Clients Want Web Expertise
Telco 8(a)s are finding that an Internet strategy may lead them to the commercial market
P> Several 8(a) companies with telecommunications expertise are using their knowledge to enter the Internet-access and World Wide Web-hosting business with an eye toward attracting more commercial customers after graduation.
"The World Wide Web will help us down the road," said Art Garcia, president of GCI Internet Services, McLean, Va., an 8(a) company that provides engineering and information services. GCI began offering Internet access in September and hosting Web sites in December after government customers, including the Patent and Trademark Office and the Federal Communications Commission, asked for Web help.
Many small telecom businesses with government clients are finding Internet savvy is not only desirable, but expected. "We were forced into using the Internet by the federal government to some extent," said Garcia.
"Our customers were asking for it," agreed Jeannette Lee, president of Sytel Inc., Bethesda, Md.
Those high expectations may translate into good business for 8(a)s, many of which are trying to find an exit strategy from the Small Business Administration program. The Internet market, especially the Web, is growing rapidly in both the government and commercial sectors.
While there were 35 million e-mail accounts and 10 million Web users in 1995, analysts at Hambrecht & Quist, New York, estimate the number of e-mail users will increase to 300 million and Web users will increase to 200 million by 2000. H&Q predicts the entire Internet service market will reach $8 billion by that year.
"We are tooling up for high-capacity Web service... since we see this as an ever-expanding profit center," said Silvia Zuniga Winegard, president and CEO of telecom company CritiCom, Lanham, Md. CritiCom recently launched Capitol.Net, an Internet services division of the 8(a) company. It seemed like a natural step, she said, coming from installing telephone connection equipment and advising clients on local area network and wide area network projects.
CritiCom sees big growth ahead: Web hosting could be one of the company's top three profit centers in the next six to 12 months, said Winegard. "Because the Web is so versatile and the Internet is expanding at a phenomenal rate, we see them both maturing and becoming a part of everyday business life," she said.
So far, however, most 8(a) companies are just getting their toes wet in Internet services because the market is still uncertain. Some suspect the hype may eventually turn out to be bigger than the reality. International Data Corp., Framingham, Mass., estimates one-fifth of corporate Web users may drop their sites this year.
"It's a young and emerging area," said Lee. Sytel plans on using Web hosting as an exit strategy from the 8(a) program, but that strategy may change in six months. "Our strategy is to test the waters by helping our existing customers," Lee said.
GCI, which will graduate from the 8(a) program in July, said government contracts in its primary businesses will remain its bread and butter. But six months down the line, Garcia said he hopes the company will be a strong Internet service provider player. Eventually, he said, on-line service could become a subsidiary targeted at the commercial market. "This is an investment to see if we can leverage our expertise," Garcia said.
CritiCom, which has made the move to create a similar division, is buying equipment to handle millions of customers, with the goal of being the largest Web host site in existence. "We have structured our system to be ahead of its time and with a far greater capacity than one might think necessary," said Winegard.
All three of these companies have found on-line expertise in the employees hired for other telecom-related jobs. Many of Sytel's personnel have Internet experience, while others have knowledge of telecom integration, which added to the mix. Consultants with technical, design and marketing expertise -- the three areas necessary to build a Web site -- also have been hired. "One of the interesting things about the Internet business is that there's no single college or trade school track to prepare for it," noted Winegard.