OpenDNS: Forget free. We want paying customers

Free isn’t all it’s cracked up to be. At least according to free DNS service provider OpenDNS, which is has unveiled a suite of paid services targeted at enterprise customers.

The idea that the best price is zero is gaining popularity, thanks to the high-tech tome “Free: The Future of a Radical Price.” Author Chris Anderson makes a compelling argument that freebies and giveaways attract customers, especially on the Internet.

But with its announcement Monday, OpenDNS makes clear that its plan is to migrate from free consumer-oriented DNS services toward paid, profit-making products used on enterprise networks.

“Our plan is to transition into the enterprise following the Google model,” says David Ulevitch, founder and CTO of OpenDNS. “Google did this with Gmail. First they had Gmail, then they had Gmail for pay, and now they have a complete office suite Google Apps.Our evolution is similar. We have a free consumer service.. We invented and pioneered the idea of DNS with integrated security. Now we’re turning that into a paid enterprise service.”

OpenDNS is a venture-funded start-up with 15 million users of its free recursive DNS service. These users include consumers, schools and some businesses, which use OpenDNS to allow their employees to browse the Web. OpenDNS says it is handling more than 17 billion DNS queries per day with this service.

One advantage of OpenDNS is that it bundles Web content filtering with its DNS service. OpenDNS also operates, a community site that fights phishing.

Users of the free OpenDNS service view advertisements when they type in the wrong Web address. OpenDNS makes money by selling ads for its re-direction service.

Now OpenDNS is selling an ad-free version called OpenDNS Deluxe, which is geared toward small businesses.

OpenDNS also is announcing OpenDNS Enterprise, which provides more comprehensive Web filtering, auditing and reporting features, 24/7 support and service-level agreements.

Ulevitch says OpenDNS Deluxe and OpenDNS Enterprise are more cost-effective for companies than running separate DNS and Web content filtering software from vendors such as Websense. Another advantage is that these premium services don’t require customers to purchase or install appliances, as some rival DNS and Web filtering companies do.

“We don’t do everything that Websense does,” Ulevitch admits. But he says that OpenDNS offers the most popular features of a product like Websense, including the ability to block adult content and 50 other categories of Web sites. “We do 70 per cent of the things that Websense does that people care about,” he adds.

Ulevitch says OpenDNS has 25 businesses using its premium paid services. These paying customers include The Coffee Bean & Tea Leaf, a retail chain that offers in-store Wi-Fi and uses OpenDNS to support Web browsing and to block adult content.

“These retail chains want to monitor sites, but it’s not reasonable for them to put a security device in every store,” Ulevitch says. “They are growing fast, and they want to have one Web-based dashboard so they can block certain sites to all their stores. Now they have granular control, and they don’t have appliances which is a huge savings. They don’t want to show ads, and they are willing to pay for professional support.”

OpenDNS says the new premium paid services for enterprise customers are available under an early access program, with general availability expected in the fourth quarter of 2009.

Free recursive DNS services such as OpenDNS and DNS Advantage Service from rival Neustar UltraDNS are gaining in popularity among corporate customers.

Neustar UltraDNS says it is handling between 3 billion and 5 billion DNS queries a day through its free DNS Advantage service. However, Neustar UltraDNS derives most of its revenue from selling managed external DNS services to enterprises and e-commerce sites such as J.Jill and

DNS Advantage “does obviously generate additional business for our managed DNS service,” says Rodney Joffe, senior vice president and senior technologist at Neustar. “But companies are looking for a DNS solution that deals with phishing and pharming and malware…Some of our customers want DNS Advantage, and some of our customers already have DNS appliances in their network.”

Joffe says DNS is so critical to corporate networks these days that customers care more about performance than about price, be it free or paid.

“The kinds of customers we have had for 10 years don’t come to us because they are trying to save a buck. They may in the beginning, but they are staying with us because we run an enterprise-level service infrastructure,” Joffe adds. “These tend to be customers for whom DNS is critical.”

DNS Advantage doesn’t include Web filtering like OpenDNS Enterprise, but Joffe says this feature will be available in the first half of next year.

Joffe says having companies like OpenDNS enter the enterprise space with outsourced DNS services helps validate the niche.

“We’ve been the major provider for quite awhile,” Joffe says. “There’s definitely a market.”

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