the verge of striking a deal to supply broadband Internet and telephony services to Virgin media over that same Bulldog LLU network.

Coming late to the BT, AT&T way of working CW are now clearly benefiting from the miracle of bandwidth wholesale.

Virgin Media and BSkyB: 'Two houses both alike in..." more than Broadband

Here is a thought on how an acqusition of Pipex might help BT to broaden its position in the consumer quad play

I have just been watching an interview with Steve Beynon the MD of NTL Telewest Business on www.telecomtv.com where he was discussing the strengths of the NTL network and how the wide national coverage and its performance capability comes from the fact that the network was built to facilitate the predicted high demand for streaming HD TV, and the decision by Virgin Media to allow them to continue on building and managing the networks and serving the business community.

Then it struck me that a few days ago I had been reading similar comments from David Rowe the founder of EasyNet, acquired by BSkyB to allow them to extend their media reach onto the net.

Whilst these two feuding media giants appear a million miles apart in style it is curious how similar their ISP businesses are in structure.

Both owned by global media brands, both working towards triple/quad play, both being extremely savvy about how they position their product offerings for consumer and business.

They have both chosen to run their home-user broadband business' with consumer friendly 'media' brands, Virgin and BSkyB, and the have also chosen to manage the both have highly successful

For business and for the construction of a national network infrastructure they have NTL Telewest and EasyNet, both long established business Internet service providers

NTL Telewest Brand to continue - is this a trend?

There is a lot more to PIPEX than "The Hoff"

PIPEX the 'Consumer DSL company" are in fact the UK's 8th largest provider of IP Services to Business.

BackChannels analysis of PIPEXs customer base shows that they perform well in the midmarket and have quite a number of major corporate' on their books as well. Where will those high value business customers go when Carphone warehouse buys them?

Bet they're all looking forward to calling Carphone Warehouses 0870 hotline for tech support .

Will it even be Carphone warehouse? You have to wonder, with the others appearing to have pulled out it just leaves Carphone but don't be surprised if BSkyB comes back for another go, when Carphone have forced the price down a bit of course.

BSkyB has a natural home for all the business services as well - EasyNet. They have proven to every ones surprise that you can be both 'fish and fowl'. Using the highly efficient Sky billing systems to handle the consumer end of the business whilst allowing EasyNet to continue running as a highly successful Business ISP.

BSkyB and BT are the only ones who would get the full benefit of the money they might spend.

Niche and Easy does it

The profile we produced of Cable & Wireless' customer base last month caused a bit of a stir.

As promised here is the THUS Profile.


The data were part of a wider project we undertook into how ISPs and Telcos market themselves, the impact that has on their customer base and how it defines the way they need to organise themselves operationally to support their customers most profitably.

Dry I know, but it has long been understood that most succesful companies fit into a niche. You don't want to waste money promoting super resilient VPNs to the finance industry, if your main business is selling masses of DSL to SMBs, or outsource third line support to Elbonia if your customers are 24x7 city dealing rooms.

Our research underlined some simple truths: Incumbent BT are present and perform well across the board; PIPEX are the boys to beat in mass market business DSL; THUS have a good cross section of customers but excel in the lower mid market, C&W are very strong in high value UK based upper mid market and notable major accounts; Verizon are historically embedded in high value major accounts where there is a strong international element, and whilst AT&T have a relatively small number of UK accounts - boy are they the cream.

The growth strategy for these companies is to play to their strengths, to structure the core operations of their business around retaining a core portfolio of profitable clients, serve them effiecently, whilst shedding / avoiding those who could be drain on resources. We call it Yield Management, it's what C&W are trying to do, it saved the airline industry can it save telco?

So what about everybody else: we identified 175 notable ISPs in the UK survey. Big, or small these companies need to know who their customers really are, and focus their whole business behind that position. Those who can't or won't might as well get their coats now.