ISP Agent Programs: A Gateway To Service Sales

Solution providers who have not jumped on the e-business bandwagon--and some are still out there--might find ISP agent programs a good point of entry. And for solution providers with established e-business practices, ISP agent programs are a gateway to expanded opportunities in the red-hot managed service- provider space.

Solution providers who participate in ISP agent programs find such service sales are helping them derive additional service and product revenue from their customers, according to "ISP Agents: Skillsets and Customer Segments Served," a new study by CMP's Reality Research & Consulting. The study also identified the collateral benefit of staff-skillset enhancement.

Some 13,000 solution-provider organizations in North America resell Internet access or connectivity from regional or national ISPs to end-customer businesses. Small businesses are the leading customer set for ISP agent companies, with nine in 10 ISP agents selling Internet connectivity to very small companies, defined as those with fewer than 20 employees.

Managed Services Opportunity
Solution providers that sell ISP services to their smaller customers find that consulting, e-commerce and Internet application-development services are natural complements to those sales. But in the enterprise market, which has companies with 500 or more employees, they are finding opportunities to sell lucrative managed services, such as managed- Internet security and managed-network services.

The vendor community is starting to recognize this and has responded by creating managed-services offerings specifically for solution providers selling to small and midsize markets. One example is the new VPN service offering from Woburn, Mass.-based OpenReach, which is striving to partner with ISP agents who will look at its product as an entree to the lucrative managed-services business.

Product Attachment Opportunity
Although ISP agents are heavily service-oriented with nearly half (47 percent) of their revenue derived from services, product sales are often tied to Internet-connectivity services. Forty percent of all hardware systems and Internet-related software products sold annually by ISP agents are tied to Internet-connectivity sales. Network hardware and systems software follow, with ISP agent organizations attaching 35 percent and 34 percent of products sold, respectively, to sales that include Internet connectivity. More good news: Product attachment rates are equal across customer-segment size, indicating equal opportunity for solution providers regardless of their segment focus. (See chart, "Who Sells What.")

Not surprisingly, one-fifth of ISP agent companies attach Internet-related software more than 75 percent of the time, while one-tenth attach those products all of the time. Hardware systems are attached more than 75 percent of the time by 16 percent of ISP agents and all of the time by 7 percent. Systems software is another logical product add-on, with 10 percent of ISP agent companies attaching those products to 100 percent of their Internet-service sales.

What Makes a 'Good' ISP Agent Program?
So how do you select the right ISP agent program? Compensation and guaranteed service levels are critical evaluation factors, according to current program participants, with product offerings, lead generation and demos following close behind. (See chart, "How ISP Agent Programs Stack Up.")

One-third of ISP agents indicated they receive recurring payments on ISP service sales, while 22 percent receive one-time (or annual) payments. (See chart, "How They Get Paid.") Regardless of the payment terms, solution providers expect to participate in renewal revenue and want the opportunity to sell upgrades (from DSL to T-1, for example).

How Do You Pick?
ISP agents interviewed for the Reality study who said they get two to three calls from ISP vendors weekly offered some of these criteria for selection:

Range of geographic services

Number of major network access points nationwide

Speed of installation

24/7 network operations center

ISP's overall infrastructure

Those criteria, along with the more tangible yardstick of potential additional revenue from increased service and product sales, are important when choosing an ISP agent program.