According to the study, which covered more than a quarter of the UK ISP community, e-mail is creating the major capital drain. Over half report that e-mail – perceived as the best revenue generator for major ISPs – is in reality non-profit making at best. Providing an e-mail service absorbs 22% of capital, rising to almost half among the biggest players, and while it generates 16% of revenue, it equally creates 16% of costs.
To combat this liquidity problem, many are looking at outsourcing their e-mail service. Of those considering this, 60% see it as a way to reduce costs while one in five see it as a way to free up resources such as capital and staff.
Keith Bellamy, managing director of Outrade.com UK said:
“Our experience shows that by outsourcing their e-mail ISPs can free up, on average, 40% of their resources. For ISPs, who face an unenviable set of pressures and have to keep enhancing their services, such new-found liquidity could have a major impact.”
One medium-sized ISP studied in the survey quantifies this impact. It predicts that outsourcing e-mail would free up enough capital to bring forward its business plans by four months.
For the sector as a whole these future business plans include moving into new service areas such as voice over IP and unified messaging, which 33% believe will provide an important source of revenue. The biggest players report that they will turn their attention to the business market with offerings encompassing e-commerce consultancy, web site design and hosting. But with so much changing in the industry, 29% admit that they don’t know what their business will be like in the next two years.
Keith Bellamy concludes:
“Few of us could have predicted how ISPs have transformed the way we work and communicate – so it is not surprising that they in turn are finding it hard to predict what their future holds. However, we can see some clear themes emerging from the study. Innovation will be high on everyone’s agenda, all ISPs will move into new competitive areas and the fight for the business customer will intensify. This will inevitably result in a rationalising of the market. The likely winners will be those who can service the present domestic customers while financing the drive to develop the future business ones.”