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ISPs may lose intranet revenues

A new study says that ISPs may lose one of their big revenue generators: running corporate intranets.

Internet service providers, struggling to supplement income from Net access fees, may have hit upon a golden opportunity by running corporate intranets for business customers. But that opportunity could prove fleeting as customers that begin to bring that function in-house, according to a new report issued by the Business Research Group.

"Initially, companies didn't have the expertise or were not willing to make the investment. There are a lot of up-front costs associated with intranets," said Paul Johnson, Internet analyst and author of the report.

"We're seeing a trend away from [outsourcing intranets], in part because companies have more experience in Internet and intranet technologies. In the long term, it's a better investment for them to manage in-house," Johnson added.

BRG surveys have found that the percentage of companies that want to run their own Web server has risen from 60 percent in 1995 to 82 percent today.

But one business-oriented ISP thinks setting up an intranet at a company's location, then managing it from afar, could be a lasting line of business for ISPs.

"There's a huge marketplace for remote administration in general," said Derrick Knight, vice president of operations for Network Intensive. "Let us come in to set up an intranet...essentially do an in-house outsource. We'll set up and configure an intranet, establish a security policy, but it resides on the customer's site."

Customers turn to ISPs to run their intranets because they can get turn-key service around the clock, says Gloria Chen Wahl, chief executive at InterNex Information Services, another business-oriented ISP that handles outsourced intranets and extranets for 18 customers.

"You get a technology partner prepared to understand your business," said Wahl. "We have the bandwidth and quality of service that allow you to sleep peacefully at night."

An earlier BRG survey on ISPs found services like intranets and virtual private networks (VPNs) account for about 28 percent of ISP revenues on average.

"From an ISP's point of view, this is how they're going to survive," said Johnson. The next big wave of services, he predicted, will be outsourced e-commerce services through ISPs, an area that InterNex, AT&T, and others are already pursuing.