Getting a Channel Bounce

Posted: 04/2001

Getting a Channel Bounce
Collocation, Web Hosting Good for IT, Telco Resellers
By Josh Long

Surging demand for web-hosting services, bandwidth and rack space is affording telecommunication companies and IT concerns who have been outsourcing their collocation needs an opportunity to bundle those turnkey solutions and partially resell them as services to third parties.

New sales channel programs supported by collocation and data-center providers are arming CLECs, value-added resellers(VARs) and others with the ability to offer value-adds such as cabinet space, IP solutions, application management and network cross-connects, often on a national scale, making it far easier for their customers to get what they need on a timely basis than if they had to line up such services on their own.

At the same time, these programs allow collocation, data center and web-hosting providers that operate large facilities throughout the United States to reduce their need for direct sales forces. The programs are being introduced in small, as well as large, markets.

According to the Colocation Network (www.colocation-network.com), a web-based information clearinghouse, the collocation and hosting industry will be worth more than $30 billion by 2003. As a result, it says, "There is a growing requirement for professional companies to specialize in providing ancillary services and solutions to this market."

Collocation Partnerships

Operating in Tier 2 and Tier 3 cities, Melbourne, Fla.-based Colo Solutions (www.colosolutions.com) manages three separate channel programs. The carrier-neutral collocation business works with approximately 150 partners.

"We are 100 percent channel driven and invest in our partners vs. a large direct sales staff," says Dave Drazen, director of channel sales. The distribution channels are a "great way to penetrate the market on a national scope without having to find a lot of sales reps," he adds. Industry analysts and executives say that more service providers are beginning to focus on Tier 2 and Tier 3 cities--regions where plenty of businesses have been left out of the broadband market--as carriers complete construction of their networks in the highly competitive Tier 1 markets. The alternative distribution channels help companies like Colo Solutions market to these providers.

Colo Solutions' programs include referral partners, direct partners and authorized distributors. Referral partners, who may include consultants, real estate firms and web-based carrier search companies, receive a one-time referral fee. In the direct partner program, companies offer their clients collocation services as a value-added offer; and the direct partner works jointly with Colo Solutions to achieve a sale.

Authorized distributors in the program are considered VAR's that manage sales, technical support, customer service and billing for collocation customers. The distributors may include bandwidth providers, service providers, optical fiber providers and independent network integrators.

Straight Line Communications, a Debary, Fla.-based company that is focused on providing converged network solutions and represents IP backbone carriers, is an authorized distributor for Colo Solutions. If an ASP wants to roll out IP services, for instance, Straight Line Communications will package and maintain a customized turnkey solution for that client--including collocation space, network access, consulting and design, notes Scott Ohlwein, the company's president. Straight Line Communications bills a customer for the rack space, he says.

Brisbane, Calif.-based COLO. COM (www.colo.com) is launching agent and reseller programs that will enable partners to offer bandwidth, cabinet space and related physical services to their clients. COLO.COM is hiring 20 sales managers to recruit channel partners around the nation, where the company operates 25 U.S. facilities in Tier 1 and some Tier 2 cities, says Kushi Kullar, the firm's senior vice president of marketing and business development.

The obvious benefits of distribution and reach justify the existence of an alternate channel, Kullar notes, adding, "We get additional distribution and leverage. It's that simple."

Neutral, optical hub-focused COLO.COM this year appointed a vice president of channel partners, Don Goodwin. And in late March, the company released product bundles specifically for channel partners, such as cabinet space bundled with bandwidth.

The provider has focused on luring a variety of top carriers to its facilities, and that provides extra value for partners, Kullar says. "The first thing is that we have buying power and leverage," he adds. "So an agent or reseller doesn't have to go out there and get a deal with Qwest or Level 3 themselves, and have that big bar they have to jump over every month."

In the collocation space there are "so many services that can be offered that require tons of expertise" and drive the need for partnerships, says Lesley Bateman, a spokeswoman at Switch and Data (www.switchanddata.com), which owns space totaling 600,000 square feet. Bateman says clients often request the names of other customers residing in Switch and Data to market their services and engage in related business with one another.

While Switch and Data operates a direct sales channel, "A fair amount of customers" do resell services, according to Bateman. For example, CLECs have resold rack space to their customers such as ISPs, DSL providers and ASPs, Bateman says.

Web Hosting Opportunities

IT and telecommunication companies specializing in the booming web-hosting arena are creating a strong current of reseller opportunities as well.

Vancouver, British Columbia-based NetNation Communications Inc. (www.netnation.com), a web hosting and domain name registration provider, accommodates 17,000 customers in 130 countries, including 400 resellers, notes NetNation CEO Joseph Kibur. NetNation, which is connected to three large carriers in one 10,000-square-foot facility, is nearing capacity and looking to expand its facility, Kibur says.

In a resale model, a web designer may register a domain name, implement its own programming and e-commerce solutions, and use NetNation's collocation space to house a server in order to make a company's page go live on the Internet, Kibur adds. The web designer--acting as a reseller--bills the customer, and NetNation provides service behind the scenes.

"These customers have a relationship with the web designer," he says, explaining his organization's role. "Not us."

People are eligible for the reseller program if they purchase a NetNation web-hosting account, and are a web designer or wish to host several websites, the company states on its website. Resellers receive a discounted price, based on the number of accounts they resell. Companies also can receive a one-time commission for referring accounts to NetNation, Kibur says.

Salem Global Internet (www.salemglobal.com), a New York-based website and development programming company, is a NetNation reseller that purchases UNIX and NT hosting services, e-commerce systems and statistical packages that track website visits. As a result of the reseller partnership, small-business customers view Salem Global as a "large vendor," says Ralphi Salem, CEO at Salem Global.

The IT-telco marriage

With the rollout of next-generation e-business services and applications increasingly demanding secure bandwidth and related telecom services, IT companies such as IBM Corp. (www.ibm.com) host services within carrier data centers and resell--or put another way--incorporate the related collocation services for their clients. Last September, IBM signed a contract to use several hundred thousand square feet of Internet hosting facilities in AT&T Corp. (www.att.com) Internet Data Centers.

AT&T--which announced that same month it was investing $2 billion with British Telecommunications (www.bt.com) and Concert (www.concert.com) to deliver e-commerce services through a network of 44 Internet data centers in 16 countries--said it would sell a joint streaming media hosted service through its VAR's among other sales channels.

In a publication dedicated to AT&T's Alliance Channel program, AT&T executives say the carrier now manages a network services platform technology and infrastructure for VARs--alleviating their e-commerce demands and ensuring that bandwidth is provisioned on time. AT&T says more than 1,200 channel partners offer consulting, professional services and systems integration support for web hosting and IP connectivity.

Exodus Communications Inc. (www.exodus.net), a global giant in the Internet hosting space with data centers in North America, Europe and Asia Pacific, offers regional alliance partnerships for large regional or national systems integrators, web developers, hardware and software resellers, consulting organizations and ISPs. The Internet-hosting provider also manages enterprise and global alliance partnerships with such companies as Cisco Systems Inc. (www.cisco.com) and Sun Microsystems Inc. (www.sun.com).

Despite the increasing number of data centers, collocation facilities and related buildings, the demand exceeds the supply. The average European collocation facility is still three times larger than a U.S. facility, according to a survey Band-X Ltd. (www.band-x.com) released in January. And carriers such as Level 3 Communications Inc. (www.level3.com), with its 66 data centers worldwide, say collocation capacity is packed and even contracted out in some instances before a facility is operational.

As these centers germinate at an astonishing pace, one thing seems sure--the number of agents, VARs, systems integrators and others will continue to mushroom as IT and telecommunications services converge.

Says Level 3 spokesman Paul Lonnegran: "We can't build fast enough to meet the demand for collocation space."

--Tara Seals contributed to this story