something I posted to the ISP-CEO list
I have written a bunch of things on the topic of xSP core business functions. I think I should drag some of it here. Post as follows:
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The issue of “core business functions” is a bit of a religious issue to me and my views are somewhat controversial, but since I have been enjoying this list I thought I would share them. As a supplier of services to ISPs and hosting companies I am certainly self-interested in my view but it is the case that we do what we do because we hold these views not the other way around.
First is the question of what are the core business functions of an ISP/hosting company (I will again use the goofy xSP title although I don't really like it)? To me this is both simple and obvious if they are a retail (deal directly with end users, both consumer and business) xSP. Customer acquisition and customer retention (“CA” and “CR”). Period. Not technical development, although the reliability (note, not complexity) of their systems will be very important with respect to CR. Not business process outsourcing (“BPO”) like constantly maintaining spam rules or anti-virus DAT files.
The distribution value chain around Internet services is essentially technical development —>BPO —->CA—->CR. There are also a number of characteristics to Internet services that make focus very important. These include extreme competition, low switching costs, high customer service component, high trust component, high loyalty component and difficult marketing environment (making word-of-mouth paramount). These characteristics combine to actually favor the small service provider. I know this is not conventional wisdom, but the empirical evidence supports this (shameless plug: I will be speaking about this at ISPCon in October).
In my view xSPs should look to outsource any significant effort spent on tasks outside of CA and CR. xSPs are amazingly heterogeneous so the specific implementations are a function of skills, customer profile and a number of other factors but generally this point is extremely important.
It is also important to understand what I DON'T mean here. I do not mean that you should all spend all of your time and money on print ads and huge numbers of people answering the phones and dealing with every issue.
Customer service. Do you know why your customers are calling you? What the top ten reasons are every month? Do you create new faq items monthly to address these issues? Do you push new self-help tools to your customers quarterly to address these issues? I could go deeper and deeper, but these are ALL technical issues and are all, IMHO, examples of winning differentiation.
Customer Acquisition. Do you track where your new customers come from? Do you sell using features or benefits (this is a whole discussion in itself as I think our WHOLE industry is way off the mark here)? Do you have one of those wanky feature tables that look like you are selling a database or a computer not a service? Are you selling hosting and giving away email, or put differently, are you selling what 10% of the market wants and giving away what 100% of the market wants? Do you know the clickstream for users arriving at the site? The conversion? The person who loves technical challenges, who sees their differentiating strength as technical, should recognize that technical solutions play an important part in all of these issues.