Outsourcing: Tata Communications Interview (Part 2)

By guest author Tony Scott

Evolution from Infrastructure to the Desktop

Tony: Shridhar, since you have obviously been with the company for a long time, let me ask you, how did the original piece of the company get started, and how have you evolved from that point to what you are providing today?

Shridhar: When the Tata Group acquired the long-distance carrier VSNL [formerly Teleglobe] in 2005, it was largely a wholesale voice provider to Indian companies for various carriers globally on a bilateral basis. What was promised as a monopoly for the Tata Group actually only lasted a little bit longer than two months. In two months’ time, our call rates dropped from 78 rupees to about 24 rupees a minute, so we lost a lot of value there. Our company went through turbulent times where even our revenues came down to almost 40% of what they were when we acquired the company. That gave us the incentive to start looking at new customer segments, products, and services. That’s how the enterprise business was created – to start focusing on the growing infrastructure needs of the telecoms and of the BPO industries that were being created in India.

We were the first to provide voice and connectivity services to Microsoft, Google, and Yahoo! in India.  That became a pretty sophisticated service. We started as basic private limited circuits, then the private limited circuits started being managed, and as our strengths in IT became renowned we started moving toward IP-based services in depth. Before this happened, we also felt that our strength was global connectivity, and to strengthen our global connectivity network we acquired a Tyco global network. Our connectivity network extended to the United States and Europe, so we carried a significant amount of global traffic. We now have one of the leading submarine cable providers, thanks to the Tyco global network acquisition. We acquired that after Teleglobe to give a bigger play to our voice story.

The earlier business model was bilateral in that we had to sign up with carriers.  Now we have created a major play where the carriers can look at us as a neutral third-party platform. As newer operations come in globally, we manage to establish contact with them, where the buyer and seller don’t know each other, and we exchange traffic. So that’s the play that was created. As I mentioned, the Teleglobe activation could not have been made unless we took a certain amount of cost out of the business, and that’s how we created the transformations services business. We always knew that infrastructure alone wasn’t going to be long term for us; we had to create a services play. That’s how David is here, and that’s because of our seriousness about getting into the services play. My own organization is now a significant part of where David is going to take this in the future.

Tony: So, David, what are the other parts of the business that you’re going to transform? Not just what you are doing right now, but also in terms of your plans for the future. Where do you see the business growing and expanding beyond your current operations?

David: What Sri was saying about TCTS is that we are going to position it a little more prominently; it’s a standalone entity and it has a lot of value to us as company. So what we are going to do over the next year is refocus and make sure we are realigning our offerings with the market. We probably are not going to grow our offerings significantly in the next year. Tata Communications has been on a major path of investing over the past few years, particularly in housing activity, managed security services, and so forth. We built a few natural extensions in that area, but it’s still in the emerging stages.

We have taken the global voice services (GVS) business, which as Sri described was essentially the 3-D acquisition of Teleglobe, and extended it in India. Today we have the ability to service almost all elements of the network except for the desktop. So if we extend, it will be in the desktop area. We use India as an test area because it’s tough market in many ways, and we can put our offerings around that and then determine if we want to expand those managed services offerings outside of India on a global basis.

Tony: Getting to the desktop, obviously that becomes very cost competitive, and it becomes even more difficult to actually manage because you can control only a few of the many types of human interactions that are required to manage the desktop. It is clearly much more labor intensive.

David: Exactly. There is an opportunity there. You’ve actually written about these issues in some of your articles – and you know that connecting with a client’s staff is very labor intensive. It’s more of a customer-need-driven environment; managing in that type of environment is the core strength of TCTS and the activities we have there.

This segment is part 2 in the series : Outsourcing: Tata Communications Interview
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