Remember EarthLink? It’s Now in IT Services and Targeting Banks

JAN 27, 2012 10:25am ET

When was the last time you emailed somebody @earthlink.net?

Once a venerable supplier of Internet connectivity, EarthLink Inc. has reinvented itself — as a vendor for banks, among other businesses.

“EarthLink has had its ups and downs, but it is the poster boy of a company that continuously reinvents itself,” says Phil Blank, a senior analyst with Javelin Strategy and Research.

In the decade since many industry experts wrote off EarthLink as yesterday’s ISP, it has been on an acquisitive tear, buying the abilities to offer private-cloud, data co-location, server-virtualization, disaster-recovery and other services. It has also improved the capacity and scope of its voice and data offerings.

Regions Financial Corp., of Birmingham, Ala., uses EarthLink’s myLink portal, a dashboard that allows banks to view and control telecommunications applications.

“If something happens in one call center, or an [interactive voice response] goes down, I can use my Blackberry and reroute traffic in real time,” says Ann H. Sears, an IT officer for Regions telecommunications.

That process, which might have taken the better part of the day before, can now be accomplished in a matter of minutes, and Sears says there’s no need for her to be in the office to facilitate any changes.

EarthLink counts 175,000 business customers and more than 3 million consumer customers. About 10% of its Business unit’s revenue comes from banking, roughly $27 million in the third quarter, the company says. The rest comes from construction, health care, government and retail. EarthLink’s total third-quarter revenue was $357 million.

“Our strategic intent is to position EarthLink as an IT services company for businesses who see the need for IT and network security as essential to their future success,” EarthLink’s chairman and chief executive officer Rolla Huff told investors during a third-quarter earnings call with analysts in October.

EarthLink’s reinvention as a banking and business service provider had the air of inevitability, experts say.

EarthLink built its capabilities not only through acquisitions of competing ISPs like MindSpring Enterprise in 2000, but through more recent purchases of telecommunications and data networking companies.

It acquired New Edge Networks, of Vancouver, Wash., in 2006. New Edge “was a leading provider of MPLS networks, a special highly secure method of transmitting IP traffic, and something you use to build a private cloud,” which is a private group of remotely networked servers, says Vikram Desai, president of advanced services for EarthLink.

That was followed in 2010 by the acquisition of regional telecom provider ITC DeltaCom Inc., of Huntsville, Ala., and last year of One Communications, a telecom provider based in Burlington, Mass.

The last two acquisitions brought with them 150,000 new customers, including some banks.

Among EarthLink’s benefits to banks is “a nationwide platform that’s highly secure and completely private, that helps financial services … in a secure and cost-effective manner,” Desai says.

EarthLink would not reveal how many banking customers it has, but it’s most likely fewer than a couple of dozen, experts say. Besides Regions, which was a former ITC DeltaCom customer, it also counts Suntrust Banks Inc., which uses its voice and data services, an EarthLink spokeswoman says.

EarthLink can potentially develop a solid niche with smaller banks and credit unions, which are eager to reduce IT costs and which often lack internal IT departments, experts say.

A big bank, by contrast, “is unlikely to take its data centers and give them to EarthLink,” says Alan Mattei, a partner at Novantas LLC of New York.

EarthLink is also likely to be fighting the perception that it is still a consumer company that lacks the necessary depth of services businesses require.

“Often with banks who feel their information is highly secure, they don’t want to deal with a consumer company,” says Zeus Kerravala, founder and principal analyst for ZK Research LLC of Boston. (Kerravala is a paid consultant for EarthLink.)

EarthLink is also competing with more established companies in the telecommunications and data storage industries, such as AT&T Inc. and Verizon Inc., as well as Level 3 Communications Inc. and Rackspace Hosting Inc.

Earthlink’s private-cloud offering intrigues experts most. Smaller banks that may currently be using the public internet to transfer portions of their information, say for their ATM networks, can do so using a private cloud, which would give a bank more security and reliability, Desai says.

As part of the service agreement, the private cloud would also help banks with compliance, because Earthlink’s facilities are compliant with SAS 70 and PCI standards, he says.

“EarthLink has a presence nationally as well as having a robust private infrastructure to move data within their own network, so they are well poised to move into this space,” Mattei says.

Movement of internal data using a private cloud is still controversial, he says. Smaller banks would likely begin by outsourcing functions and database capabilities that are not customer centric, such as purchase and order entry systems or the help desk, Mattei says.

Representatives from Regions said that even though they use EarthLink for some services, they are hesitant to try new offerings like EarthLink’s private cloud.

“We are generally not a company that puts our resources outside of our facilities, [but] it is certainly something we will continue to consider and see if there is value there,” says John Thomas Karney, manager of telecommunications for Regions.

Leave a Reply

Your email address will not be published. Required fields are marked *