Bigger is better for small ISPs

Small Internet service providers (ISPs) are responding to a lull in demand for IT services from small- and medium-sized enterprises (SMEs) by focusing on larger, more robust clients and improving customer service. In the mid-1990s, before the Internet was widely seen as a serious business tool, Poland's ISPs were not selective about their work, accepting contracts in areas as diverse as Internet security, Web site and database design, and Internet access. But the growing importance of the Internet in business and marketing and the worsening finances of SMEs during the current economic slowdown means that ISP's must specialize to hold on to their clients. "The current level of competition means that if a company is not good at, say, designing databases, their clients will easily find other contractors," said Robert Kowal, marketing director at Wrocław ISP Alfa Net. "In the next year the number of Web hosting companies will shrink because companies with fewer than 200 clients have no right to exist. The costs of maintaining the necessary infrastructure with fewer than 200 clients make this size of business irrational and is only possible at the expense of quality." Alfanet's investment in Internet infrastructure in recent years has allowed it to narrow the scope of its business to hosting Web sites and server storage, Kowal said. To increase its turnover, the company last year took over two small Wrocław ISPs, Wanet and Infonet, and plans to buy the client base of two more local ISPs in 2002. Alfa Net is aiming to become one of Poland's top 20 providers under its new name, Online.pl, he said. Other ISPs have narrowed their range of clients to limit financial exposure - customer bankruptcies and non-payment pose serious threats to small ISPs, according to company officials. "While smaller companies are less of a risk to their contractors when they default on payments, we prefer bigger companies because they are less likely to go bankrupt," said Piotr Podstawski, technical director of Poznań ISP Gammanet. "We have to be very careful in assessing which companies have a good chances of survival on the market." Gammanet offers e-commerce solutions and servers and provides support for around 100 clients, including Poznań distillery Wyborowa and domestic travel agency Scan Holiday Travel. But not all small ISPs are in a position to focus only on their field of expertise. Wojciech Wolański, vice president of Gdańsk ISP Koti, would like the firm to focus on selling business-to-business (B2B) and business-to-client (B2C) solutions but the market for these products is not developed enough to support the firm. "We would like to specialize because most of our people are from a programming background ... we also create B2B and B2C systems, but there is not enough interest on the market right now," Wolański said. Wolański estimates that the tough Tri-City Internet market has seen seven of its eight ISPs go out of business in the past year but is confident that by optimizing its customer relations profile, Koti will be reap the benefits when demand picks up again. "There are still many companies that don't use the Internet or have very basic Internet services," Wolański said. "When their situation improves they will be able to afford new systems such as customer relations management or to have their Web site integrated with their in-company software."