Vikram Desai, President, EarthLink Advanced Services
Vikram Desai has a simple philosophy when it comes to serving businesses: Focus on helping the customer "solve real world problems" they are facing. This strategy has driven EarthLink (Nasdaq: ELNK), once known mainly as a consumer dial-up service provider, to purchase assets that give it network platforms from which it can launch managed services and advanced connectivity services for its customers. Following its acquisition of New Edge Networks in 2006, a move that instantly gave it a national business footprint, EarthLink acquired both Deltacom and One Communications in 2010. FierceTelecom Editor Sean Buckley recently sat down with Desai to talk about his customer service philosophy and the moves EarthLink is making to achieve its business services goals.
FierceTelecom: To establish a greater presence in the business services market, EarthLink has expanded its service portfolio and market presence through targeted acquisitions, including One Communications and Deltacom. Can you talk about that strategy and how it fits into your overall business services mission?
Vikram Desai: If you take a look back over the past several quarters, you can see that EarthLink has been acquiring a platform, including regional fiber-based network platforms from which we can launch managed services and advanced connectivity services for our customers. Those assets are in the form of One Communications, Deltacom and, of course, there were some other smaller acquisitions we made in advance of that as well. If you really step back and really look at it, on one hand this is a very challenging time from an economic and customer acquisition standpoint, but on the other hand if you have a healthy balance sheet there's no better time to acquire new and advanced capabilities that can reposition you in what I would hope to be a leapfrog type of effect. That's really what our strategy is. We're assembling the pieces and products that will allow us to deliver to our target customers advanced managed services, IT services and connectivity services.
FT: How has your strategy resonated with your business customer base?
VD: If you look at the late '80s and early '90s it was a time when we had the giant monopoly AT&T (NYSE: T) that served business customers, but there was not a lot of focus on solving business problems and driving value. In fact, I remember the company I was at the time that had a philosophy that we earned every customer rather than being given each customer as a monopoly. Well, there are some similarities between that time and now. The similarities are that not many of the service providers take the time to understand what the pain and pressure points are from an operational and business perspective with their customers. That's what we've been doing.
There was one new customer who had several pain points related to how their 20-some odd offices interconnect with one another. They did not have the same level of capabilities and there wasn't any efficiency in the business structure. When I say efficiency, there wasn't a way in which this business' expenses could scale or decrease based upon their own business. It was like the old days when you had to nail up that infrastructure (as) the cost of doing business because they needed to communicate. That's not the way business is conducted today, when you have things like cloud utility computing and you can integrate voice and data across multiple locations and when you can have even older technologies like fax be delivered into your virtual resources. There are other companies that have those capabilities too, but the differentiator we have is we sit down and ask, why is your business suffering? and ask, how is it that we may be able to help you? When we do that we find we build a lasting relationship that's not governed by price. The value is the ability to sit down and help you do things better and faster.
FT: Are there any specific services that you're seeing the most demand for? Is it Ethernet, VoIP, managed services, or is it driven by the specific client's needs?
VD: I think the way to look at it is there's a toolkit of capabilities. Whether they are related to connectivity, which may be Ethernet or old fashioned TDM, it does not really matter because we have all of those options. Then there's a higher level of services that would revolve around utility computing: computing capability, storage capability and networking capability using EarthLink Business as your data center. For those companies that decide to use a different company for cloud computing there's no reason you can't take a look at EarthLink for managed security. There's a series of services and capabilities that can be custom assembled to solve real world problems that specific businesses are facing. Here at the National Accounts business unit we're looking at the largest and most complex customers that EarthLink has the privilege of serving. We'll see everything from large locations (to) a retail customer that has little IT resources in their business. That's a great example where EarthLink Business can become that company's total provider, whether it's telephone communications, data connectivity or cloud services.
FT: A recent survey commissioned by Comcast called "State of Communications Services in Commercial Real Estate" revealed that the availability of broadband services and access will make a commercial property a more desirable location to locate a business. Are you seeing the same thing?
VD: We do see that. It's a simple as the definition of communications has become equal to computing. It's all different types of data streams, but at the end of the day it's simply a data stream. Another notion that's becoming equally is powerful is what mobility is. If you talk to someone they will say mobility is cellular or wireless, but with capabilities like those available from EarthLink your entire office becomes mobile. It may include wireless and wireline or it may be Ethernet, but together it's a package and that package can move with you. If you take a look around, you see this giant explosion of Apple (Nasdaq: AAPL) iPads or new application processing type devices, but they are only as effective as the connectivity they are attached to and the applications that can be delivered across that network to the iPad.
FT: The competitive telecom industry appears to be in a state of flux with the growing presence of cable operators and the overall consolidation of the CLEC market. Do you see cable operators as a credible threat in the markets you serve?
VD: It's a good question. At the end of the day the cable company is a regional business, which is an inhibitor to the types of customers that we serve in the National Accounts group. Imagine you're a business and you can get dial tone and data connectivity inside a cable operator's footprint, but what happens when you go outside that footprint? All of a sudden you're managing a complex situation. To me and the customers I have been talking to it's really all about complexity. In the late 1980s and early 1990s, the telephone was as simple as a line and a handset that connected to a network, and when something broke it was one of those three things. Today, it's very, very complex. Chances are that phone set is some type of IP phone that's based on SIP goes into a server, and when the dial tone stops it's just not that easy to fix. That's just the voice. You need to also figure out the data communications and (if that is) a separate issue. The point is while we, the end users, believe things are becoming simpler it's actually becoming incredibly complex. You need to have a single platform that can manage it for you and make it simple for you.
If you don't have a single platform to do that you're back to managing the piece parts yourself. That means you'd be using Cablevision (NYSE: CVC) in the Northeast and Time Warner Cable (NYSE: TWC) somewhere else and you have to build up that IT organization and your overhead costs go up and your efficiency goes down. Our value proposition is to make it simple for businesses to leverage advanced technology that we manage for them. That allows them to use technology and apply it to their core business and grow revenue and create shareholder value.
FT: EarthLink made a number of acquisitions in the past year. Is the integration of these assets on track and have there been any challenges?
VD: This has got to be the strongest integration team I have ever seen. I have worked with multibillion-dollar companies and 10 million-dollar companies. This is a very complex thing and they know how to do it and they're doing a great job.
FT: Beginning with the acquisition of New Edge and later Deltacom and One Communications, it would be safe to say that EarthLink is transforming itself into a major business services competitor?
VD: I think you're spot on. The vision Rolla Huff has with respect to future service providers is right on and this company isn't encumbered by old technology and people that are encumbered with the way they always have done things. In many ways, this is very much like when AT&T was broken up and you had a couple of very creative customer-driven companies that evolved. I bet you'll see a lot of EarthLink business moving forward.
Technology is great, but technology to have technology is really a waste of shareholder money. I think this company has done a great job of acquiring pieces that can make a difference to their operations and make our customers a stickier long term customer. This allows us to sell them multiple services, which goes hand in hand with being sticky. There's no 10,000-pound gorilla in this space. To see a company the size of EarthLink making a directed move into this space shows that we intend to be the 10,000-pound gorilla in this space.