Small Businesses Provide Opportunities for Service Providers

Specialized providers will find a wealth of opportunities providing small companies with easy-to-use Web site services, according to a report by Cahners In-Stat Group.

The report, “Annual eBusiness Service Provider Rankings: Small Business — 2000 The Year in Review,” found that eBusiness Service Providers (eBSPs) have evolved dramatically over the last two years, and continue to make advancements in their services platforms and channel structure. In-Stat estimates vendor revenues in this segment to have reached more than $100 million in 2000.

By 2004, these specialized vendors are expected to earn more than $600 million. Given this expected growth, In-Stat sees 2001 as a key year in execution and merchant acquisition for eBSPs, and as a result, providers with effective channel strategies are likely to dominate in the long-term.

“The market for Web-enabling services in the small business market has grown quickly over the last 18 months. More than 800,000 small companies have built a Web presence using an eBusiness Service Provider. By the end of 2001, In-Stat expects more than 3 million small companies to move online through an eBSP,” said Kneko Burney, director of In-Stat’s eBusiness and Infrastructure Service. “The challenge for providers in this market will be acquiring serious, paying customers quickly and cost effectively, as well as continually provisioning new, useful and relevant services to these customers as they evolve online.”

The competitive landscape in the eBSP market quickly evolved in 2000, as players began to implement vastly different strategies to acquire and keep customers for the long term. There is a clear division between firms that sell their services direct and those that choose to use two-tier distribution, where they enable others to sell eBusiness services directly to small businesses. As a result, a new subcategory of providers, Infrastructure Services, is gaining traction and changing the dynamics in the small business eBusiness services market.

By 2004, In-Stat estimates revenues for specialized eBusiness Services will reach more than $600 million.

The market for Internet-based virtual private network (VPN) services that reduce the cost and complexity of remote access for small and medium-sized businesses (SMBs) is also poised for explosive growth in the next two years, according to a white paper by Access Markets International (AMI) Partners commissioned by Netilla Networks.

AMI Partners predicts that nearly one in five of the 7.6 million SMBs in the United States will have high-speed Internet access and a local area network in 2001.

“Such services can bring the advantages of VPNs — revenue increases, lower costs, increased productivity and improved responsiveness to customers — to SMBs, which previously could not afford VPNs and typically lack the technical resources to install and operate them,” said Alex Kalamarides, senior vice president, research and consulting services at AMI-Partners. “Given such benefits and the growing number of SMBs using low-cost, high-speed Internet access and operating local area networks, AMI-Partners sees a potential for growth well beyond the $2.2-billion SMB market currently forecast for VPNs in 2001.”

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