Don’t sweat the small stuff. Outsource it

What Digital Envoy delivers to its customers isn’t much-—perhaps three bits of information about Web site visitors. This company serves as a reminder: Leave the simple stuff to someone else.
Written by David Berlind, Inactive
After hearing Digital Envoy executive vice president, chief strategy officer and co-founder Sanjay Parekh describe his business and how the company is “off the runway” (code for “self sustaining and not burning through its investor’s cash”), my first reaction was, “That’s it? That’s all you do?”

“The short description,” explained Parekh, “is that we can tell you a lot about a visitor to your Web site knowing only their IP address.”

“A lot” may be a bit of an exaggeration. Delivering three pieces of information per visitor, Digital Envoy provides its customers with hardly anything at all. But to its customers (of which CNET Networks, ZDNet’s parent company, is one), those three pieces of information --- geographic location down to the closest city, connection speed, and in some cases the industry in which the visitor works --- provide enormous insight to operators of the sorts of Web sites where such information is factored into all sorts of decisions regarding user experience, marketing, and business policies.

Are you looking for ways to outsource that part of your business where your expertise doesn’t make a material difference to your company’s mission? For those of you who are trying to gather data (or should be gathering it) about visitors to your Web sites, Digital Envoy represents just such an opportunity.

“A lot of decisions are based on geography,” said Parekh. “For example, the language of a Web site, which is about personalization, should be based on geography. Web site operators can also use the information for security reasons. For example, if during one minute a user was logged into your site from New York, and then, during the next minute, Moscow, you’d be able to spot that and set some policies to manage that situation. The search space is hot with us too: For example, being able to respond to people in a relevant localized manner.” Google is a Digital Envoy customer.

“The number of applications literally cross a large spectrum” Parekh told me. “Speed of connection is extremely important, especially to folks who stream media. Another customer, AT&T, makes network routing decisions based on the physical source of traffic. Our data is the intelligence for everything from digital rights management to business analytics. But the line is clear. We provide the raw data and we let our customers worry about where to apply it.”

To date, Digital Envoy boasts over 100 clients, including big ones like AT&T, Google, Microsoft, Verisign, and America Online. That level of clientele suggests there might be more to the company’s formula than a few simple offerings that can be recreated from a decent tracerout log

There is more. One attribute of Digital Envoy’s offerings that Parekh says sets the company apart is scale. In addition to providing IP intelligence to its customers, Digital Envoy uses some customers (but not all) as sources of raw IP data. (Although Parekh wouldn’t say which customers are also sources, my guess is that AOL/Time Warner is one of them. In July 2001, Digital Envoy closed a $10.5 million round of venture financing that included AOL/TW Ventures as one of the investors.)

With multiple sources of data, Digital Envoy is assured of having a bigger database of IP addresses than any one of its customers. It also has more data per IP address. For example, if an IP address appears to connect to one of Digital Envoy’s customer’s Web sites from New York City and to another customer’s site from Miami minutes or hours later, some of Digital Envoy’s customers could be interested in knowing that.

But, the more likely usefulness of Digital Envoy’s sizeable database probably has to do with what happens when one of its customers detects a new IP address that it hasn’t seen before on any of that customer’s sites. When Digital Envoy already has intelligence on an IP address that shows up through one of its customers, then all of its other customers automatically benefit from that data.

The other advantage Parekh touts is the speed of Digital Envoy’s database. Says Parekh, “Even on a low-end Linux box, we can do 30,000 queries per second.” In other words, Web site operators can view audience intelligence (and take automated or manual action in response) as fast as their sites are registering inbound IP addresses.

Digital Envoy runs on Windows, Linux, Solaris or FreeBSD. “All a customer has to do,” said Parekh, “is install the software and APIs on their server, integrate the APIs into their application; their application is ‘aware’ at that point.” The database of intelligence is local to Digital Envoy’s customers. Digital Envoy collects data from several customers, consolidates it, digests it, and redistributes it back to its customers.

Demonstrating another benefit of outsourcing, Digital Envoy offers flexible pricing as well. Said Parekh, “A small customer getting nothing but country level information is about $1,000 per month and it scales up from there. Our larger customers spend in excess of $70,000 per month for the works.”

So, with a respectable revenue stream coming off a relatively simple formula, what do Parekh and his Digital Envoy co-founders Rob Friedman and Dennis Maicon have up their sleeves? “Next up are some different products for some different verticals,” Parekh said. “The financial market in particular could benefit from having our offerings tuned for their applications and needs. We can offer a lot of information about fraudulent activity. Beyond that, more accuracy and coverage and then we’re still looking around for other natural extensions to what we do.”

I suggested that customers might benefit from some canned integration. Instead of loading customers up with a bunch of APIs and leaving it up to them to make their applications “aware,” some canned “awareness” that cuts the broadest swath of his current customers’ needs might go a long way, especially in the SMB market where stressed IT departments are averse to new integration projects. “That too,” Parekh agreed. “ We could offer canned stuff to make it easier to integrate and implement.”

What Digital Envoy has to offer may seem almost too simple to outsource. But outsourcing is all about focusing your limited resources on the stuff that gives you competitive advantage and letting others worry about the stuff that doesn’t. After all, if you can’t afford to have your best people focused on generating competitive advantage, then one of your competitors likely will.

Use TalkBack to let your fellow ZDNet readers know what you think. Or write to me at david.berlind@cnet.com. If you're looking for my commentaries on other IT topics, check the archives.

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