Tata Communications bets big on managed services

These are expected to garner a fourth of the revenue from data services in the next few years, up from 18% in FY12

Srinivasa Addepalli, chief strategy officer at Tata Communications has been a vital part of the team that in the last ten years transformed the erstwhile Videsh Sanchar Nigam Ltd into a vibrant global player providing new-age telecom solutions from a company known for domestic monopoly in international calls.

Now he says, “We are fighting with our own businesses, because if we do not fight then someone else will take it away.” Then he explains how company’s enterprise customers are increasingly seeking “cloudification” of the technology they purchase.

The cloud based applications that the company has now put thrust upon is one among the many that are categorised as managed services by the company. This also includes managed ATM services to video conference solutions. This is now expected to garner one fourth of the revenue from data services in the next couple of years, up from 18 per cent in 2011-12.

The company reported Rs 14,196 crore of revenue in last financial year out of which the revenue from data services was 40 per cent. Voice services and South African subsidiary Neotel respectively constituted the rest 48 per cent and 12 per cent of the revenue.   

The company has a strong infrastructure of submarine cables and data centres and its mainstay so far has been in offering bandwidth and data storage services. While it offers bandwidth to other telecom service providers on wholesale lease it provides the same to enterprises on retail basis along with the data storage facilities.

It now defines the managed services where it goes beyond offering just the infrastructure capability and takes the responsibility of managing the service offering. It usually works on pay per use basis instead of leasing arrangements.

“When you move into managed services you have sticky relationship with your customers as you start to manage their activities and manage things on their behalf,” says Addepalli.  Network leases are usually a 12 month contract renewed every year. But for  managed service contracts customers prefer a three or a five year contract as they want certainty.  So that they do not have to look for someone every year.

However, the chief strategy officer says, ”We do not see providing managed services in the absence of network services, either one of the two will go first,” he explains. 

The company's recent announcement of technology arrangement with Formula 1 management explains the same. Here while providing connectivity of their different race tracks to their central head quarter comes under network services offering, providing hosting facility to their website and bunch of other services including security comes under managed services.

Uncertainty in the business environment has led its enterprise customers to make their business cost flexible and scalable.  While earlier these customers were willing to invest up front in technology now they prefer pay per use model.

“We know what is changing around us, so we know which direction we have to go to,” said Addepalli. The company has in fact taken three bets for its future growth including one that says: "all businesses will seek cloudification of the technology that they purchase." The move in managed services through cloud based applications is essentially to live up to this bet.

The other two bets are: "mobile broadband will be pervasive but the operators will have challenge in making money" and "video will be the primary form of collaboration in business in years to come." Working on these bets the company is improving its solutions for video conferences facilities across multiple technologies and looking forward to build services on low latency network for mobile operators so that they can monetise their investments.

The company which has been so far focused on banking and financial services industry in India besides media and entertainment industry globally for its data services business, is now considering health care and education industry to achieve the growth in managed services. It expects to get into one of these two sectors by the end of the current financial year.