A new study by European messaging management company Outrade.com
suggests a massive shake-up in the ISP market. The UK’s leading
ISPs predict that 40 of their weaker peers will fail and 17 will be
acquired during the next 18 months. With only 140 major ISPs in the
UK this represents a massive upheaval. The end result of this will
be more ISPs focusing on the business community, where the revenue
opportunities are greater, and more outsourcing their e-mail in a
bid to reduce costs.
Those surveyed report that fierce competition, unmetered access,
poor liquidity plus the high cost of investment are the key causes
of business failure. Insufficient liquidity is cited by 42% as the
major reason for ISPs currently going out of business. Almost one
in five report that they do not have adequate finance to deliver
their business plans and almost 30% admit that ISPs do not know
when they are going to start to make money.
According to the study, which covered more than a quarter of the
UK ISP community, e-mail is creating the major capital drain. Over
half report that e-mail – perceived as the best revenue generator
for major ISPs – is in reality non-profit making at best. Providing
an e-mail service absorbs 22% of capital, rising to almost half
among the biggest players, and while it generates 16% of revenue,
it equally creates 16% of costs.
To combat this liquidity problem, many are looking at
outsourcing their e-mail service. Of those considering this, 60%
see it as a way to reduce costs while one in five see it as a way
to free up resources such as capital and staff.
Keith Bellamy, managing director of Outrade.com UK said:
“Our experience shows that by outsourcing
their e-mail ISPs can free up, on average, 40% of their resources.
For ISPs, who face an unenviable set of pressures and have to keep
enhancing their services, such new-found liquidity could have a
major impact.”
One medium-sized ISP studied in the survey quantifies this
impact. It predicts that outsourcing e-mail would free up enough
capital to bring forward its business plans by four months.
For the sector as a whole these future business plans include
moving into new service areas such as voice over IP and unified
messaging, which 33% believe will provide an important source of
revenue. The biggest players report that they will turn their
attention to the business market with offerings encompassing
e-commerce consultancy, web site design and hosting. But with so
much changing in the industry, 29% admit that they don’t know what
their business will be like in the next two years.
Keith Bellamy concludes:
“Few of us could have predicted how ISPs
have transformed the way we work and communicate – so it is not
surprising that they in turn are finding it hard to predict what
their future holds. However, we can see some clear themes emerging
from the study. Innovation will be high on everyone’s agenda, all
ISPs will move into new competitive areas and the fight for the
business customer will intensify. This will inevitably result in a
rationalising of the market. The likely winners will be those who
can service the present domestic customers while financing the
drive to develop the future business ones.”
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