Building a Better B to B

Internet Week

Let's make a deal.

By Joe Mullich

Shopping for an ISP? Maybe you should be. With the market shrinking, competition is fierce, and ISPs are offering price reaks and special services that simply won't be around once the industry consolidates.

Who can ignore the fact that WorldCom Inc. has swallowed MCI and Uunet Technologies Inc.? And that GTE has gobbled up BBN Planet and now markets Internet services as GTE nternetworking. How long will it be before the market settles and the deals start to fade? Most analysts say about 18 months.

For now, savvy buyers can get the best deals by matching their eeds to particular types of ISPs, knowing the best times to buy and plying some old-fashioned comparison-shopping skills.

Although the lines are blurring, ISPs can be divided into three categories: large-or giant-sized-nationals, such as Uunet and TE
Internetworking; telcos, including the major long-distance carriers and the regional Bell holding companies; and the local and regional ISPs, which fight the big boys by searching out new niches and delivering value-added services.

All three ISP classes are clearly staking out positions in the
marketplace. How do you choose? The telcos sell reliability, backed by their brand equity, which makes them a good buy for conservative companies.

"The telcos' security systems are as good as the industry gets, and no one is going to lose their job going with AT&T as opposed to some Internet company no one at the company has ever heard of," says Robert H. Stern, president and CEO of consulting company Internet Solutions Inc. (www.misnet.com).

Stern says the large ISPs, pressed by competition to stay ahead, tend to be feature-rich technology leaders. For example, they were first out of the box to support 56K modem technology. The smaller ISPs are scampering around the fringes, offering specialized niche services such as network management and Web server hosting.

These days, many businesses are splitting their ISP services among several different providers.

Tony Baublis, director of systems for OneSource, a $30 million CD-ROM and online publisher, selected GTE Internet-working as his primary ISP, and he says he's quite satisfied with the choice.

Still, Baublis keeps an account with Uunet as an emergency backup and for beta product testing. He also purchases some T1 lines through a smaller ISP because it offers the lowest price. The key element most businesses look for in an ISP is reliability.

"As long as they do the basic connectivity well, everything else is
gravy," says Rebecca Wetzel, director of Internet services for
consulting company TeleChoice.

"You can always get your Web hosting and value-added services elsewhere and layer those on," adds Wetzel, who recently surveyed 1,300 large business customers to gauge their satisfaction with their ISP. She found that the primary concerns are service reliability, performance, technical support and price.

Know What You Want

Before shopping for the best ISP deal, a company needs a clear sense of what it wants. The first time around, many businesses choose an ISP almost haphazardly. That's not necessarily a bad thing if the services aren't mission-critical and the ISP choice is regarded as a one-year trial for the company to get its feet wet in the ways of the Internet.

But sooner rather than later, businesses usually find themselves wanting Web-hosting services and more bandwidth, which causes them to re-evaluate their Internet needs and their ISP. At that point, a company needs a checklist of basics.

Developing a request for proposals-a step that consultants say few companies take for their ISP selection-can help winnow choices to a manageable few. Items to include in the RFP are bandwidth requirements, support levels and special services such as Web hosting. You also should ask about the ISP's network availability and reliability, security systems, number of point of presences and experience with business customers.

Many buyers believe it's crucial to visit the ISP in person, especially for mission-critical services.

Ethan Zuckerman, vice president of business development for Tripod Inc., a privately held interactive media company, went on a "road trip," visiting ISPs from New York to Boston.

For one thing, Zuckerman wanted to see if the facilities were properly set up with raised floors or good overhead wiring racks, air conditioning and proper security. The personal visits also gave him the opportunity to apply subtle negotiation pressure.

"During the tour, we'd mention we'd have to be out by 2 p.m. to see the next ISP," he says. "This is an incredibly competitive space-everyone needs to keep their customer list growing to justify their stock price."

Lots Of Haggling

Although some consultants insist prices have standardized for many ISP services, a lot more haggling is going on than ISPs would like customers to know.

"This is like buying a car," says Zuckerman. "You don't want to pay the list price, and the salesperson doesn't expect you to," he says.

At the same time, he notes, "there is a limit to how much you can get. Don't go in there assuming you can get 40 percent right off the top."

Though there are few hard and fast rules, each ISP tends to be best for a certain kind of deal. Traditional Internet backbone firms, such as Uunet and Netcom, are more likely to give discounts on volume deals for customers with multiple locations, says Joel Maloff, principal of consulting company Maloff Group International. The telcos, in contrast, are very eager to bundle services.

Smaller ISPs, ISP resellers and original research and education
networks-like the Pennsylvania Research Education Network-are least likely to offer discounts and price breaks, says Maloff. They also target niches and offer specialized services to grab customers.

Consider, for example, Brice Building Company Inc., a $181 million building contractor. Brice needed an ISP that could support a Microsoft FrontPage feature that connects to a Microsoft Access database on a client PC.

Surprisingly, Ashley Colburn, rice Building's Webmaster, found that most national ISPs and large telcos don't offer this service. The big outfits were using Unix and Sun servers, and had no interest in supporting a product that required running Windows NT servers. InLine Connections Inc., a small local ISP eager to win business, was quick to provide the database connection.

"They were willing to work with me to get my business, and that meant a lot," Colburn says.

Colburn narrowed the choice to InLine and another regional ISP that would also support the FrontPage database access. "I played one against the other to get the best deal," he says.

There was never much variation in price. Colburn says InLine matched every service the other ISP would offer and even tossed in some unexpected freebies, such as free password protection on certain folders.

Analysts say small players, when pressed, are more likely to wave installation costs and throw in free services, such as domain registration and configuration.

"Of course, there is wide variation within the individual categories," says consultant Maloff. "Some ISPs set their price in concrete, and others are being very entrepreneurial and find a way to do business."'

New Deals

Nailing down the best terms and prices is not as simple as game show choices. For example, many ISP buyers find telco prices high and inflexible; others find them quite willing to negotiate-particularly the regional Bells.

"The telcos, especially, will meet competition if you don't discuss it publicly," says Stern. "I have seen large telcos whose stated rate of $1,100 to $1,200 a month for a particular T1 line flatten out to $600. They want the volume, and they understand the additional cost of maintaining that additional volume is cheap."

Even if they are skittish on price, most ISPs will throw in the
equivalent of free tinted windows to cement a sale.

"One national ISP, if you push hard enough on T3 service, will throw in a free Cisco 7300 router, which is a $45,000 piece of equipment," says Don Zereski, vice president of technology at Tripod Inc.

Indeed, deals can be a mouse-click away. Most ISPs have Web sites listing services, cost and features. A little Web surfing is a
stress-free way to do some initial comparison shopping. ISPs hungry for business typically run more specials than Kmart.

In November, for instance, the Web site for InterNex, a regional ISP based in Santa Clara, Calif., offered a two-week special that included free setup if a company signed up for T1 service for 24 months. A 12-month sign-up reduced the set-up cost from $2,500 to $1,500.

Evaluating Bargains

Of course, the key is to find specials that meet your company's needs, rather than being swept up in a wave of bargain hunting. If a company can shop around for at least three months, the chances of getting the best deal increase. Ask all the ISPs on your short list to send faxes or E-mail about their month-end specials. Much like purchasing a car,
month-end is the best time to finalize a Web deal.

"If the salesperson needs to make a quota, he's more likely to push his manager on waiving installation costs than he will on the first of the month," says Marcy Rustad, principal with consulting company Online Marketing Partners.

ISPs also are experimenting with new pricing models. Many are starting to add burstable capabilities that let customers pay for only the actual amount of bandwidth they use.

Others are trying to coax customers with long-term deals. Generally, the discounts offered are 5 percent to 10 percent for one year, 10 percent to 20 percent for two years and 20 percent to 40 percent for three years, Rustad says.

Understandably, with the market in flux, many customers are wary of signing up for more than a year-especially the first time around with an ISP.

Your best bet before choosing: Know what you need, know where you're going and stay nimble. Then, jump in and make that deal.

TECHtips

Need An ISP? You'd Better Shop Around

It's a buyer's market out there for Internet services. Shop around to make the best choice. Here are some things to keep in mind:

Plan properly. Develop a matrix of your needs for ISP services and a request for proposals.

See through the sales hype. Listen to specials, but don't get suckered in by bells and whistles. Also, if the deal seems too good, analyze whether the ISP will stay in business long-term.

Be up-front during negotiations. Make sure ISP candidates know you're shopping around-and don't be shy about playing one off the other.

Buy smart. Buy at the end of the month, when salespeople need to make quotas.

Move out of your comfort zone. Offer to do a testimonial for the company if you like the service-it may improve the deal you can get.

Take nothing for granted. Check several references for each ISP.

Don't put your eggs in one basket. Consider splitting services among several ISPs to get the price and service you need.

Consider an onsite visit. Tour the ISPs in person-you'll get a better sense of their operation, and they'll view you as a more important prospect.

Look beyond the obvious. One irony is that as ISPs consolidate, more choices pop up. For example, CAI Wireless Systems in Boston recently received FCC permission to offer a wireless ISP service. And mail-order PC house Gateway 2000 is launching an ISP.

Don't sign a contract without an escape clause. Make sure you can get out if the ISP's performance heads south.