On April 21, Montreal-based Radialpoint, a provider of managed IT services for Internet service providers, announced that it has acquired Toronto-based Casero, a privately held provider of white-label personal media-management solutions for ISPs. Casero's Vault is an online backup and sharing service that ISPs can offer as a subscription service to customers.
The Casero acquisition brings a customer base of 20 ISPs, including U.S cable operators Cox Communications and Comcast, as well as Bell Canada, BT, and Sky, serving more than 50 million subscribers.
With the acquisition of Casero and its earlier acquisition of Boston-based HiWired, Radialpoint offers ISPs an end-to-end white label service suite that includes Internet security services; online backup, storage, and sharing; and premium support services:
As the penetration of broadband Internet services increases, MSOs and other ISPs are facing challenges in driving revenue growth and in retaining customers. While it remains to be seen whether users in a tight economy will be willing and able to pay for additional services such as those offered by Radialpoint, the availability of such offerings will be an important tool in retaining subscribers as competition increases.
"Our goal is to help Internet service providers become the personal IT manager for their subscribers' digital home under their own brand," said Radialpoint CEO Hamnett Hill in a release, "Over the past three years, our services have generated hundreds of millions of dollars in revenue for our ISP customers while substantially reducing subscriber churn."
Hill's statement and the experience of some of Radialpoint's customers would appear to indicate that at least some users are willing to pay for value added services. According to Singu Srinivas, co-founder of HiWired and V.P. Sales and Marketing for Radialpoint, Verizon recently reached 1 million subscribers who also pay for the security service provided by Radialpoint. Similarly, according to Srinivas, Windstream is successfully selling Radialpoint's premium support service for $12 a month above the base subscription rate.
While continued near-term growth in consumer spending on value-added services is likely to slow as the economic picture remains uncertain, services such as premium support and online backup are also critical to the MSOs' commercial services plans, specifically for services aimed at small and medium businesses.
According to Srinivas, Radialpoint's solutions are suitable for business sites with up to about 15 or 20 employees. Beyond that size, it is difficult to scale the remote support services, such as PC, server, and LAN support. Srinivas said that Windstream has deployed Radialpoint's Premium Support offering to its SME customers as well as its residential base.
While value added services will be critical in these areas, pointing to significant ongoing opportunity for Radialpoint, the challenge for Radialpoint will come as MSOs and other ISPs evaluate the "build-versus-buy" calculation for providing these services. The larger U.S. MSOs and telcos have a traditional preference for moving such offerings in house as quickly as possible. Embarq, for example, built and runs its own premium tech support organization. And many MSOs have migrated from third-party hosted VoIP services to running their own voice operations.
Radialpoint's best target market over the long term would therefore appear to be smaller service providers, including more rural cable operators and telcos, and smaller ISPs that do not have the resources to develop and maintain a full suite of value-added services on their own. In fact, according to Srinivas, the company's focus remains on larger operators.
In part, that reflects the realities of a smaller company with a direct sales model. Srinivas said that Radialpoint made a decision over the last year to stop working with OEMs and retailers (which was HiWired's pre-acquisition model) in favor of a direct channel to ISPs. That decision increases the workload for the company's sales and marketing staff but establishes much closer working relationships with its customers. At the same time, however, it largely eliminates Radialpoint's ability to pursue sales to service providers below about 1 million customers.
For the near term, keeping those customers is likely to be as much a part of Radialpoint's value proposition as increasing average revenue per user. Over time, however, it is critical that Radialpoint helps ISPs reach deeper into the home and business with managed services that drive additional spending. In Pike & Fischer's opinion, the company should focus significant attention on the needs of small and medium-size businesses as it evolves its strategic roadmap, aligning itself with both the next major arena of cable-telco competition and a major pain point, in terms of SMEs need to add new capabilities while offloading as much IT support as possible.
Copyright 2010 Radialpoint SafeCare Inc. All rights reserved.
