Telus sinks $2M into self-service Web hosting firm

Telus Ventures on Thursday announced a $2 million investment into Hostopia, a private label firm that provides what its president calls “”Web hosting in a box.””

“”The analogy I

use is (it’s like) Windows desktop for Web sites,”” said Franc Nemanic, president of Hostopia, which has offices in both Toronto and Ft. Lauderdale, Fla. “”If you didn’t have that, you’d have machine code and you wouldn’t be able to get anything accomplished.””

Hostopia’s business model is a combination of white-label Web hosting and a Windows 95-inspired software platform that enables self-service hosting, which can reduce help-desk expenditures for Hostopia’s wholesale clients, Nemanic said. Those clients include telecommunications companies, Internet service providers, cable companies and Internet domain registrars.

“”What they’re outsourcing to us is the management of the Web sites and the development of technology to management of those Web sites,”” Nemanic said. “”From a service-provider point of view, we give them an automation technology that allows them to reduce their technical requirements by 90 per cent of more.””

Hostopia’s WebhostOS is a Web-based control panel that allows wholesalers to rebrand the Hostopia systems and manage their customers, while WebsiteOS puts management of sites into customers’ hands.

Two-and-half year old Hostopia counts Telus Corp., Charlotte, N.C.-based US LEC Corp., a Bell Canada subsidiary and “”one of the top three cable companies”” in Canada among its 200 hundred clients. Nemanic would not be more specific about his wholesalers, who combined serve more than 150,000 small and medium-sized business end users.

Nemanic said it makes sense even for telcos like Telus to buy into Hostopia’s private label hosting as Hostopia has already spent $11 million developing its technology.

“”It allows them to make money on low-end hosting,”” he said, adding wholesalers like Telus make 75 per cent plus margins profit on their investments. “”It’s like trying to develop Windows. Why try to develop it when you can buy it?

“”We don’t need to invent the services ourselves,”” added Mark Schnarr, executive vice-president of Telus and president of Telus Ventures.

Schnarr said the investment into Hostopia dovetails with Telus’ strategy of focusing on the growth markets of data and IP and the small and medium-sized business markets.

Nemanic said Hostopia plans to use the Telus funding to built out its sales and marketing efforts, specifically in the United States.

Jason Bremner, IDC Canada outsourcing and IT utility services senior analyst, said Hostopia is not alone in the private-label hosting market, as the competition includes GT Group Telecom Inc., among others.

But he said there is merit in Hostopia’ self-service approach to hosting.

“”The idea of automating customer support . . . is becoming more prominent. Particularly, if you’re going to be the provider to other ISPs, providing the back end help desk is going to be very important.,”” Bremner said. “”You’re going to have to figure out ways to drive out costs, and any automation you can do is beneficial.””

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