Iserv changes focus, posts best year for profit

Tuesday, January 03, 2006
By Chris Knape
The Grand Rapids Press

CASCADE TOWNSHIP -- Weathering industry changes forcing others out of business, Iserv Co. just finished its first decade with what the chief executive said was its most profitable year.

For 2006, the privately held provider of Internet and technology services expects to continue an aggressive campaign to grow via acquisitions and new products.

Getting the struggling company on even footing as broadband arrived in West Michigan was a big challenge, said chief executive Victor Shepherd, who joined Iserv in 2001.

"Like many dot-com businesses, the business here had grown very rapidly but had not the most profitable footing," he said. "The focus had been on growth and not necessarily the quality of service and the business."

Doing so meant going back to customers, expanding services to them, then growing into a statewide player.

"Our goal was to figure out what we had here and then march out in a different direction," he said.

Iserv accomplished that goal by focusing on marketing and acquisitions, Shepherd said.

This month, the company's Iserv Technology Group completed its 15th acquisition. It bought the customer base of Springnet, a Dayton, Ohio, ISP primarily serving residential dial-up customers.

The company, based at 5230 33rd St. SE, doesn't release sales or earnings information, but claims nearly 60,000 subscribers. If the firm brought in $15 a month per subscriber, that would put annual revenues at more than $10 million.

A 2004 report from One Source CorpTech estimated Iserv's revenue at $11 million.

Nationally, dial-up Internet access is a diminishing, but still profitable, market -- the low-priced choice for many and the only choice for those living in areas where speedier broadband is not available. It also is a base upon which Iserv can build, providing steady monthly income and future growth prospects, Shepherd said.

"Because of our size, all of a sudden they've got many new products available" he said.

Those products range from accelerated dial-up to higher-speed digital subscriber line, or DSL, and corporate data and Web hosting services.

Despite a larger geographic footprint, Shepherd said Iserv has been able to maintain quality by adding support staff each time it passes a certain threshold of subscribers.

The company has more than 50 employees, he said.

Iserv also strives to be competitive on price against juggernauts such as AT&T and Comcast.

"Early on, we lost a significant amount of our customers when we did not have broadband-based options," Shepherd said. "A lot of our customers went to cable providers.

"Now, (the broadband) part of our business has grown substantially."

Revenue from corporate customers using Iserv's data center services has been a major source of growth of the company. Today, close to 50 percent of revenue comes from corporate customers, versus just 20 percent a few years ago.

The company prides itself on service, regardless of customers' problems. Most of its service calls are related to viruses, spyware and how to use Microsoft products.

Where larger providers may shy away from providing support for such issues, Iserv sees such service as a means of differentiation, Shepherd said.

"That's what our business has turned into," he said. "It's more of a service-and-support operation, helping people stay connected."