Jack of all trades gets a partner: Service providers find alliances offer more

Added and expanded services are at the forefront of most service providers' agendas, and many are learning that the fastest way to tack on additional services is through partnerships.

Recently, Concentric Network and AT&T announced new platforms that place a heavy reliance on those relationships under the theory that customers with an increased dependence on service providers will be less likely to look elsewhere for various services.

For Concentric, which is being acquired by Nextlink Communications for $2.9 billion, adding value for customers equals adding services and partnerships. Concentric has forged about 40 partnerships with an array of companies, including dot-coms and software vendors.

Both Concentric and AT&T have recognized that they cannot efficiently offer the broadening collection of services customers look for, so partnerships are logical and necessary.

"The industry seems to have come down with bipolar disease," said Tom Jenkins, director of consulting at TeleChoice. "Two camps are forming where you either tackle the applications and services space or you stay focused on wholesaling, for example. But it is very difficult to do both."

Concentric last week detailed its new Gateway that is intended to serve as an online business and service management center for its small and medium-sized business customers. The company is using its proprietary Metra platform to handle the services ordering and management.

"[It's] not just cross-selling or upselling, but things that add value," said Connie DeWitt, vice president of marketing for small business services at Concentric. "And it gives us the ability to offer management of multiple services all from one place."

Small and medium-sized businesses don't necessarily have the means or the interest in dealing with IT issues, so Concentric hopes to fill in that gap, DeWitt said. In addition, small businesses have unique needs that Gateway is addressing, she said. "The industry loves to talk about bundling [of services]. But customers don't necessarily want to buy everything at the same time - this lets them do it on their own time," DeWitt said.

Although DeWitt said Concentric doesn't compete with AT&T, AT&T also recently detailed a very similar services plan with a hefty partner list. Under its Ecosystem for ASPs, the carrier is partnering with big names such as Cisco Systems, Hewlett-Packard, IBM and Sun Microsystems to bring more services to its enterprise offering.

"We are building a better ecosystem, as our job is to create a platform to keep the promises of the Internet," said Kathleen Earley, president of AT&T data and Internet services.

Perhaps the most difficult aspect of taking on services partnerships is that companies have given customers only one tie to grab. If a customer has a question or problem regarding one of the services offered via the service provider, does the customer's contact remain the service provider or the company offering the service? "That could really become a tough spot," Jenkins said.

Yet another flaw in the partnership trend may be that most of the deals are not exclusive. So although a service provider may be the only one offering a service today, the competition could be doing the same tomorrow.

While the development of third generation wireless systems continues to be a hot topic, the U.S. lags far behind Asia and Europe, according to a report released recently by The Strategis Group. By 2006, the U.S. is expected to have less than 14 million subscribers of 3G and 2.5G services, compared to Japan's nearly 40 million users. Operators in the U.S. are aware of the potentially lucrative services that 3G networks could offer but currently are focused on expanding capacity and coverage of their existing networks, said Jon Dorfman, an analyst with The Strategis Group. Still, he believes operators are actively pursuing 3G opportunities so that they eventually can take advantage of the potential of those next generation services.