New Strategy Bolsters ITS Growth

September 12, 2004
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GRAND RAPIDS — ITS Communications extended its reach to the Chicago market two months ago and entered the Cleveland market last week as part of its plan to expand throughout the Great Lakes region.

The 20-year-old Grand Rapids company is a technology service provider for voice and data integration and related consulting services that has an established a presence here and in Kalamazoo, Lansing, Detroit and Midland

The company is in the midst of a growth spurt and the primary reason is its new business strategy called the Virtual Network Carrier, which the company launched in Michigan in January 2003, said Chuck Hagerty, vice president of sales.

Hagerty said the Virtual Network Carrier model offers high quality network connections and great long-distance rates, Internet access rates and dedicated connectivity to point-to-point circuit rates.

"We've negotiated national contracts with the Tier I carriers in the network industry, such as AT&T and Qwest. But we have great rates in the five-state area that used to be the Ameritech area, which includes Michigan, Ohio, Indiana, Illinois and Wisconsin. We want to primarily expand into the Great Lakes region and then continue on nationwide."

ITS studied the industry landscape and came up with a different business concept.

Tier I carriers are the nationwide carriers, such as AT&T, Qwest, Sprint and MCI. According to Hagerty, the primary reason customers buy from those carriers is the quality and reliability of their networks.

Tier II carriers include carriers like TDS Metrocom and LDMI that have built their own infrastructure in geographic areas to compete against the Tier I carriers.

"The primary reason you buy from a Tier II is because of the price. If it were the same price, people would probably go to the big guys."

Then there are resellers or agents that sell for both Tier I and II entities. The primary reason people buy from resellers or agents, he said, is for the customer support they provide as representatives of Tier I and Tier II solutions.

"We came up with this concept of the Virtual Network Carrier to offer clients all three rather than having to choose just one," Hagerty explained.

"What we do is buy wholesale from the Tier I carriers, price at the Tier II carrier level and then wrap it up with personalized customer support, so you can actually talk to a sales rep or a systems engineer," Hagerty explained "You can talk to people live during the implementation and the customer support is all personal."

Because ITS buys in quantity at "great" wholesale rates, it can afford to pass the savings on to customers, as well as give them personalized customer support, he said. Some customers have saved as much as 10, 20 or 30 percent on their network costs.

Unless a customer is a mega account, he said, trying to get a Tier I rep, engineer or customer support person either face to face or on the phone is "like pulling teeth," as Hagerty put it. The situation is made worse by the fact that a lot of the big companies continue to downsize for profitability's sake.

According to Hagerty, ITS excels in connecting the office locations of multi-site, medium-sized companies. On the lower end, it has customers that have five to 15 locations. On the higher end, its largest client has 300 sites.

The concept of a Tier I solution at a Tier II price with plenty of customer support seems to be catching on.

"People are liking it, they're listening to us and they're buying from us," Hagerty remarked. "We're growing that business to the point where it makes sense to expand that into other states."

Although ITS is placing representatives in new markets in the Great Lakes region, it's actually doing business nationwide because its customers are telling other customers, Hagerty said.

A customer in Holland, for instance, told its sister company in Dallas about ITS and ITS ended up providing the sister company's wide-area network and long distance service. The Dallas company, in turn, told its sister company in Kansas City, and that order arrived at ITS headquarters last week. The word has been passed on to yet another sister company in Denver that has 65 locations, Hagerty noted.

It took ITS about 18 months to two years to put Virtual Network Carrier together because the company had to file licenses in 44 states to do business, and contract with a company out of New York to do ITS's billing. However, Hagerty pointed out, bills are issued directly by ITS, not another company.

As he sees it, it's much, much easier to be a reseller or an agent of a Tier I or Tier II company because "you're just selling their stuff" and don't have to have the infrastructure, the back office operations or people to do it.

If a reseller or agent sells a customer an AT&T circuit and the circuit goes down, they just call AT&T to fix it, he explained.

"With ITS, if a circuit goes down or you have a problem with long distance or Internet access, you call ITS and we handle that for you so you don't have to sit on hold for two hours."

ITS Communications now has 55 employees on staff, five of whom were hired this year. Hagerty anticipates another 10 percent increase in staff next year.    

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