Internet Security Inc'

1
Internet Security Inc.

• IFMG 581/481

2
Start

• Founded in June 1994 by the brothers Gary and
  George Mueller
• The brothers had a vision that the Internet would
  become an important channel for conducting
  business in the future.
• ISI provided hard-to-find financial, business,
  and political information to business
  professionals.

3
ISI features

• ISI differentiate itself from other established
  business information providers such as Reuters,
  Dow Jones, Wall Street Journal, and Bloomberg by
  focusing solely on information from emerging
  markets and by offering its service at a much
  lower cost on the Internet.

4
Risk? Opportunties

• During 1996, as ISI grew, many large established
  players, concerned about cannibalizing their
  existing business and the rapid pace of change in
  Internet technology, had adopted a wait and see
  attitude. The Mueller brothers capitalized on the
  uncertainty to enable them to get in under the
  radar---to penetrate quickly and establish a
  defensible market position before large firms
  could respond.

5
Growth

• By late 1998, ISI Emerging Markets provided data
  from over 650 information providers to over 600
  institutional customers. The company established
  19 emerging markets.
• Revenues grew from 87500 in 1996 to 3.7 million
  in 1997 and to over8 million in 1998.

6
By 1999

• By 1999, however, the competitive landscape had
  changed and most established information service
  providers had aggressively moved their business
  into the Internet.
• At the time of the sale to Euromoney
  Institutional Investors PLC, the global market
  for information services was estimated to be in
  excess of 50 billion.

7
Challenges

• Determining how to structure a growing
  organization designing an incentive and
  compensation system that would attract the right
  talent and grow with the company

8
Steps

• 1. Developing the technical infrastructure
  headquartered in his apartment obtained Internet
  service at 605 per month high-speed secure data
  line dedicated from Bell-Atlantic at 2500 per
  quarter partner with a Polish banker to form an
  Internet access company, Internet Technologies.
• 2. Lease offices in Poland and other emerging
  markets.
• 3. Developing the information content Whenever
  possible, contracts contained exclusivity clauses
  that prevented the information provider from
  selling the same information to other online
  information providers, but these contracts were
  difficult to obtain. ISI paid most information
  providers an average 15 percent of subscriber
  revenues.

9
Steps

• 4. ISI emerging Market information service was
  launched in June 1995.
• 5. Growing business rapid pace of geographic
  expansion.
• 6. Adding specialists and developing systems
  hired a CPA in 1996.
• 7. Creating a formal organization in 1996.
  Organizational chart on page 356. Emphasized
• marketing capabilities of the firm.

10
Discussions

• Does the vision mean good opportunities?
• Chaos and challenges in the growth?
• Entry barriers?
• Has Euromoney made a good deal?
• Economies of scope and scale in information
  service?
• Vertical Integration structure in Euromoeny?