ENTREPRENEURS - To Protect and Server - 12/24/2007

Business-to-Business Co-location Service, ISP Offers
Disaster Backup, Peace of Mind

By Mark R. Madler

ISWest: Drew Kaplan, co-founder of the Agoura Hills-based company, stands among new equipment.

Here's a story Drew Kaplan tells to show the benefits of keeping a server at a separate, outside location.

During his run for governor, Arnold Schwarzenegger didn’t keep the computer equipment handling his campaign website at his office because it wouldn’t have been able to handle the traffic.

“He would have flooded the connection,” Kaplan said.

Being a muscular former actor running for state office isn’t necessary to get the same service at ISWest, the Agoura Hills company Kaplan co-founded and now heads.

Started in 1996 as an Internet service provider, the business-to-business co-location service took off for ISWest in recent years as more companies took the cost-effective route of outsourcing its information technology infrastructure.

Why have internal IT departments with thousands of dollars of equipment and the accompanying thousands of dollars in electric bills when ISWest is willing to do it instead?

The reasons businesses come to ISWest vary, including server and website hosting, and as backup for disaster recovery. Some publicly-traded companies are required by Sarbanes-Oxley (the federal accounting reform act of ’02) to keep their data at a neutral site.

Serving its varied customer base resulted in the company being named on fastest growing private companies lists by the Business Journal, Inc. magazine and professional services firm Deloitte.

Its own feedback also shows the company is on the right track.

A survey done last year of customers asked if they would recommend ISWest to business associated resulted in a 93.6 percent saying they would.

“We took that as satisfied customers,” Kaplan said.

Toby Scott, a partner at Ventura County Computers, has recommended ISWest to a number of its clients.

“We have a mutual customer we introduced to them that has three servers over there,” Scott said.

Cabinets, cages, and 200 tons of A/C equipment

Sleek black cabinets and cages fill the recently completed data center in Agoura Hills.

That wasn’t always the case.

The early years of the co-location service was putting hard drives side by side on a shelf bought at a Home Depot. Only later, as the company grew, did the cages and cabinets arrive and lend a professional appearance.

With the high tech look and all the security in place, stepping into the ISWest data center is akin to being on the deck of the Starship Enterprise, said Jeff Sherman, the owner and manager of Arcadia Web Service.

At his website design and hosting company in Ojai, the server is the biggest asset and Sherman cannot afford to have something go wrong with it.

“It makes me feel comfortable that it’s not being stored in someone’s garage,” Sherman said.

The new data center is made necessary by the existing center, also in Agoura Hills, filling to capacity. Its design takes advantage of every redundancy possible – two power sources, with two generators and two transformers.

A biometric scan is necessary to enter the room, cooled by more than 200 tons of air conditioning equipment and protected by a fire detection system sniffing the air for combustible materials and automatically alerting the fire department when it detects something.

While the server hosting drives the growth for ISWest, internet service still accounts for about half the business.

Connectivity is provided through DSL lines, T1 lines, and bundled T1 lines that give faster speed without the use of fiber optics. ISWest becomes the conduit between the telecomm provider and the business customer using the service.

There is a benefit to being both the ISP and the co-location, Kaplan said, as the connection between the customer and their servers becomes a direct private line that never hits the Internet.

Growth through acquisition

A strategy of acquisition grew ISWest’s customer base for much of its existence.

Between 1998 and 2004, the company bought out six other ISP in Los Angeles and Ventura counties.

That strategy was the quickest way of adding new customers as the purchased companies were not profitable or had no market penetration.

“We could benefit from the quick growth and make it profitable right away with the economies of scale,” Kaplan said.

Both Sherman and Scott ended up as clients as a result of the buyouts.

Sherman, in fact, had some reservations about ISWest taking over his former service provider until a face-to-face meeting with co-founder Robert Johnson calmed those fears.

That personal service shown by Johnson continues to this day.

“While they have grown bigger and bigger I have never felt like I was just another number to them,” Sherman said.

When the switch over to ISWest took place for Scott his server was down for the time it took to drive the equipment from Ventura to Agoura Hills.

“They had me up in no time at all,” Scott said.

With consolidation reaching its peak, the company now shifts its strategy to using an inside sales force to bring in new customers.

Previous tries at using sales people had never worked because the company lacked the right person to lead the sales team, Kaplan said.

Several months ago, Joey Cary was hired as the new vice president of sales and marketing to build the sales force. Cary’s experience and track record make him the right person to tackle that job, Kaplan said.

Solidifying an internal sales force will help meet Kaplan’s goal of making ISWest into a $50 million company with more data centers serving its customers.

Getting there will likely result in more recognition as a fast growing company.

The growth the company has already seen, however, has never been unmanageable.

Kaplan credits that to the methodology of the business decision process that has the management team staying ahead of the growth.

By adding people and equipment ahead of time the future workload can more easily be absorbed.

“The worst thing is to have an unhappy customer because we can’t handle what we’ve got,” Kaplan said.

ISWest
Year Founded: 1996
Revenues in 2004: $5.5 million
Revenue in 2007 (projected): $7.8 million
Employees in 2004: 13
Employees in 2007: 25

SAN FERNANDO VALLEY BUSINESS JOURNAL STAFF - October 23, 2006

ISWest Plans New Data Center
as It Rides Trend

By Mark R. Madler

Drew Kaplan equates renting space at his server host company to renting an apartment.

ISWest accommodates whatever space a client needs - be it a single server used for a webpage and e-mail or racks and racks of servers to run a company's operations.

Except this apartment building has 84 tons of air conditioning equipment, a room full of batteries charged by a generator, and biometric palm scanners and combination locks to ensure the security of millions of dollars of IT equipment.

Astronomical costs keep companies from providing the same setup on their own, which is why hosting companies with data centers such as ISWest are in big demand.

"It makes more sense to outsource it to a company like us because that is all we do," said Kaplan, a co-founder, chief executive offer and chief financial officer of the privately-held company.

Outsourcing of server equipment tends to be popular with smaller data center requirements," said Michael Bell, an analyst in the Infrastructure and Operations Group for Gartner & Associates.

"But with large enterprise centers that are 50,000 to 100,000 square feet, a third party probably can't improve on the economics," Bell said. "In fact it would be more expensive because they have to make a profit."

Recognized four years running as one of the fastest growing tech companies in Southern California by professional services firm Deloitte, ISWest is meeting future demand by clients by constructing a new 16,000- square-foot data center a half mile from its headquarters in Agoura Hills.

The new center goes on line in May, just five months after Kaplan expects to hit full capacity at the company's existing data center.

Outgrowing space is in ISWest's blood since the company was founded in 1996.

A 1,400 square foot space in Westlake Village then became a 3,000 square foot space. In 2001, the company moved to a 10,000 square foot facility in Agoura Hills for its 22 employees.

The new building carries a price tag of $2.5 million to $3 million.

A key to success for ISWest has been its location.

Not only does Agoura Hills put it along the 101 Corridor, home to many technology and biotech companies, but also gives easy access to a dual sonnet fiber ring providing multiple fiber optic paths to the Internet.

A fiber ring from the major telecommunication companies is more commonly found in a downtown area than in an area like the West Valley.

"It's what keeps us here and attracted us to this part of the Valley," Kaplan said.

ISWest provides the space for companies to put their equipment, power to run the equipment, a connection to the Internet, and safety features such as a fire suppression system designed specifically for data centers but the companies maintain their own equipment themselves.

What ISWest provides would be too expensive for a company to install on its own.

More servers for computer equipment creates more heat and companies don't want to have to deal with heat dissipations and having enough power to keep it all running, Kaplan said.

So, along with the 84 tons of air conditioning equipment to keep the servers cool, ISWest employs an entire room with just batteries to provide an uninterrupted power supply. An on-site generator kicks on if the power goes off.

In the tech industry, a tiered system ranks data centers based on their level of redundancy that reduces downtime for the equipment.

Clients are looking at more power and redundancy when choosing or building their own data centers because they are trying to avoid the notion of a single point of failure, Bell said.

"So they have to double up on the electrical systems and air conditions systems to ensure there is no single point of failure in their operation," Bell said. "Any one of those failures can bring you down."

Bell identified three factors driving expansion, relocation or new construction of data centers: higher-density servers; consolidation; and improving disaster recovery methods.

Whereas four or five years ago, a rack of servers needed 2 kilowatts to three kilowatts of power, today's racks consume 10 times as much and require the corresponding amount of cooling for the heat generated.

Companies are moving past having each of its business units operate its own data center and now bring all that processing power into one place to meet economies of scale, Bell said.

Also, software is now available that can run multiple applications from a single server.

"You can get more capacity utilization out of a server than you could in the past," Bell said. "That gives another reason to consolidate."

SAN FERNANDO VALLEY BUSINESS JOURNAL STAFF - June 20, 2005

Dot-Com Hangover May Have Put
Damper on Startups

By Shelly Garcia

Is the country's entrepreneurial spirit waning?

A just-released study of entrepreneurship found the number of startups and emerging businesses declined by 20 percent in 2004 compared to 2003, the first such drop-off since the study began in 1993.

The study authors, the Entrepreneurship Research Institute at the Eugenio Pino and Family Global Entrepreneurship Center at Florida International University, are not ready to sound an alarm just yet, but they do point out that if the trend continues it could have a dramatic effect on the U.S. economy.

"If the decline continues in 2005, there may be a justification for policy intervention," said Prof. Paul D. Reynolds, director of the Institute and the lead researcher in the study.

The study, which bills itself as the largest of its kind, looked at startups and young businesses in operation for up to three- and a-half years.

In 2004, there were a total of about 18 million such enterprises, reflecting 4 million fewer such businesses compared to 2003.

The national study found no significant regional differences.

The study also found that the drop-off was concentrated among men and women aged 18 to 35 and mid-career men aged 35 to 54.

"Something has changed in the way people see their career options," said Reynolds of the drop-off.

To gauge factors that may be responsible for the shift, the survey asked respondents if they had personal knowledge of others starting a business, if they believe they have the skills to start a business and if they perceive good opportunity for business startups in the area where they live.

The responses, particularly within the groups that saw the greatest decline in entrepreneurial activity, reflected a change in these perceptions versus previous years, with respondents having fewer role models and less confidence both in their own skills and the economic opportunity in their locales. The results lead the survey authors to conclude that at least some of the shift may be due to these changes.

Another factor impacting the decline may be backlash from the tremendous amount of startup activity associated with the Internet bubble of the late 1990s and early in the 2000 decade, survey authors and others say.

"At UCLA students were coming in the late 1990s and they were really, really excited about starting a company or being involved in a startup," said Bill Yost, adjunct professor in the school's Anderson School of Management who has developed graduate courses in managing entrepreneurial operations. "That's changed quite a bit in the last years. The exuberance and interest has waned considerably."

Participation in business startups more than doubled between 1993 and 1999, according to the study. Activity rose by as much as 80 percent from 1999 to 2001, the height of the Internet bubble.

"In the 1999 to 2002 period, people though it was too easy to start a business and become a millionaire," said Reynolds. "What's happened is it's become clear that it's a lot harder than it looks."

Inflated era

The shift, Reynolds said, may simply be due to normalization in the number of startups from a very inflated period of activity.

"That's why the report doesn't make a big cause for alarm," he said. "There were probably too many people trying to start businesses in 1999 and 2000 that didn't belong there."

Indeed, some suggest that entrepreneurial activity may be cyclical in the same way that industry sectors experience cycles of growth and retraction.

"I think people are still wanting to forget the dotcom bomb," said Drew J. Kaplan, CEO at Internet Specialties West and an entrepreneur himself. "As time goes on, just like real estate has cycles, I think we'll see more and more startups, especially with the young generation. Now I just think people are still feeling the sting."

Gone too is the image of entrepreneurs getting rich quickly that prevailed during the dotcom era, and Yost at UCLA suggests that the longer timeframe anticipated for payback may also be affecting students' plans.

"You put a lot of money into getting an MBA and you want to have a lot of money to offset that," Yost said. "And the typical entrepreneur isn't going to make a lot of money for the next couple of years."

Interestingly, there has been no drop off in the proportion of blacks and Hispanics starting new businesses.

"We've been doing this since 1993, and the ratios are pretty constant," Reynolds said. "Blacks and Hispanics are two to three times more likely to be involved as whites."

The more education black men have, the more likely they are to start their own businesses in comparison to whites.

"So black men with graduate education are three times more likely than white men to be involved in a startup," Reynolds said. "Maybe they find once they work for ran established business their career development is truncated. And maybe they're founding businesses because it's the only way they can take advantage of their education. It's the same with women and Hispanics."

Programs available

One reason may be the programs available to some of these ethnic groups, said Scott Hindell, an instructor at UCLA Extension, which offers a number of courses for entrepreneurs.

"I think there are incentive programs, and I think there is new acceptance of development," Hindell said. "Areas that have been rundown, for example Culver City and downtown L.A., are changing their face, so I think there are opportunities for people that own businesses to reshape them and for new ones to come in."

Another study conducted by the Center for Women's Business Research last year found that that the number of companies majority owned by women of color grew by 54.6 percent while all privately held firms in the U.S. grew by just 9 percent between 1997 and 2004.

Of those, businesses owned by African-American women grew by 32.5 percent and firms owned by Hispanic women grew by nearly 64 percent for the same period.

According to the Center for Women's Business Research study, there were 1.4 million businesses majority owned by women of color as of 2004.

Despite the downturn, Reynolds pointed out that the U.S. continues to lead the world in entrepreneurial activity.

SAN FERNANDO VALLEY BUSINESS JOURNAL STAFF - June 20, 2005

Who is the Real Entrepreneur?

By Shelly Garcia

Nature or nurture: Increasingly, events and experts are challenging the traditional notion that entrepreneurs are born, not bred.

More and more universities are adding entrepreneurial programs to their offerings, suggesting that the skills needed to start and run a business can be learned. Venture capitalists and others involved in financing new businesses are seeking seasoned managers to run them. And entrepreneurs themselves are signing up for management networks that allow them to air their problems and learn from their counterparts.

So will the real entrepreneur please stand up? Is he or she a born risk-taker, fiercely independent with creativity and charisma to spare or can an entrepreneur succeed with little more than a set of managerial skills, a willingness to sweat the details and dogged determination to overcome obstacles?

Part of the problem is there are different types of entrepreneurs. Those who are most well-known, the Bill Gates and Michael Dells of the world are not representative of the vast majority of entrepreneurs.

"The common ones, the businesses that most people start, are all their jobs basically," said Bill Yost, an adjunct professor who focuses on startups and turnaround management at UCLA's Anderson School of Management. "They don't require anything except being able to make that job work, and that's what most people do. You can make a job out of it and sustain it for 30 years and you're not going to make any serious money but you're going to be okay."

A study of entrepreneurship just released by the Entrepreneurship Research Institute at the Eugenio Pino and Family Global Entrepreneurship Center at Florida International University found that only 2 percent of those starting businesses or operating new businesses expect to have a major impact on the markets where they operate or on the broader economy. Most entrepreneurs, some, 91 percent, say they are copying existing business activity.

There's growing evidence that in other respects too, the romantic notion of the entrepreneur as an individualistic innovator does not match up with reality.

For one thing, a large majority of entrepreneurs don't start their businesses alone. At the very least they have silent partners who supply a good portion of the financing, but many also begin with one or more partners who are actively involved in the business as well.

"The biggest fallacy is that it's all done by one person," said Prof. Paul D. Reynolds, director of FIU's Entrepreneurship Research Institute. "It's really done by teams, 60 percent are started by teams, and the more they grow and the more innovative they are the more they have teams."

Nor are entrepreneurs necessarily fierce risk takers.

"Entrepreneurs, the successful ones, are risk-averse up the wazoo," said Yost. "Why? It's their money. We're not talking about the ones that get venture capital backing. That only constitutes 4 percent or 5 percent of total startups. Most are individuals who don't have a lot of money, and it's their money and the way they got the money is by saving it."

While it may look to the outside world like the entrepreneur who puts up his house as collateral to start a business is a risk-taker, these business folks see it differently.

Confidence level

"I remember thinking I have no money," said David J. DiTomaso of the first Subway franchise he opened in 1986 – he is now one of the largest Subway franchisees in California with 19 stores. "I put my house payment on a credit card. I couldn't afford a candy bar. And never for a second did I doubt I would make it."

DiTomaso believes it's that confidence level that is often seen as willingness to risk it all.

"I don't look at it as a risk. I don't do anything that I don't calculate out. It's not risk, it's a different avenue that I take, and life is a risk," he said.

Ask other entrepreneurs if the skills they required can be learned and, like DiTomaso, they will insist they are born to it.

But just as quickly they will point out that they could not have developed their businesses without the skill sets others have brought to the table.

"At the beginning when IS West was just a baby, myself and my partner (Robert Johnson), we wore every hat," said Drew J. Kaplan, CEO at Internet Specialties West, an Internet service provider. "As you get bigger, you bring in key people who can do these things. You start hiring managers so you can continue to look at the bigger picture."

It may take a healthy dose of chutzpah to start a business, but keeping it going is another matter.

"An entrepreneur's willingness and capacity to follow a strategic approach turns on a broader set of skills and traits than are necessary in the start-up stage," wrote Amar Bhide, a Lawrence D. Glaubinger Professor of Business at Columbia University in the oft-quoted book, "The Origin and Evolution of New Business." "For instance... entrepreneurs usually have little to lose when they start a business; the willingness to bear personal risk often becomes a significant factor, however, in building and growing one."

Some believe that today's business environment also requires a different set of skills than may have been necessary years back.

For one thing, the advent of the Internet has brought far more competition than entrepreneurs once had to face.

"The reason the business field is more saturated is because the barriers to entry are less," said Scott Hindell, an instructor at UCLA Extension who teaches budding entrepreneurs how to start a business. "Some guy can pop up online and operate virtually and make it much more difficult for you to compete. Before you were only competing with the neighborhood. Now you're competing with surrounding areas and nationally."

Business savvy

Most entrepreneurs start up their businesses with money from friends and family or their own investments or a combination of both. But those who seek outside, professional financing find they have to present the kind of business savvy that will instill investors' confidence. "The expectations by investors seem to have increased," said Eric Speer, managing director of VenCore Solutions LLC, a venture lessor that provides entrepreneurial companies with lines of credit for equipment acquisition. "You have to have someone capable of raising money, someone who is good at business development and customer relationships. The further along you get, you need professional management rather than inspiration and passion."

Experts say that the greatest evidence of the need for startups to shift into professional management mode is the huge failure rate of these businesses — at least 50 percent of businesses fail within the first two years, more when they are tracked over a five-year or 10-year period.

"It's only 20 percent or 25 percent idea. It's 75 percent business," said Hindell. "There's a saying that you may have the greatest recipe, but baking cookies is not going to make you a successful business person. At the end of the day, the money has to be flowing in a way that's sustainable."

SAN FERNANDO VALLEY BUSINESS JOURNAL STAFF - APRIL 11, 2005

ISWest Leads Way as Local ISP Industry Consolidates

By Jeff Weiss

With its purchase of Woodland Hills-based DCN Internet, ISWest has taken another step in the consolidation of the local business-to-business Internet Service Provider market.

Purchased for an undisclosed amount, DCN Internet is the sixth local competitor that Agoura Hills-based ISWest has acquired since 1997. Some of the now-defunct competitors included Westlake Village-based TSCO; Thousand Oaks-based InfoSpec; and Camarillo-based VCNet.

Although DCN Internet's client base will be taken over by ISWest, DCN's wireless business, DCN Wireless will remain in operation. DCN Internet only employed a small handful of workers, who will be integrated into DCN Wireless.

According to ISWest Chief Executive Officer Drew Kaplan, ISWest was attracted to DCN because of the great deal of overlap between the two companies.

"The two companies had many similarities, such as both using SBC and Verizon as major Internet providers. There were a lot of overlapping costs that will be mitigated by merging their customers with ours," Kaplan said. "Their customers will see lot of benefits. We have more technical support and have been in the business far longer than DCN had been. We also have a very seasoned staff here for potential troubleshooting."

In the tumultuous ISP market, ISWest seems to have positioned itself well in contrast to many of its competitors who are no longer in business. By balancing organic growth with acquisitions, ISWest expects revenues of $8.5 million for 2005, compared to $5.5 million in 2004. In 2003, the company was named to Deloitte & Touche LLP's Los Angeles Technology Fast 50, a ranking of Los Angeles' 50 fastest growing technology companies. The 20-employee company has added five employees in the last year and plans to add more in the coming months. Together the staff services over 3,000 businesses, representing approximately 20,000 user accounts.

Profit motives

Kaplan believes that ISWest was well-positioned to be near the top of the local ISP food chain because of its constant reliance on being profitable, unlike many of its peers who overextended themselves during the Internet bubble.

"Slow and steady wins the race. We never got into that whole dot.com thing, where a lot of ISPs tried to add customer accounts even if it meant losing money. We went by a traditional business model," Kaplan said. "We made sure that when we priced every deal that there was some profit margin in it. The competition wasn't doing that. They gave away free installation, free equipment, and had the lowest price in town. From what I heard, their model was to put on as many customers and services as possible, because they planned on going public or selling out."

Phil Harvey, an editor for Light Reading, a daily news website focusing on the telecom industry, maintains that a great deal of consolidation is currently taking place among ISPs.

"We're seeing a lot of consolidation on the ISP front. A lot of business-to-business ISPs have only one or two really marquee clients. When you combine two or three of those companies, you get a nice customer base and enough network access to help," Harvey said. "ISP's are finding that they need to offer more than just bandwidth. The smarter ones are thinking that there's safety in numbers. If they can get enough customers on board and cut their operational costs by merging companies then it's a good deal."

Server services

Indeed offering more than just bandwidth has been another one of the reasons why the company has survived and flourished. In addition to offering DSL access, T1 lines and other various high speed Internet connections, ISWest offers server co-location, which allows for businesses to store their servers at ISWest's facilities. According to Kaplan, the nearest co-location facility is Burbank, which would give ISWest a competitive advantage in the area stretching from Santa Barbara to the West Valley. Not coincidentally, all of the competing business-to-business ISPs purchased by ISWest, once operated in this space.

Ultimately, all parties knowledgeable in the ISP space agree that an old-fashioned focus on servicing the customer and having a successful business plan were the essentials to surviving the vicissitudes of the tech marketplace.

"A lot of ISPs lost focus of why they were doing business in the first place. The whole reason why these guys exist is to give their customers some type of connection to the Internet and sell services on top," Harvey said. "Instead many ISP CEOs tried to charm the pants off of venture capitalists. That should never be your goal. Additionally, they refused to recognize that there were just too many people doing the same thing that they were doing."

Understandably, Kaplan repeatedly asserted ISWest's emphasis on customer service, touting the company's support staff.

"The trick is going to be to grow into a large company and to retain the focus on the customer that we've always had. It's the customers that put food on our table. We love our customers and I think that it's that attitude that we will definitely keep. It's been our vision all along."

Mike Jackman, the executive director for the California ISP Association, claims that Kaplan's high self-appraisal of his company is valid.

"ISWest has an excellent reputation. They are a premier business-to-business ISP. They have been in the business for a long time and they are going

CONEJO VALLEY EXAMINER - FEBRUARY 19, 2004

Agoura Hills hosts high-tech ISP

By Tracy Marcynzsyn

A focus on customer service has been a driving force in the growth of Internet Specialties West, or ISWest, an Agoura Hills-based Internet service provider (ISP) that has grown from a one-person enterprise in 1996, to the Conejo Valley's largest Internet service provider, as ranked by the Pacific Coast Business Times.

"We put the customer up on a pedestal, supplying them with the technology they want and executing it with a higher level of customer service," said Vice-President and Co-Owner Drew Kaplan, whose sales and marketing experience, paired with company President Robert Johnson's industry knowledge and expertise, created a business now ranked number 478 on the 2003 Deloitte Technology Fast 500, a list of the 500 fastest growing technology companies in North America.

It all started in 1996 when Johnson, with a background in telecommunications and computers, founded ISWest as a dial-up ISP with 30 modems and one employee in a 200-square foot building. Meeting Kaplan shortly after, the two decided to partner up and focus on business rather than residential clients.

Today with 16 employees and $5 million in sales in 2003, ISWest provides business-class Internet services to more than 4,000 customers, with some 25,000 individual accounts.

Contributing to ISWest's growth was its acquisition of five smaller area ISPs: TSCO of Westlake Village, Channel Islands Internet in Ventura, NCPlus of Ventura, InfoSpec of Thousand Oaks, and VCNet in Camarillo.

Servicing mainly small to mid-size businesses, ISWest's clients also include Suzuki, the Grammy's, Century 21, and Arnold Schwarzenegger's campaign.

The fact that most of its advertising is by word-of-mouth attests to ISWest's quality of service. "You can't buy word-of-mouth," said Johnson.

And despite competitors who "low-ball the industry by undercutting the market" and charging less money for services, ISWest is still thriving.

"We don't like to sell on price, we like to sell on service," said Kaplan. "In this business, you get what you pay for," he added.

Anthony Concotilli, Internet department manager at Guitar Center, switched to ISWest after having problems with a former ISP. "We're very happy with them [ISWest]. They have a willingness to help, and the way they run their facility is top-notch."

"Taking that extra step" for the customer is important to Johnson. "We take care of everything," he said. "We really pull together as a team here. If you've got happy, everybody's happy," he added, noting that the team environment makes ISWest a great place to work.

"I love what I do for a living," Johnson said.

With its current 10,000-square-foot facility half full, Johnson is optimistic about the future, which includes projected earnings of $25 million in five years. "We poised ourselves at the beginning," said Johnson. "We've adapted to the business, and tomorrow it's going to be different...it's an ever-evolving industry, so you have to go with the flow and have a little bit of a crystal ball."

The fastest-growing segment of ISWest's business, comprising some 40 percent of its current business, is co-location, where business rent space for their Web servers at ISWest's data center, a high tech, high-security facility.

ISWest also provides high-speed T1, DS3s, and nationwide DSL service. Headquartered at 29219 Canwood Street, ISWest can be reached at (818) 735-3000, or at www.iswest.com.

THE VENTURA COUNTY STAR - JANUARY 5, 2004

'Cadillac' of Net services Agoura Hills ISP makes customer service top priority

By Roger Harris

Consultant David Lehrman hates it when customers scream at him. That's why he breathes easier when his clients get Internet service from Internet Specialties West Inc., a national Internet service company based in Agoura Hills.

"There are a lot of ISP's, but they're at the Cadillac end of the spectrum," said Lehrman, owner of Tucson, Ariz.-based Netcomm Consulting Services Inc. "I've seen a lot of ISP's come and go over the years. A lot of them can talk the talk, but very few can walk the walk and the guys at ISWest can walk the walk. They know what they're doing," Lehrman said.

When he needed an Internet company to link a client's facilities in Los Angeles, Tucson, Ariz., Manhattan and Schenectady, N.Y., Lehrman called on ISWest.

"They have the expertise I need. If there's a problem they take care of it," Lehrman said.

Focusing on customer service has helped propel ISWest into the fast lane of the technology economy. With triple-digit percentage increases in sales over the last five years alone, ISWest has grown into one of the largest ISPs in the extremely competitive Los Angeles area marketplace and one of the fastest-growing tech companies in North America.

The company's customer base has grown from about 500 customers with 850 user accounts in 1998 to more than 3,000 customers with 15,000 accounts today. While the bulk of its customers are small- to mid-size businesses, some of its more well-known customers include the Grammys, Gov. Arnold Schwarzenegger's gubernatorial campaign and Pleasant Hawaiian Holidays.

In addition to basic dial-up Internet access, ISWest offers server co-location, high-speed T1 connections, nationwide DSL service and co-locations Web hosting services.

Co-location, the term for customers renting space to locate their Web servers in ISWest's secure facility, is the fastest-growing part of ISWest's business. Co-location now represents about 40 percent of ISWest's revenues, said Robert Johnson, President
and CEO.

When Sprint Corp., Cable & Wireless and other major corporations closed data centers earlier this year because they couldn't make money in the Web-hosting business, ISWest was there to scoop up business customers who needed a new ISP.

ISWest had been preparing for increased demand for co-location services for about two years. The company invested more than $1 million on the latest fiber-optic connections to the national Internet backbone and other equipment, and it tripled the size of its data center with the move to its present location at 29219 Canwood St. The new data center has the latest biometric security system as well as sophisticated water and temperature sensors and a backup generator with enough fuel to keep full power flowing into the data center for 48 hours.

"There's always going to be a need for co-location services because it is just too much for an individual company to do on its own," said Drew Kaplan, ISWest vice president and director of sales and marketing.

Growing the business ISWest is in the talks with potential clients whose co-location needs could eat up all of the vacant space in the ISWest data center, Kaplan said.

To stay ahead of the growing co-location demand, ISWest is looking at taking space in a new building planned for a vacant lot next door to its existing Canwood Street location.

ISP offers co-location
Keeping a close eye on market demands has produced fast, but steady sales growth in recent years. The growth rate allowed ISWest to crack the Deloitte Fast 500 for the first time, ranking No. 478 on this year's list of the fastest-growing tech companies in the United States and Canada.

ISWest growth is a mixture of recruiting new customers and buying other, smaller ISPs.
Since 1997, ISWest has bought five local ISPs, including TSCO in Westlake Village, Channel Islands Internet and NCPlus in Ventura, InfoSpec in Thousand Oaks and VCNet in Camarillo. Kaplan and Johnson look for continued strong growth over
the next several years. They should end this fiscal year with revenues just shy
of $5 million. Sales are projected in the $10 million range in another two or three years.
Not bad for a company launched on the proverbial shoestring in 1996.

Seven years ago both Kaplan and Johnson were coming off a series of business ventures that were not financial blockbusters, but had taught them valuable lessons, nonetheless.

When they met through a mutual business acquaintance in the mid-1990s, the Internet was just starting to generate some buzz, and Kaplan and Johnson saw an opportunity.

"We agreed we could make money in the Internet business, but to do that we had to provide really excellent customer service and always go that extra mile with the customer," Kaplan said. And they chose to focus on business-level Internet service, when just about everybody else in the ISP game was banking on dial-up residential service.

Business customers demand a higher level of service, but they are willing to pay a premium for dependable, quality service, Kaplan said. Jason Bender, president of In Focus Advertising Inc. in Agoura Hills, switched to ISWest three years ago after suffering through poor service with a string of other ISP. There's no comparison, Bender said. "With other companies it would always be what's going to happen next with our Internet service. With ISWest our Internet connection is always up and running," Bender said. Even if another ISP offered a lower price, changing Internet providers isn't worth the risk. Bender said. "Being without e-mail would cripple us. When we call
they pick up the phone, and if we have a problem they fix it. Even if the problem is on our end they'll come out to our office to fix it."

Odd Couple
On the surface, Kaplan and Johnson appear to be mismatched partners.
Johnson, 55, is a half-foot shorter, has a lot less hair and is more than 20 years older than Kaplan, 34. And, other than their previous character-building business experiences, the two didn't have a lot in common when they decided to build a new company. However, their differences have proven to be complementary. Johnson, with his background in telecommunications and computers, provides the technical expertise. Kaplan is the idea guy who loves marketing and sales. They share a boatload of energy and an unsinkable desire to succeed.

"We're both always pretty much on the go," Johnson said. " I don't know why we make it work so well, but we do."

Even when they're not working they enjoy each other's company. Johnson and Kaplan and their wives like to go hiking in the mountains together. And the partners enjoy the grown-up toys that have come with their financial success in recent years.

Kaplan favors tooling around town in his "tricked out" H2 Hummer. He's been into cars and their audio systems since he was a teenager. In 1989 he competed in car audio shows across the country with a Thunderbird Super Coupe packed with 20 hidden speakers and "500 watts of clean car audio like no other," Kaplan said.

Friends told him he ought to install car audio systems for a living, so he started Audio Impressions and installed car audio and alarms from his garage. Kaplan also has sold real estate and when he was 23 his family sent him to New Zealand to oversee development of a 1,500-acre farm.

Johnson, who spent two years in the U.S. Army, likes to feel the wind in his face. A 100-mile weekend bicycle ride is his idea of total fun, and so is riding his Harley-Davidson motorcycle or motoring up the Pacific Coast Highway in his Corvette, top down, of course. Johnson has worked in the telecommunications and computer industries for more than 30 years. Prior to starting ISWest, he worked for Pacific Bell and AT&T Corp., and for more than two years he managed the telecommunications services for Universal Studios. In the early 1990s he went into business for himself selling and installing
voice mail systems. On the nontechnical side, for a number of years Johnson
ran his own photography business, shooting weddings and other events.

These varied experiences prepared them well for building a successful Internet business, the partners said. When they started ISWest they understood the absolute necessity of staying customer-focused. And they resisted the temptation to grow too fast, a philosophy that many now-defunct got com companies probably wished they
had followed. "I've always said slow and steady wins the race," Kaplan said.

SAN FERNANDO VALLEY BUSINESS JOURNAL - NOVEMBER 24, 2003

Strategy Change Helps Tech Company to Rise in Market

By CARLOS MARTINEZ Staff Reporter

When Drew Kaplan and Robert V. Johnson established Internet service provider, ISWest in 1996, they saw a chance at taking a chunk of a fast growing market.

But the market was soon flooded with new startup ISPs, each one seemingly cheaper than the next, forcing Kaplan and Johnson to rethink their business model for their new company.

"We were losing $10,000 a month and we knew there was no way we could keep that up," Kaplan said.

After about nine months of operation, the two partners agreed to change to abandon the consumer market and tackle the business segment which had been overlooked by most ISPs.

"Our strategy was simple," Kaplan said., "we wanted to provide customers with the most reliable business-class broadband Internet service available."

After suffering through a disastrous first full year in 1997 where it made just $250,000 and lost nearly as much, ISWest turned things around the next year with $540,000 in sales.

By focusing on providing affordable Internet service along with high-speed service to businesses in the Valley and surrounding area, ISWest became one of the top business ISPs in the area.

The company was able to close a deal with the city of Thousand Oaks, becoming its service provider for city facilities, spurring similar deals with the cities of Agoura Hills, Camarillo, Simi Valley, and Oxnard.

As more customers were signed up, the company began to look toward acquiring struggling ISPs to solidify its market share.

It acquired TSCO in June 1998, which served part of Ventura County, and then went on to acquire Channel Islands Internet, NCPlus, Infospec and VCNet in the next three years.

"We wanted to grow but not for the sake of growth," said Johnson. "We had very specific goals and we didn't want to overextend like a lot of companies did."

The company was able to attract a number of small and medium-sized business along with some high-profile firms like Guitar Center, the National Academy of Recording Arts & Sciences, J.D. Power & Associates, Pleasant Hawaiian Holidays and others.

"We've really focused on providing great customer service and I think that's been a big reason for our growth and success," Kaplan said.

Customer service
By offering live customer service technicians 24 hours a day, Kaplan says his firm has continued to attract a growing number of businesses who are fed up with bad customer service from their Internet service provider.

"A lot of that is by word of mouth referrals from our customers and it's been a real key for us," he said.

Ryan Rockabrand, CEO of Santa Clarita-based Virtupoint, Inc., said he's been pleasantly surprised by ISWest's service.

"In an industry when so many companies don't seem to care about the customer service anymore, ISWest does everything it claims to do," he said.

Jonathan Kramer, a Santa Monica-based telecommunications consultant, said small ISPs have been successful by finding their niche in the larger market.

"It's a very difficult market out there, but if you can find a niche and exploit it, you can be successful," Kramer said.

With an estimated 3,000 ISPs spread across the country, the market has only become tougher for those ISPs that have been able to adapt to it, Kramer said.

"Companies have to find ways to stand out from the crowd and still be competitive," he said.

Last year the company posted $3.5 million in sales with revenue this year projected to reach about $5 million, Kaplan said, noting that a growing number of customers are now coming from cities outside the state.

DELOITTE TECHNOLOGY FAST 50 - OCTOBER 28, 2003

ISWest named one of 50 fastest growing tech companies in Los Angeles

ISWest has been named to Deloitte & Touche's prestigious Los Angeles Technology Fast 50 program, a ranking of the 50 fastest growing technology companies in the area by Deloitte & Touche LLP, one of the nation's leading professional services firms. Rankings are based on the percentage of growth in fiscal year revenues over five years, from 1998 to 2002.

The Deloitte & Touche Los Angeles Fast 50 companies have shown the strength, vision and temerity to succeed despite a very challenging technology environment, said Gary Dickey, partner in the Technology, Media & Telecommunications group, Deloitte & Touche, Los Angeles.

"We applaud the successes of ISWest and acknowledge their place as one of the very few to accomplish such a fast growth rate over the past five years," Dickey said. "To succeed during prosperous times is one thing; to succeed in adversity is much more challenging, and that's exactly what the Deloitte & Touche Technology Fast 50 winners have done."

Drew Kaplan, ISWest vice president, credits the rapid growth approach to the company's 502 percent revenue growth from 1998-2002.

"We have run our company as an old brick and mortar, unlike some of the recent dot coms that have come and gone, such as Rhythms Network and Exodus," Kaplan said. "We make sure our products and services have the best customer service and support for a fair price. By going for quality not quantity, both ISWest and our clients benefit."

ISWest's increase in revenues of 502 percent from 1998 to 2002 resulted in an 18th ranking overall in the Fast 50 for Los Angeles.

To qualify for the Technology Fast 50, companies must have had operating revenues of at least $50,000 in 1998 and $1 million in 2002, must be public or private companies headquartered in North America, and be a "technology company" defined as owning proprietary technology that contributes to a significant portion of the company's
operating revenues.

In 1998, ISWest had approximately 500 customers with 850 user accounts; in 2002, the company grew to serve about 3,000 customers with 15,000 user accounts. Each customer receives multiple services, such as T1, Server Colocation, web hosting, e-mail, dial up and DSL.

The recent recognition reflects that ISWest is a major player in the Internet Industry, Kaplan said.

"The pressure that analysts and stock holders put on companies to turn a profit and grow each year is too unrealistic," Kaplan said. "Fortunately, ISWest has been profitable for many years and was able to borrow money as needed from a traditional business bank."

Another reason ISWest has been so profitable is due to the importance placed on providing quality customer service. We have always focused on our customers. That is why we offer them a higher level of customer service, which really sets ISWest apart from all competition, he added. For instance, by having a live person answer each
and every phone call, ISWest ensures that clients receive the attention they deserve.

"It's our clients that put food on the table of each and every person that works for ISWest," Kaplan said. "Without our clients, we would be hungry...this level of customer service promotes loyalty and full satisfaction."

DELOITTE TECHNOLOGY FAST 500 - OCTOBER 28, 2003

ISWest Ranked 478th Fastest Growing Technology Company in North America.

ISWest attributes its 502 percent revenue growth to old school business values

ISWest announced today that it ranked Number 478 on the 2003 Deloitte Technology Fast 500, a ranking of the 500 fastest growing technology companies in North America. Rankings are based on average percentage revenue growth over five years, from 1998 to 2002. ISWest grew 502 percent during that period.

ISWest vice president Drew Kaplan credits old school business practices in a modern day technology company to the company's 502 percent growth over the past five years. Kaplan also attributes his company's growth to customer word of mouth and past ISP acquisitions.

"ISWest is a sound business model and offers truly the best customer support in the Internet industry," Kaplan said.

Growing the top line enough to make the Deloitte Technology Fast 500 is especially meaningful during tough economic times for the technology sector, said Mark Evans, national managing partner of Deloitte's Technology, Media & Telecommunications Group.

"We congratulate ISWest on becoming one of the 500 fastest growing technology companies in North America," Evans said. "Achieving sustained revenue growth of 502 percent over five years is a tremendous accomplishment during a difficult time period for the technology sector."

In addition to ranking on the Deloitte Technology Fast 500, ISWest ranked 18th on the Los Angeles Technology Fast 50, which is a ranking of the 50 fastest growing technology firms in Los Angeles.

Overall, companies that ranked on the 2003 Technology Fast 500 had growth rates ranging from 469 to 296,080 percent over five years, with an average growth rate of 5,493 percent.

The Fast 500 List is complied from Deloitte's 20 regional North American Fast 50 programs, nominations submitted directly to the Fast 500, and public company database research. To qualify for the Fast 500, entrants must have had 1998 operating revenues of at least $50,000 USD and $75,000 CD for the United States and Canada.

THE VENTURA COUNTY STAR - SEPTEMBER 26, 2003

ISWest Grows Again After Its Acquisition Of VCNET

By Roger Harris

Internet Specialties West Inc. in Agoura Hills has solidified its position as the largest local Internet Service Provider with the recent purchase of VCNet, a diverse family-owned ISP based in Camarillo.

Financial terms were not disclosed.

"VCNet had a lot of home-office users, so it was a good fit for us," ISWest Vice President Drew Kaplan said Wednesday. "But they are a very diversified company. They have a little bit of everything."

VCNet founders and owners Bob and Jon Rust, a father and son team, will work with ISWest for three years.

The purchase is ISWest’s fifth local ISP acquisition in less than six years. Previously, ISWest bought TSCO in Westlake Village in 1997, Channel Island Internet in Ventura in 1998 and NCPlus in Ventura and InfoSpec in Thousand Oaks, both in 1999.

"We’ve always said it was more cost effective for us to grow by acquisition," Kaplan said.

The deal was struck last month and ISWest has since closed VCNet’s Camarillo office and transferred most of VCNet’s 1,400 customers to the ISWest network. With the addition of VCNet, ISWest now has more than 4,000 accounts with more than 25,000 users.

VCNet customers will benefit by having access to ISWest’s nationwide DSL service and its expanded server co-location, Web hosting and other services.

"Right out of the gate, we’ve had a number of VCNet customers who couldn’t get DSL before ordering it from us," Kaplan said.

Launched in 1995, VCNet was one of the first ISPs to set up shop in Ventura County. Within a couple of years, there were at least a dozen ISPs based in Ventura County. Most have gone out of business or been swallowed up by larger companies.

One of the survivors is dock.net in Camarillo, which has picked up some former VCNet customers in recent weeks, said dock.net President Bill Harrell.

"Dependability wise, ISWest is a good company, but some customers don’t like to wake up in the morning and find they have a new Internet company. They want to make their own choice," Harrell said.

ISWest’s latest expansion will have little effect on dock.net , Harrell said.

"We ran into VCNet more than we did ISWest, so with VCNet out of the picture it will probably help us," Harrell said.

DAILY NEWS- AUGUST 19, 2003

ISW has 'Gigaman'
Techfirm in Agoura Hills can do more than connect businesses to the Internet

By Evan Pondel Staff Writer

AGOURA HILLS -- In a nondescript office building at the base of the Santa Monica Mountains, two men stand as gatekeepers to a pipeline of information that could dwarf the California Aqueduct.

Bob Johnson and Drew Kaplan aren't interested in hoarding access to that pipeline. Instead, the two are charging admission to businesses in search of a broader audience.

The pipeline is known as a "Gigaman," an average-looking piece of cable that can transform an Internet server into a supercharged purveyor of information.

"Before the Gigaman, we were like a water pipe going to the Internet. Now we're bigger than an aqueduct," said Johnson, co-founder and president of Internet Specialties West.

An engineer who worked for Pacific Telephone and AT&T before starting ISWest, Johnson decided to plug people into the Internet in 1996. His technical expertise, coupled with Kaplan's marketing savvy, helped land ISWest on Deloitte & Touche's 2003 list of the 50 fastest-growing technology companies in Los Angeles.

But the Agoura Hills company isn't just connecting businesses to the Internet. In a room secured by a hand-print recognition system, black lockers house the servers of various companies for about $350 a month. From behind the locker doors, blinking lights flash on and off as the servers transfer information to the Gigaman and other networks. The
room's air temperature is closely monitored so each machine can maintain its monotonous hum 24 hours a day.

"Would you believe we host the Grammys from this room?" said Kaplan, co-founder and vice president.

The company's "colocation" business -- which is an industry term used for renting server space -- accounts for about 40 percent of ISWest's revenues. Johnson said this is the fastest-growing segment of their business, while providing Internet access, Web and e-mail hosting account for about 60 percent of the $5 million ISWest expects to churn in sales this year.

The company has been profitable for four years, and though its employee base is paltry, ISWest could be a formidable challenge to other businesses in its sector, said Alex Zastrow, a network administrator for video game publisher TDK Mediactive.

"I suppose if I found a better price I would be willing to leave ISWest for another company. But based on the service I've received elsewhere, ISWest is better than the other companies," said Zastrow, who stores a TDK server at ISWest and also uses the company's broadband Internet access. "The company's attention to customer service is probably what has kept us there for nearly a year now."

Kaplan and Johnson aren't timid about their slavish devotion to customer service. They said ISWest can capitalize on its size by offering a superior level of personal service.

"You're not going to hear a live person on the other end of the phone when you're dealing with some of the other big companies out there," Kaplan said.

But large companies also stressed customer service before demand led to glutinous success. And companies like Level 3, Qwest and Global Crossing continue to dominate the colocation business.

There's a large open space in ISWest's colocation room. The company also spent a significant chunk of revenue on its network operations center. Visitors who walk into the company's foyer are dazzled by the wall of glass shielding a NASA-like control room.

Johnson said he isn't passive about keeping ISWest alive. "I'm very hands-on. I like challenges and making things work," he said. "We're not breathing hard at all right now in terms of our bandwidth. We have a lot of room for growth."

More growth could mean another Gigaman for ISWest. The company anticipates it will need more bandwidth in the next year or so.

THE VENTURA COUNTY STAR - SEPTEMBER 19, 2003

ISWest might pick up some important pieces. Door is open to provide service to big firms abandoned by ISPs

By Roger Harris

Big companies need massive Internet capacity to do business in today's wired world, but they can't get it anymore from companies like Sprint Corp. and Cable & Wireless which are closing money-losing Web hosting centers across the country.

Big companies, however, might find what they need at independent Internet Service Providers like ISWest which has upgraded its bandwidth capacity to fill the void left by struggling telecommunications companies.

The Agoura Hills ISP's most recent upgrade was the installation of a 1.2 gigabit fiber optic pipe, which greatly enhances its connection to the national Internet backbone and rivals the capacity of much larger ISPs.

It costs $10,000 a month merely to keep the pipe open, but it will be money well spent if it attracts big businesses looking for a new ISP to host their Web servers, said ISWest vice president Drew Kaplan said Tuesday.

" We're getting a flood of large companies that are looking at ISWest as their new home," Kaplan said. "We'll see what happens, but we now have the capacity big businesses need and the service and support they need."

ISWest tripled the size of its data center two years ago and spent more than $1 million on the latest fiber optics and other telecommunications equipment. The center is only at half capacity, meaning it has plenty of room for new customers, Kaplan said.

"We've got Pleasant Hawaiian Holidays hosted here now...the Grammys and Suzuki.com and other big companies are here," Kaplan said. Fallout from Sprint and Cable & Wireless cutbacks is a potential windfall for companies like ISWest, said Mike Jackman, executive director of the California Internet Service Providers Association, a trade group based in Chico.

"I don't have any hard evidence yet, but anecdotal evidence indicates some independent ISPs are going after that business," Jackman said.

Sprint and Wireless & Cable, which together have thousands of business customers, announce last month they were getting out of the Web hosting business and closing data centers. Among Sprint's closures are data centers in Sacramento, Santa Clara and Los Angeles.

In the 1990s, the telecos invested heavily in building data centers catering to the Web needs of big business. The centers, however, have not proven profitable, and many of the telecos are cutting their losses.

Independent ISPs will succeed where the telecos failed by focusing on customer service and support, Jackman said.

" The business market is one that is particularly suited to independent ISPs because businesses are looking for reliability and responsiveness. They want someone to pick up the phone when they call their ISP," Jackman said.

Personal service always has been a focus at ISWest, Kaplan said.

"The big guys have thousands and thousands of customers. We want to grow, but we want to stay small enough that we can always tend to customers needs," Kaplan said.

PACIFIC COAST BUSINESS TIMES - OCTOBER 4-10, 2002

ISWest plugs along
Internet provider steadily increases customer base

By Laura Polland Technology Editor

ISWest continues to dominate the Ventura County Internet service market, recently taking VCNet under its umbrella as its fifth acquisition in as many years. Mirroring its move from Ventura County to west L.A. County more than a year ago, its next acquisition targets are down south.

"What they call the 101 tech corridor [is] up and coming, a growing, exploding area. It's a great place for our market--it's the exact customer we want, small to medium business," said Drew Kaplan, vice president at ISWest.

The company, which moved from Westlake Village to more capacious quarters in Agoura Hills last year, still enjoys proximity to both Ventura and Los Angeles County. ISWest's acquisitions--TSCO, Channel Island Internet, NCPlus, InfoSpec, and most recently, VCNet--have helped it build a customer base of about 4,000, encompassing 25,000 individual accounts, and earned it the ranking of the fourth largest ISP in the Los Angeles area. In a broader sense, Kaplan believes it reflects a continuing industry trend
toward consolidation.

There are 5,000 to 6,000 Internet service providers nationwide, according to some estimates, Kaplan said. "It'll take us five to 10 years to get down to 50 or 100," he said, adding that in a down economy bankruptcies contribute more to the falling numbers, while more consolidations may be expected when the economy turns around.
According to Webmergers.com, Internet access providers made up about 10 percent of the Internet-related shutdowns in the 18 months between January 2001 and June 2002. Internet shutdowns and bankruptcies dropped off in early 2002, totaling 93 in the first six months compared to 345 in the first half of 2001, the company reported.

Acquisitions can be an efficient way of growing, Kaplan said. "You can spend tens or hundreds of thousands on marketing, or... do an acquisition such as VCNet. That brought us 1,400 customers overnight," he said.

Outside of acquiring its competitors, the company adds to its customer base by appealing to people looking to upgrade their services as well as to former customers of ISPs that have shut their doors. "Every time that happens, we pick up a bunch," Kaplan said. "It's been an interesting year," he said. In spite of the recession, April and May had the highest growth rates in company history, and that without the aid of a merger or acquisition. Since then business has been up and down in what Kaplan calls unexplained cycles. "What's really exciting is that we're continuing to grow during a tough economy," Kaplan said. "Everyone here is excited to see what happens when the economy recovers."

High-speed Internet access grew at a rate of 80 percent in the year 2001, down from 158 percent growth in the year 2000, according to Federal Communications Commission reports. The second half of 2001 showed slightly slower growth than the first half. National statistics for 2002 are scheduled for release in February.

Established in 1996, ISWest has grown to 14 employees and is profitable. From its 10,000-square-foot office in Agoura Hills, it offers Internet connection options from dialup to DSL, DS3 and T-1 or bonded T-1. It offers services including e-mail hosting, firewalls, managed servers and server co-location. It has 5,000 square feet set aside for server co-location where customers essentially rent space, power and bandwidth.

The co-location facility offers temperature and humidity control, a generator and connections to 10 back-bone providers, including AT&T, UUNet, and Level 3. A partnership with Covad Communications also provides it with points of presence in 150 metropolitan areas. "We have nationwide capabilities, though our focus is [on] our backyard," Kaplan said.

ISWest
An Internet service provider offering access options including dialup, DSL, T-1 and fiber; server co-location; and network enhancements.

Established: 1996
Headquarters: Agoura Hills
Customer focus: small- to medium-sized businesses
Employees: 14
Customers include: Pleasant Hawaiian Holidays, Litton, the Grammy Awards, Suzuki.com and cities in Ventura and Los Angeles counties.

SAN FERNANDO VALLEY BUSINESS JOURNAL - JULY 10, 2000

B2B Ground Breakers
Three Years Ago, A Struggling Residential Internet Service Provider
Switched To Courting Business Customers-And It's Been Growing Rapidly Ever Since

By Shelly Gacia Staff Reporter

Five years ago, when the Internet was still in its infancy, Robert V. Johnson had a hunch.

He figured that more and more folks would be traveling through cyberspace and they would need a way to get there. So Johnson opened Internet Specialties West Inc., a service provider based in Westlake Village.

"We figured if we built it, they would come," he says.

To Johnson’s chagrin, they didn’t.

Johnson, who is president and chief executive of the firm, was ready to close the doors when he met up with his current partner, Drew J. Kaplan. Together, the two repositioned the company to focus on the business market instead of residential consumers, and the company began to take off.

That was 1997, when e-commerce was just starting to boom and business-to-business service was nowhere near as popular as it is today.

"I saw that the company had the wrong focus, and I saw where the money was," said Kaplan, who joined ISWest as director of sales and marketing. "There was more profit on focusing on business-to-business."

A year later, annual revenue had shot up to $580,000, and in 1999 that figure nearly doubled to $1.1 million. This year, the company expects to record sales in excess of $2.5 million while looking for a new building to accommodate its rapid growth.

As it turned out, ISWest ended up in a segment of the market that is now growing at breakneck speed.

"They were right on time," said Greg Tally, managing editor of ISPworld.com, the Web site and business-to-business portal for Boardwatch magazine, a Golden, Colo.-based publication for the Internet service provider marketplace. "The research firm Data Monitor predicts that $89 billion will be spent worldwide on Internet access and (related) services for business over the next two years. Even if they’re capturing a sliver of that marketplace, they have an opportunity to do very well."

The old days
Back when Johnson started, providers like America Online Inc. were signing up thousands of new residential accounts each day with an aggressive advertising campaign, while Johnson’s tiny company was running ads in local newspapers and waiting for the phone to ring.

His service, designed by a consultant that Johnson describes as a "computer nerd," was not nearly as user friendly as AOL’s, and it was costing a fortune to offer technical support to the few customers the company had.

Johnson, a veteran of the telecommunications and computer industries who had worked at Pacific Bell and AT&T Corp., had met up with Kaplan through a supplier the two were acquainted with.

Kaplan, an entrepreneur who began making spin-art T-shirts at the age of 16, had no experience with Internet technology. His most recent venture had been a pre-paid calling card company geared to the Latino market. He decided to close that operation because he didn’t have the capital necessary to expand.

Despite his inexperience, Kaplan quickly realized that the cost of supplying Internet services to consumers was as high, if not higher, than the cost of supplying such services to businesses. But the revenues generated by business-to-business services could be higher.

For one thing, businesses typically need a broader range of services, including web-hosting and data retrieval capabilities to track e-commerce transactions, as well as e-mail. And they usually require faster connections provided through T-1 lines, which can be sold at higher prices and are more reliable than the dial-up service that most residential consumers use.

That meant that by switching to business customers, ISWest would be able to generate more revenue at a lower cost.

"I may spend the exact same time on the phone with a (business) customer that’s going to spend $1,000 than with a (residential) guy who’s going to spend $30," said Kaplan.

"Since we figured that out in 1997, that’s all she wrote."

At the time, businesses had begun to exploit the Internet, adding e-mail for internal communications and Web sites to sell goods and services.

"Why is it that ISPs continue to proliferate at 1,500 (providers) a year?" posited Tally.

"It’s because this is such an incredibly lucrative market right now that plenty of people are willing to throw their hat into the ring."

There are 849 Internet service providers headquartered in California alone, according to Boardwatch, and small providers account for about 80 percent of that total.

Though many smaller companies go out of business, many more are able to survive largely because the demand is growing at such a rapid clip.

Accumulating accounts
Rather than build its customer base from scratch, ISWest went on a shopping spree to acquire other small providers. In 1998, the company acquired Channel Islands Internet, followed by the purchase of NCPlus and InfoSpec in 1999, doubling its customer base.

ISWest now boasts more than 3,000 accounts, typically small to mid-sized companies with anywhere from five to 50 employees.

"We were lucky enough to find three ISPs at a level that were just eking out an existence (and therefore interested in being bought out)," said Johnson. "We had the staff and all the stuff in-house where we could move their stuff to our infrastructure and it added little cost."

The next step for the company is expanding its services to companies that want to host their own Web sites. Instead of using a host service, these companies locate their own servers at the Internet service provider, where they can plug into the connectivity infrastructure more cheaply than buying the equipment outright.

Internet Specialties West Inc.
Year Founded: 1996
Core Business: Internet service provider
Revenue in 1996: $100,000
Revenue in 1999: $1.1 million
Revenue in 2000: $2.5 million
Employees in 1996: 2
Employees in 2000: 9
Goal: Build the company by expanding business in the server co-location market
Driving Force: Growing demand and decreasing availability of space to house co-location services by larger companies

DAILY NEWS, CONEJO VALLEY EDITION - JUNE 12, 1999

Firm Gobbling up area ISPs
ISWest buys third competing Internet service provider

By Enrique Rivero Staff Writer

WESTLAKE VILLAGE--A local company says it's found the key to becoming the biggest Internet service provider in Ventura County: Snap up other area companies.

Internet Specialties West Inc., a privately held, seven-employee firm in Westlake Village, said Friday that it has bought NCPlus of Ventura--its third acquisition in less than a year.

The value of the deal was not disclosed, though ISWest Vice President Drew Kaplan said it was in cash and involved a down-payment plus monthly payments spread over one year.

The company acquired Ventura-based Channel Islands Internet in December and Thousand Oaks-based TSCO Inc. in July, Kaplan said.

But it was the Channel Islands acquisition that provided the key to ISWest's growth strategy, he said.

"That's when we decided that the biggest and fastest way to grow our company was via merger and acquisition, " Kaplan said. "This makes us one of the largest (Internet service providers) in Ventura County."

ISWest's offices are within the city of Westlake Village, about 50 feet into Los Angeles County, Kaplan said. But about 90 percent of its approximately 3000 users are in Ventura County, he said.

Currently, ISWest has more than $1 million a year in revenues, according to Kaplan. NCPlus has annual revenues of $125,000. NCPlus' office at 1937 Goodyear Ave., Suite 707 in Ventura will close. Its two employees--the company president and a part-timer--are not joining the merged companies, Kaplan said.

ISWest is now in negotiations with three unnamed potential acquisitions--one each in Camarillo, Ventura and Thousand Oaks, he said.

ISWest provides high speed T-1 and Digital Subscriber Line connections. It provides Internet service mostly to business customers, Kaplan said.

"But we still do take residential and consumer-type accounts," he said.