Verizon outsourcing unit looking to make a name

Outsourcing group Verizon IT is now putting more of its efforts into serving midsize businesses, an area that analysts say is a growing but untapped market for outsourcing.

Magazine publisher Highlights for Children in Columbus, Ohio, was expanding rapidly and realized that it needed more IT support than it had in-house. So the company started searching for an outsourcer.

While Highlights President Elmer Meider won’t name names, he says the major vendors were considered. The service provider that was selected, however, probably is not one that most network executives would immediately associate with IT outsourcing: Verizon IT.

Highlights has used Verizon IT to manage its mainframe, AS400 and RS6000 platforms, which handle subscription processing, order fulfillment and other tasks, for about four years. Meider says his company settled on Verizon IT because of the stable, secure infrastructure it could provide and its commitment to customer service.

“Once they had passed the test of our IS group telling us that they could deliver what we needed to be delivered, we felt comfortable,” Meider says. “We have to have a comfort level with the philosophy of the company and how they treat their customers.”

That’s what Verizon IT is hoping to hear from other midsize businesses.

A business unit within Verizon, Verizon IT has been in the outsourcing business for more than 12 years. In the past, the company has focused on serving large customers and competing with bigger outsourcers such as IBM and Electronic Data Systems (EDS). But recently Verizon IT made a switch, deciding to put more of its efforts into serving midsize businesses, an area that analysts say is a growing but untapped market for outsourcing.

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“The small and [midsize] markets have always been seen by the [telephone companies], in particular, and IBM and EDS to a small extent, as being an untapped region where business might be found,” says Laurie Seymour, program manager for service provider research at IDC.

Verizon IT originated with the former GTE, and when GTE and Bell Atlantic merged to create Verizon, the IT outsourcing unit found itself with even deeper resources. The company has about 800 staffers and has access to the capabilities and expertise of 10,000 IT professionals within its parent company, says Mike Luebke, Verizon IT unit president. Verizon IT has data centers in Fort Wayne, Ind.; Sacramento, Calif.; and Tampa, Fla. It has about 65 customers.

Luebke says about half its customers have annual revenue of more than $1.5 billion. These days, however, Verizon IT is focused on the midsize market, companies with annual revenues from $250 million to $1.5 billion, and says it hopes to change its customer mix to an 80/20 split, with the majority being smaller companies.

Luebke says the business unit is taking advantage of its parent company’s stability, while still trying to sell itself as a smaller player that can provide the hand-holding that small and midsize businesses need.

“We want to leverage the advantages of the large Verizon and the telecom capabilities that we have there and the strength financially,” he says. “At the same time we’re a small business unit so we can bring customized attention.”

But Verizon IT faces several challenges. The first is getting its name out to prospective customers.

“When you think of IT services, you don’t think of Verizon. You think of EDS or IBM,” Seymour says. “They don’t want to directly combat an EDS or IBM, though; they want to try to find the customer who is looking for perhaps a slightly less-custom option without a high price tag. There are plenty of enterprises out there that are willing to take them up on that.”

Another challenge is getting around the reputation of being a telecom firm, which customers might associate with questionable service. At the same time, Seymour says that having the telecom expertise and infrastructure puts Verizon IT in a good position to deliver IT services.

“It really lowers their costs,” Seymour says. “They understand how to build networks that are scalable and reliable. And they understand how to blend their services with the larger telecommunications network.”

The proof will be in how Verizon IT can deliver its services, which include managed hosting, application management, mobile computing management and help desk support.