The "Southern" example: A profitable ISP!

Nareshchandra Laishram

HYDERABAD: Even with national ISPs struggling to make profits and with the
news of some closing down circulate, the market is not without exceptions, ones
that offer hope to a nascent industry. One such ISP is the Hyderabad-based
Southern Online. In April 2000, this now-listed ISP surprised industry pundits
by announcing profits for fiscal 1999-00. A net profit of Rs 40.71 lakh on a net
sales of Rs 200.69 lakh! If you call that a stroke of luck, then the company’s
performance for the half year, which ended September 2000, strengthens the
belief that this ISP has found a way to strike gold in the so-called tough
market. The company has already done a revenue of Rs 205.06 lakh in the first
half, twice its revenue for the entire last fiscal. And guess what, cash flow
remains positive. This time, net profit for the first half stands at Rs 96.57
lakh. How did it manage this? Pat comes the reply: focus and overheads
management.

The company’s focus was to be known as a friendly neighborhood ISP.
Southern Online operates only in Andhra Pradesh–presence in Hyderabad,
Vijayawada, Kakinada, Karimnagar, and Khammam. By trying to be a one-stop shop
for customers, it moved ahead by delivering services to over 10,000 subscribers.
And what is significant is that Rs 140.82 lakh, which is more than half of its
sales for the first half of the current fiscal, came from corporate services
which includes providing Internet access (leased lines, cable, microwave) and
other value added services. Web hosting and solutions accounted for Rs 7.09 lakh
while dial-up connections brought in Rs 57.15 lakh. But, what actually takes the
cake is the way this company has managed its expenditure. Total expenditure,
including staff costs and other expenditure, for the first half of the current
fiscal was just Rs 86.09 lakh.

Southern Online executive director, Satish Kumar is not cowed down by the
doubts raised over its performance. He attributes success to, "one per cent
of luck and lots of hard work". Kumar is an optimist. He puts the outlook
for ISPs in India as bright. While A-category ISPs might be feeling the crunch,
B-category ISPs are making profits, he says. For Southern Online, the key was in
being not too ambitious and to keep the operational overheads to a bare minimum.
The company is a B-category ISP that started operations in Andhra Pradesh in May
1999. It is listed on the Hyderabad and Bangalore Stock Exchanges.