Providers Roll Out Collocation, Referral Plans

Posted: 04/2001

Providers Roll Out Collocation, Referral

By Tara Seals

Collocation service providers not only are supporting resale programs to
enhance their sales reach; they’re rolling out referral programs as well,
thereby opening opportunities for agents and value-added resellers (VARs) that
are less technology-intensive than direct resale.

These programs allow channel partners to work closely with direct sales
engineers and other managers, or simply to turn over leads to the colo
providers. And, in some cases, these providers are also leveraging their own
technology suppliers’ existing channels, such as VARs, to enhance the sales

Canadian collocation provider NetNation Inc. (
built out its collocation center six months ago and is already running out of
space, says its international director of sales, George Muenz.

"Build it and they will come," he says. "More and more people
are aware of how quickly they can ramp up. It’s good for a startup that wants to
launch with really good bandwidth and connectivity, and there’s no way a small
business can afford to put in their own."

Target clients include smaller financial services companies online brokerages
and online marketing companies.

NetNation’s channel partners, which consists of VARs and other, traditionally
IT-based members, gain value by adding collocation to their portfolios.

"Tools and systems are commoditized," Muenz explains. "But if
partners help businesses build up their websites, sell services on the Internet,
do an Intranet type of thing, then they differentiate themselves beyond that
they happen to be in the neighborhood or give good customer service."

In addition to a resale channel, NetNation’s referral program for dedicated
collocation services pays a 25 percent commission of the first four months of
whatever the customer signs up for.

Lightyear Communications Inc. (
in Oct. 2000 opened a collocation center in its Global Technology Center in
Kentucky. The carrier, which embraces the agent channel, has found the product
expansion to be "a good surprise," according to Kent Lanam, director
of product development.

"I wouldn’t be surprised as we get more into this that there are more
and more consultants and agents out there that could direct business in our
direction," he says. "And systems integrators–they can sell the
server and then say, ‘Hey, here’s a good colo option,’ rather than having to
build security and redundancy into the customer’s own building."

Referral Programs

Despite the benefits, there are concerns in utilizing an alternate channel,
some say, which is why some providers tend to rely on a referral model rather
than independent consulting.

Lightyear leases space for rack-mounted servers and also provides fast
Ethernet connections to the Internet. Its primary customers, rather than ISPs,
are companies that are using the Internet to deliver applications, says Lanam.

As a result, each deal is unique.

For instance, he says, "We’ve just brought on the National Weather
Service. They needed to put a satellite dish on top of the tech center to track
weather problems in Appalachia.

"It takes a special kind of agent, because the model’s different for
each customer. They may need a Structured Query Language (SQL) server or access
to some software we have. So [the agents] go out and prospect, then they’ll hand
it off to one of my product support managers or sales engineers that will work
with the agent and customer, unless the agent is sophisticated in the ways of
web server technology."

Regardless, Lanam says, "It’s really taken off with those outside
sources giving us the leads."

Digex Inc. (, which focuses
on managed hosting for such customers as Ford Motor Company (,
J.P. Morgan Chase & Co. (,
and United Air Lines Inc. (, also
recognizes the difficulties in training outside consultants.

"We provide the colo, but also all of the hardware, software,
provisioning, implementation and configuration, and we support that 24 hours a
day," explains Andy Hunn, Digex’s director of business development.
"Our product set is standard; however, products are put into different
combinations based on customers’ technical requirements."

He adds, "To train all those people, it’s a tough sell in that it’s very
complex and the learning time is very long."

Digex has channel managers and direct salespeople involved with its partners,
to work on opportunities in a joint fashion.

"We want to ensure those guys know what our products and services look
like as we roll out new things," says Hunn.

Thus, he says the "eLink" referral program has been a "huge
channel." Close to 40 percent of Digex’s closed business has touched an
agent, system integrator or VAR.

Leveraging Technology Partners

In addition to building their own channels, providers are working with
technology partners that provide servers, or other equipment and products
relevant to collocation, in order to expand their reach.

NetNation has an arrangement with Intel Corp. (
to sell its services through Intel’s VAR channel. The processor giant has close
to 8,000 partners in North America and 40,000 worldwide, Muenz says.

He continues, "So these are companies that sell computers and systems
and software to small businesses, and, by the way, they can recommend us for

Similarly, WorldCom Inc. (
recently acquired a 55 percent stake in Digex. Hunn explains that his company
will leverage the relationship to create "volume channels," because
WorldCom’s entire sales force will have access to Digex services.

"We’re now building an infrastructure to support that, along with
training and product lists and so on," he adds. "It will be
systematized. Right now we’re teaming so they have access to our expertise, but
over time we’ll continue to educate these guys, and the intent is to automate
the whole process."

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