Taking Care Of Spam

f you get them by their e-mail, their hearts and minds will follow. At least that’s the way executives at Tangent Computer see it.

The Burlingame, Calif.-based solution provider is offering a hosted spam-filtering service to its customers in the education and government markets, and increasingly in the SMB market, and finds the strategy is winning customers for other services.

“It just opens the door for you to many other things,” said Mike Zabaneh, Tangent’s co-founder and COO. “If you gain their trust on e-mail, the next thing, it’s: ‘What’s your network infrastructure like?’ ”

Zabaneh also says it is a lot easier to call on new customers and talk to them about spam filtering than it is to pitch hardware. While Tangent is selling the service to existing system customers, spam filtering is driving new business. “Our services business is allowing us to add new customers,” he said.

Tangent began developing its antispam offering—which also includes sales of a spam-filtering firewall appliance from Barracuda Networks, Cupertino, Calif.—about a year and a half ago and launched its service in earnest during fourth-quarter 2003. The company now has 300 clients that it services from three network operation centers.

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Spam filtering isn’t the only service that Tangent has added over the past several years in its transition from system builder to custom-system solution provider. The company has actually gone through a few major transitions since Zabaneh and CEO Doug Monsour founded the company in 1989 as a direct-mail-order PC vendor, a business driven by a healthy dose of catalog and print magazine advertising.

In the late 1990s, Tangent dropped the catalog sales to focus on government and education markets, a move that helped the company approach a peak $175 million in sales amid the Internet boom and Y2K spending cycle.

Today, Tangent is still perhaps best known as a system builder, maintaining some of its brand identity, and builds about 3,000 systems a month, Zabaneh said. But about 20 percent of its $50 million in annual revenue last year came from services.

After the Internet boom fizzled, which prompted tier-one vendors to slash prices and push into the education market, Zabaneh and Monsour decided to step up services to enhance margins and build customer loyalty. That has included providing remote network management, software migrations, network security, Web content filtering and thin-client installations for its education accounts and other customers.

It took the company a couple of years to fully make the transition. “The problem of trying to move to a solution provider from a hardware vendor is you cannot increase the numbers from providing solutions fast enough,” Zabaneh said. “You can’t close your eyes and just do it. It takes time.”

But now Tangent is profitable, and top-line revenue is up slightly from last year. The company is looking to grow about 10 percent to 15 percent in system sales and services in the coming year. And Zabaneh is counting on its spam-filtering service to lead the way.

With the hosted solution, the customer has e-mail routed to one of Tangent’s operation centers. There, Tangent filters e-mail out of the system based on preset domains, keywords or content, and sends the remaining e-mail back to the customer. While Tangent provides lists of domains and other filtering options, the customer also has the option of adding or subtracting domains, keywords or other content as needed.

“If you look at spam-filtering solutions, you basically have the enterprise-level customer that’s kind of figured it out already,” Zabaneh said. “Small and medium businesses have no idea what to do. They’re bombarded with viruses, bombarded with spam.”

While Tangent has competitors, most offer expensive services, often out of the reach of small to midsize businesses, he said. Tangent provides three tiers of service that range from $1,000 per year for up to 1,000 e-mail accounts and as many as 1 million e-mails a day to an offering that covers 10,000 e-mail accounts and 10 million e-mail messages per day for $3,000 per year. “The competitors’ margins are extremely high,” Zabaneh said. “They’re just making unruly amounts of money. We’re operating on thinner margins, and we’re not as greedy.”

Tangent is also beginning to sell its antispam offering through other solution providers and is approaching several reseller organizations with a formal program that will offer partners a 20 percent to 30 percent discount off the subscription price, Zabaneh said. He is particularly hoping channel partners will help Tangent penetrate the SMB market, an area that until now has not been a big focus for the custom-system solution provider.

Many of Tangent’s traditional clients have been government agencies and school districts. Monsour said these clients are particularly vulnerable to spam: Since they routinely have small or limited budgets, they often have to handle spam filtering on their own.

After Tangent’s antispam solution was installed at a Catholic girls school, for instance, the school’s IT manager wrote to the custom-system builder with a particularly telling anecdote: “One of our nuns was receiving pornographic material on a regular basis. Since using [the solution], our spam has virtually stopped. All in one day!”

On its Web site, Tangent now prominently promotes its spam service. It developed a “spam calculator” that estimates how much spam costs an enterprise on an annual basis. According to the calculator, for example, a company with 1,000 e-mail accounts and an average salary level of $75,000 per year loses $193,000 a year in productivity.

“You can’t delete an e-mail in no time,” Monsour said. “It may take three seconds. And then you take the average amount of time you’re paying an employee, [and] you get a cost per work minute, per work second.”

That is an argument that many business managers can easily grasp. And Tangent is betting that for $1,000 a year, its spam service will be an investment that even small businesses can easily justify.