Intermedia continues adding business tools to Office in the Cloud product
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1 Intermedia continues adding business tools to Office in the Cloud product Analyst: Liam Eagle 18 Jun, 2013 Intermedia is a service provider that has historically focused on delivering hosted Microsoft Exchange , but is demonstrating an increasing focus on building a greater breadth of hosted SMB application services. Those efforts include both the pending acquisition of Telanetix, and its AccessLine VoIP product, as well the upcoming launch of a file sync and share service known as SecuriSync. The new product is part of a focus at Intermedia on developing the technology to support new services in-house, and a strategic decision to offer a more complete set of SMB services. Product and technology The basis for Intermedia's services is its HostPilot control panel, which it developed in-house. It provides Intermedia with a platform for provisioning and managing customer accounts, and delivers the same functions to the company's partners. It also offers customer-facing administrator and end-user interfaces that can be configured with permissions by partners. HostPilot is also the platform for tight integration, from an end-user perspective, of all the company's services. The company's bread-and-butter product set today is what it informally refers to as 'Exchange-plus,' and includes hosted Exchange mailboxes (for which it guarantees % uptime), archiving services across all (including POP and IMAP), Microsoft Lync chat and conferencing and a large group of other add-ons that includes encryption, PC backup and fax via . Intermedia's cloud servers, launched in late 2012, are a fixed (monthly) cost cloud infrastructure product, built on the company's own platform. The per-month, fixed-resources cloud is similar to hosting providers' entries into the cloud server space. The product is launching with a limited Copyright The 451 Group 1
2 service catalog that includes file server, active directory server and Web server configurations. Intermedia is working to introduce cloud server configurations designed around QuickBooks, and will be exploring ways to offer hosted versions of other non-saas applications in the future. SecuriSync is Intermedia's file sync and share service, designed as a competitor to products like Dropbox and Box. The company suggests the unique value in the service will be its tight integration with the existing Office in the Cloud products, including , as well as business-focused encryption and security features. A key distinction will be the product's administration layer, which will enable organizations to control where and how employees share data, and to, for instance, prevent departing employees from taking shared data with them. Strategy Intermedia focuses on providing hosted applications into the SMB space. Its stated value proposition is providing them with what it describes as 'Fortune 50 IT capabilities.' The company defines that according to the hardware components of its services including Dell, EMC, Cisco and Juniper Networks and according to its architecture. It uses a four-quadrant redundant design architecture that uses doubled A and B paths to deliver failover capabilities and an SLA guaranteeing % availability. The company's strategy for introducing new customers to its services includes cross-selling those services to existing customers on its other lines of business, for example, selling VoIP into its existing base of hosting customers. Internationally, Intermedia has business from 100 countries. It has staff in the US, the UK and Russia, and the bulk of the company's revenue comes from the US, Canada and the UK, without a focused effort in any particular international market the fourth-largest hosted exchange provider in the UK. Management indicates it is beginning to execute on international expansion plans, with specific plans for Australia, Singapore and Malaysia. Context Intermedia's pedigree is in the hosted Exchange space, with Exchange (as well as supplemental services like archiving and Lync messaging) representing the bulk of the company's revenue today. Indeed, Intermedia indicates it is the largest distributor of hosted Exchange. It currently serves about 50,000 customers and 600,000 mailboxes, with 33% year-over-year new user growth. Expanding on its business to include other services has developed as a point of focus since Copyright The 451 Group 2
3 the company's acquisition by Oak Hill Capital in May Intermedia launched cloud servers and VoIP services in November The Telanetix acquisition will place VoIP as its second largest revenue generator, with cloud servers and the (not yet generally launched) file sync and share service representing the smaller two lines of business. Intermedia has close to 400 employees right now, and will add about 100 more with the acquisition of Telanetix. Management indicates it expects to close the year at between 550 and 600 employees. Currently running at roughly $100 million in annualized revenue, Intermedia expects to close the year at about $150 million, accounting for both the acquisition and organic growth. Competition With its Office in the Cloud approach to across-the-board business application outsourcing, Intermedia competes most directly with Google Apps and Microsoft's Office 365. A committed Microsoft partner, Intermedia was, for a short time, a syndication partner for the 365 service. The company also competes with specialized service providers in each of its main lines of business. In the space, it competes with both the specialized Exchange hosting providers like Apptix and SherWeb, as well as the hosted exchange offerings of a large group of more traditional Web hosting providers ranging from Rackspace to Hostway, to The Go Daddy Group and 1&1 Internet. When the acquisition of Telanetix and AccessLine is completed, the company will be one of the larger players in the SMB VoIP space, competing with the likes of 8x8, Vonage, XO Communications, ShoreTel, MegaPath and others. In the fixed-cost cloud server business, the company competes with a broad range of hosting companies offering simple cloud server products, including iweb Technologies, LiquidWeb, PEER 1 Hosting and others. The launch of its file sync and share service will see the company competing with purpose-built products like Dropbox and Box. The 451 Take As it adds new proprietary and third-party technologies to its product mix, Intermedia's full set of services becomes unique not just as an end-user product, but as a wholesale product. The company is building out a complete set of SMB application hosting services at a time when SMBs are warming up to the prospect of application outsourcing in general. We believe Intermedia, already one of the largest suppliers of hosted Microsoft Exchange, is well positioned to capitalize on two separate, but related, trends in the SMB application hosting space. The first is SMBs looking to expand upon their early investments in hosted applications, Copyright The 451 Group 3
4 having been convinced of the value. CRM is the beachhead, led by all-saas market leader salesforce.com, but is a close second, and Intermedia's big presence gives it a large existing base of prospective customers. The second is that, as outsourcing applications becomes more appealing to SMBs, the VARs and integrators that frequently manage the internal IT for those businesses, and were once considered a barrier to cloud adoption, are today serving more of a gatekeeper role, one that Intermedia is equipped to address and even benefit from with its extensive partner program. There is inherent challenge and risk in a company venturing outside what it does best. But there is an established case for bundling hosted small business applications, and Intermedia is among the companies leading the charge down that path. Copyright The 451 Group 4
5 Reproduced by permission of The 451 Group; This report was originally published within 451 Research Äôs Daily T1R. For additional information on 451 Research or to apply for trial access, go to: Copyright The 451 Group 5
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