June 29, 2012

4 Min Read
Intermedia: Beyond Hosted Exchange to the Business Cloud

By samdizzy

Intermedia President Michael Gold

Intermedia is pushing beyond its hosted Exchange business and focusing on a complete business cloud strategy. Already the largest independent provider of hosted Exchange, the company both competes and cooperates with Microsoft Office 365. Intermedia President Michael Gold sees opportunities to blend third-party services with home-grown cloud offerings — integrated into a single management dashboard for MSPs and VARs.

Intermedia has built a cloud computing dream team that includes executives who previously worked for Citrix Online Services, Equinix, NetSuite, Qwest Communications, SAP and Savvis. CEO Phil Koen, for instance, previously was CEO and director of Savvis, and president and COO of Equinix.

Intermedia’s total headcount is now 350 employees. Revenues grew 40 percent last year. Channel-driven revenues, led by Senior VP Bob Leibholz, grew roughly 50 percent. The company is profitable, but does not break out actual sales and net income figures.

So far, Intermedia’s reach extends across approximately 50,000 small and midsize business customers, more than 10,000 channel partners and roughly 500,000 user seats.

Intermedia’s Cloud Services Portfolio

But how can Intermedia both compete and cooperate with Microsoft? The answer involves the Intermedia HostPilot Control Panel, a dashboard that allows VARs and MSPs to manage:

  • Best of breed third-party services: Exchange, Lync, ActiveSync, SharePoint, BlackBerry, Compliant Archiving, Encrypted email and PC backup.

  • Proprietary Intermedia services: Including SecuriSync, cloud-related servers (coming soon), Hosted PBX, conference bridges, fax via email, outlook backup, SpamStopper and VirusStopper, MessageMirror, UserPilot and Web Hosting.

Intermedia offers a five-nines SLA (99.999 percent) on hosted Exchange, with various SLA levels on the other SaaS components.  The company allows partners to white label its cloud services and partners can also offer end-customer billing.  “With Intermedia, you [VARs and MSPs] can set yourself up in the cloud with your own brand in a matter of minutes,” said Gold. Plus, Intermedia offers phone support to its partners.

In contrast, Microsoft controls branding and billing for Office 365 and I think the SLA is closer to three-nines (99.9 percent).

Key Inflection Point

Intermedia has tried for several years to push beyond hosted Exchange. The company has taken multiple stabs at the hosted PBX market, and gradually adjusted its strategy around late 2010 or early 2011 — realizing that customers wanted Outlook support for PBX functions rather than a proprietary front-end user interface.

But the real inflection point arrived around May 2011, when Oak Hill Capital Partners acquired Intermedia. At the same time, Intermedia acquired Zlago (another SaaS provider), which Gold had been running.

What prompted the Oak Hill and Zlago deals? “We thought it [Intermedia] was an amazing platform to leverage the email move to the cloud, and then cross sell and upsell beyond that. Customers don’t want to worry about 10 different service providers, 10 different bills and 10 different IT systems,” Gold said. “We wanted to make life easy for the VAR and their SMB customers.”

Gold believes there are 300 million corporate Exchange users worldwide and almost all are still running on-premise. In the U.S. SMB market alone, he sees a total market opportunity to move 8 million Exchange inboxes to the cloud between 2011 and 2014.

Hosted PBX: Growing Stronger?

Still, Intermedia faces challenges. Generally speaking, I think channel partners and customers have been slow to embrace hosted PBX services because of legacy PBX investments plus fear of losing dial-tone service (though many hosted PBX systems are incredibly reliable). Also, emerging services like VDI (virtual desktop integration) have not taken off as quickly as analysts expected — though there are signs that a tipping point is nearing.

Nevertheless, Gold says he has bigger priorities than VDI — including cloud servers. Intermedia is in “soft preview” with a cloud server offering, and reaction from initial partners has “been great.” I don’t know when the cloud server solution will officially launch.

In the meantime, business performance sounds strong. Gold says the company has exceeded its revenue targets in the past year, and the company is working with high-profile clientele in such areas as professional sports (NBA franchises, apparently) and major consumer companies.

Intermedia also is focusing heavily on a Net Promoter Score initiative, surveying customers and exploring ways to boost support so that positive word of mouth about the company continues to accelerate.

Microsoft,  Google and More

Some critics may wonder if Intermedia can continue to grow, remain profitable and compete as Microsoft and Google continue to escalate their cloud wars — which often include price wars. Intermedia isn’t focused on the Google market, though, and instead remains zeroed in on the on-premises Exchange market — those 300 million inboxes — as the prime target for more customers.

As for price wars, “a minority of customers buy on price first and we’re not going after them. For a little more [in price,] you get a lot more with us.” Indeed, the Intermedia cloud suite costs about $40 for all-in monthly services, with lower prices available for entry-level hosted Exchange services.

Gold will share more of the Intermedia story this morning with The New York Times Business Day Live. And the Intermedia team will head to Toronto July 8 for the Microsoft Worldwide Partner Conference 2012 (WPC12), proving again that the company continues to cooperate and compete with Microsoft.

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