June 2015 | Philip Chacko
'We are outperforming our industry peers'
Tata Communications, the world’s largest wholesale voice carrier, carrying 53 billion minutes of wholesale voice traffic annually, clocked revenues of $3.2 billion in fiscal 2013-14, with 77 percent of it being generated outside India. The company’s global network includes nearly 1 million square feet of data centre and collocation space worldwide, as well as an internet protocol network with connectivity to more than 240 countries and territories across 400-plus points of presence.
Managing director Vinod Kumar speaks about Tata Communications’ performance in 2014-15, about being a big player in the business-to-business space, and about the growth opportunities and challenges before the company. Excerpts from the interview:
Tata Communications made steady rather than spectacular advances in 2014. Have the growth and profit figures been up to expectations?
For us 2014 has been an important year. In terms of financial performance the business has been showing steady improvements. Investments in our data and managed services portfolio have moved from being purely strategic, and are beginning to give us steady return on investment. We also launched our ‘strategy 2.0’ to prepare the business for the future.
Activities related to business excellence and innovation and our diversity programmes have taken on a formal structure. In business excellence we have moved into the next band of scores in the Tata Business Excellence Model. Overall, both in terms of results and investments for the future, we are beginning to see the traction we had hoped for. Growth and profits have been meeting expectations despite a sluggish environment.
How has enterprise data helped lead the turnaround for the company?
Our fastest growing vertical is the enterprise business, and there are two cylinders in this engine. One is the large enterprise business, which focuses on the Forbes 2000 kind of companies. This business has grown by 20 percent year-on-year, which is impressive when compared with our peers.
The second is our ‘next gen’ group, which focuses on service providers and e-commerce companies. This has also shown significant growth and the nature of our relationship with our customers here has changed from us being a component provider to working alongside the digital giants and jointly creating services, thereby being embedded in their growth platforms.
Tata Communications was always quick off the block with regards to technology changes. What further needs to be done to become more nimble and agile?
There are so many technology choices that keep emerging; our customers’ business models and the procurement of telecom and infotech services keep evolving. Our competitive advantage comes from agility, flexibility and hyper-communication with our customers and markets.
We have launched two major programmes, both of which have proved successful. One is SauMill — a combination of ‘sau,’ which in Hindi means hundred, and million — the idea being to find opportunities to generate $100 million of cost savings. There was great enthusiasm across the organisation for the initiative and we achieved the target. ‘Shape the future’ was a programme that sought ideas from employees regardless of function or level. These ideas go through a rigorous evaluation process before internal and external judges choose the best. Two rounds of the initiative received nearly 300 responses, of which we shortlisted three.
Separately, we have invested in an artificial intelligence company. We cannot build everything ourselves; we need to partner extensively. The key aspect is investing in technology companies that complement our strengths. We’re also working on a space mission, alongside TeamIndus, India’s only competitor in the $30 million Google Lunar XPrize. TeamIndus is determined to be the first-ever privately funded team to land a spacecraft on the moon. As their communications partner, we will be helping them achieve that dream.
Has the company put a stop to building more undersea cables?
We have already covered all the major routes of the world and are looking at more selective investments. We invested in a company that is building a cable into Brazil; this will be activated in early 2016. We have other such projects in the pipeline, where we are looking at selectively augmenting our already large submarine cable network to further strengthen our position.
Tata Communications has tapped opportunities to collaborate with companies like Google and Amazon. What is the logic here?
We believe that the business-to-business — particularly the large enterprise — space is a specialised one requiring complete dedication; it is tough to coexist with a business-to-consumer focus. The addressable market for business-to-business in the global marketplace is also huge and we are a challenger. The headroom for us to grow in the segment is fairly significant.
We have a big wholesale business that complements the direct enterprise channel. This business is important and many of our in-country partners play the role of serving small and medium enterprises and consumers in their respective countries. We want to avoid direct competition with some of these customers.
Compared with its global peers, how innovative is Tata Communications?
We are a relatively small player in terms of scale, but we are outpacing our industry peers in pretty much every product category that we serve. There are sufficient opportunities for organically expanding our scale and for continuing to be a meaningful competitor.
Which are the areas with scope for improvement?
We expect that our large enterprise business will continue to grow. There is an opportunity for us to offer more cloud, private-public cloud services and cloud orchestration services. There is also scope for us to do more in the collaboration services space.
Which are the most significant challenges for Tata Communications?
There are many challenges and opportunities. One is around service innovation: the customer experience and making telecom and infotech infrastructure services user-friendly, flexible and adaptive to customer needs. Service innovation relates to using new technology, bringing faster network speed, higher uptime for networks and easier-to-deploy hosting solutions.
Mindset is the key; this is about looking at everything through a customer lens, and having systems in place so we can partner and create services and bring them to market quickly and intuitively. We have a broad portfolio of services and have to internally partner across functions and product categories to create powerful propositions. This leads to the bedrock: people.
How much of your energies are directed towards securing business in India and the Asian region? How does this compare with your businesses in the rest of the world?
India is our home market, accounting for 23 percent of our revenues, and we have been gaining market share here. It is an extremely important market and will continue to be so. In the large enterprise space, Asia is a growing region. The United States and Europe are bigger, but as Asian multinationals become global we see more opportunities for us to scale up with them.
Five years down the road, where do you see Tata Communications?
While we are serving a big market, our goal is to redefine the scope of our addressable market from $30 billion to $50 billion. We believe that in five years we will be recognised as a meaningful player in terms of scale and also for the innovative nature of our services, for our agility and flexibility, the way we serve customers and the experience we create for them.