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- Business tunes into opportunities online -
The global reach of the web provides new markets as firms respond to the hi-tech slowdown

People who do not use the internet in the belief that it is not going to improve their life underestimate just how powerful and pervasive it has become across Europe. Many IT companies have seen their profits dip during the last quarter, others have yet to make a profit, and some small firms are likely to disappear off the map. Meanwhile, new internet applications are constantly being introduced to both industrial and commercial users anxious to increase their margins by the smallest fraction. The global reach of the web means that businesses can set up one office and operate services out of another. Dutch company Interxion, for example, has just opened a 140,000 sq ft internet exchange centre at Parkwest, Dublin. The enterprise, headquartered in Amsterdam, is Europe’s leading network of internet exchange centres (IEC).

These buildings store all of the servers and necessary support, and manage customers’ web sites. They are all connected to major national and international carrier networks. Interxion was founded in 1998 by Bart van den Dries and three employees. The company’s shareholders include five international investment banks, and today it employs about 500 people in IECs in 15 cities in 13 European countries. Although it has a strong customer base of about 150 clients, including KPNQuest and Versatel, the firm has yet to make a profit, although Mr Van den Dries expects it to break even in the first quarter of 2002. He forecasts sales for 2001 will be three or five times more than last year’s $13.18 million. The increasing demand for web-hosting and related services as the need for data transmission expands will help to boost sales, he says. Last year, Interxion set up a joint venture with the Dutch Broadcasting Services Corporation, a supplier of television, film and video facilities, to provide data centre services in Hilversum, Holland. The move enabled the corporation to process and distribute both audio and video content over the internet. Mr Van den Dries hopes to form similar agreements with other European companies that will combine TV and web technologies. He reveals that a flotation is not on the cards at the present time, although he would not rule it out in the next two years.

Future mergers are expected between web-hosters and the big carriers

Interxion is in the fortunate position of having secured about 270 million euros in capital funding. Mr Van den Dries expects to see mergers and acquisitions between web-hosting companies and big carriers, which aim to fill their networks with data, while other businesses will be seeking cash to expand. But he does not underestimate the hurdles that still need to be overcome when building network centres. “The adoption of e-commerce in France, for instance, is much slower than it has been in Germany. Many of the American companies that chose to expand into Europe quickly learnt that ours is not a single homogeneous market,” he says. “Setting up operations in 13 countries is no easy task. We offer businesses the opportunity to focus their efforts solely on their sales and marketing strategy. They don’t need to find technicians to support their systems in every one of the EU countries they enter. Instead, they can ship their equipment to a single destination and we will install, maintain, run and store their data, effectively taking over their day-to-day operations,” he says. In May, former IBM vice-president Michel Broussard succeeded Mr Van den Dries as chief executive, while the latter became chairman. “Michel’s arrival at Interxion accelerates the rapid deploy-ment of our full services portfolio in the European market,” says Mr Van den Dries. Turkish firms are less developed when it comes to internet connectivity than their Western European counterparts, but they are slowly catching up.

The nation’s IT players are pinning their long-term hopes on traffic and commerce-driven revenue. Last year saw a 609 per cent rise in internet subscribers, although Turkey’s penetration rate is still only 5.5 per cent. Some analysts point to redundancies made by several IT companies and they are not convinced that e-commerce will be a big money-spinner – less than five per cent of surfers have even shopped online. Ixir, one of the top three Turkish ISPs (internet service providers), hopes to grab a 50 per cent share of the market by 2005, when the number of users is expected to reach more than 20 million. Banu Gulsever, senior vice-president, capital markets and investor relations, at Ixir, says: “Our strategy is to increase internet traffic in Turkey, and convert this into advertising and e-commerce revenue. The ISP business is saturated in Turkey. We would like to become a major player with regard to both e-commerce and new media businesses.

As yet, there are no big operators in these fields.” Ixir, a wholly-owned subsidiary of Dogus Holdings and Garanti Bank, has two main competitors: mobile operator Turkcell’s Superonline and E-Kolay. “Internet use is going to grow exponentially,” says Mrs Gulsever. “Turkey is the second most-populated country in Europe, with around 65 million people. “About half of the population is aged under 30 and a third is under 15. Our young people love going online. Another peculiarity is the fact that in Turkey there are, on average, five people living in each household, sharing a single PC. That is the reason for the high usage rates of around 25 hours a week per subscriber – three times the European average.”