Poll Shows E-Commerce Is Cornerstone Of ISP Business

Even as the dot-com sector continues to shrink, ISPs expect e-commerce to generate the highest service growth in 2001, indicating that ISPs believe e-commerce will remain a cornerstone of their businesses over the long term.

All told, 22 percent of ISPs single out e-commerce as the most significant opportunity for new service business this year, while 16 percent cite Web and database hosting. Large ISPs are most optimistic about the prospects for e-commerce, with 28 percent citing it as their top growth area for the year, compared with 19 percent for small ISPs. A Reality Research & Consulting phone poll, based on 150 telephone interviews with ISPs in the United States and Canada, shows that large ISPs, with a broader customer reach, have more of a stake in e-commerce services.

Conversely, small ISPs are more upbeat about consulting services, with 19 percent pointing to it as their leading service for 2001, compared with 8 percent of large ISPs. Reality believes that in 2001, ISPs of all sizes will rely on a blend of strategic and tactical services.

In addition, one-third of ISPs are involved with partnership hosting and other xSPs. Among those ISPs, one-fourth are reselling or sharing opportunities. Reality believes hybrid ISP business models will continue to emerge as storage service providers and ASPs offer ISP services.

ISP Product Sales Trends

ISPs sell a wide range of software and hardware to their business customers, indicating they have developed into full-fledged sales channels for high-tech products. Reality says the top products sold by ISPs are Internet- and network-centric. Out of an estimated 10,000 ISP organizations in North America, Reality estimates that more than half sell Internet-related software such as Web server, browser, e-mail or groupware. Networking hardware products frequently sold by ISPs include routers, hubs or switches.

Elizabeth Gallagher Caginalp, director of research operations, manages research for industry reports and newsletters at Reality Research & Consulting, an independent business unit of CMP. Before joining Reality, Caginalp was director of research for CRN. Contact her at egallagh@cmp.com.