January 2015 | Nithin Rao

'Strategy 2.0 will make us a value-added service player'

A $3.2 billion conglomerate, Tata Communications owns and operates the world’s largest, sub-sea fibre optic network and delivers 20 percent of global internet traffic. Set up in 2004, the company’s North American operations cover enterprise, wholesale voice and carrier services businesses, and it is well positioned to take advantage of the growing American economy. The company is launching its Strategy 2.0 to take the business to a new level. Dave Ryan is executive vice president and Americas regional head at Tata Communications. With over 25 years of international telecommunications sales management experience, he has an extensive background in developing US markets for global carriers. In this interview, Mr Ryan speaks to Nithin Rao about the challenges, and strategy for future growth.

Could you tell us about your North America operations?
Our North America operations are centred around three segments — enterprise, wholesale voice and carrier services. In the enterprise segment, we sell directly to large multinational corporations. We are the largest wholesaler of international voice traffic. The carrier services business caters to the needs of large telecom companies around the world. The Americas region accounts for 20 percent of our global business. The enterprise and wholesale voice businesses contribute about $250 million each in revenues, whereas carrier services add up to another $150 million. We are still a small player in the enterprise space though we are growing rapidly. Unlike established American telecom majors such as AT&T and Verizon, we do not have a retail business nor do we sell any services to consumers. We are in the B2B category and sell services to large enterprises.

Tata Communications has grown through strategic acquisitions. How have they contributed to the company’s growth in North America?
We have grown substantially in North America since 2004 when we set up operations here. In 2005, we acquired Tyco Global Network which had laid fibre cables across the Pacific and Atlantic oceans. A year later we acquired Canada’s Teleglobe which was involved in the wholesale voice business. Both these acquisitions gave us a foothold to build our network infrastructure, which today circumnavigates the globe and touches geographies that account for 97 percent of the world’s GDP. The Tyco acquisition gave us the necessary assets and Teleglobe gave us the traffic volumes. Today, we are the largest wholesaler of international voice traffic; that business is based in Montreal. In 2011, we acquired BitGravity, a content delivery network firm in California. Earlier, much of the content used to be voice and data, but that has changed dramatically, and today video accounts for 99 percent of content.

Could you tell us about the recent partnership with Kaltura? Are you looking at similar partnerships in the future?
Kaltura specialises in video content. Our partnership covers the management of content, tracking and monetising it. We will offer cloud-based services to some customers to help them manage video content on their website. Partnering is a critical piece of our strategy going forward. We see the partnering philosophy growing substantially in the future. At present, 15 percent of our revenues are through various partnerships; we see this doubling in the future.

What is your strategy for ensuring growth in North America?
We are about to launch our Strategy 2.0 to offer a handful of leading-edge, cloud-based services that are unique to our capabilities. This strategy will transform us from a commodity-based telecom industry player to a value-added service player. As part of this, in October we launched IZO, a global network platform for enhanced hybrid cloud enablement. For the first time, a single provider offers access to an entire ecosystem of network, cloud and data centre connectivity. This makes it simple for a business to connect and build its cloud — be it private, hybrid or public. Today, about 25 percent of the world’s internet routes are on our network. We will be launching the service in 31 countries with 18 partners, using them in each geography as a gateway to the internet. We will be able to provide our large customers a level of security and a class of service that has not been available through the public internet. Basically, we will be making the internet ‘fit for business’. This will be followed by a series of other products including cloud connect. It is a global initiative that will have a big impact in North America, allow us to compete with telecom majors and take business to the next level.

What is the growth potential for the three verticals you are present in?
Our enterprise segment will grow significantly through IZO. It will also help us in the carrier space where we will be able to offer white label services. Cloud connect could be geared towards other large cloud service providers. For instance, Amazon’s customers would be interested in it. When we launch these services around the internet, I envisage some new partnerships which will allow us to collaborate with companies that bring value to our cloud-based offerings. Some of those companies may be relatively small and niche players with potential for acquisition.

Over the next year or two, as our business matures, we will pursue our strategy of partnerships and acquisitions. As our earnings before interest, taxes, depreciation, amortisation (EBITDA) numbers grow, we will be well positioned to look at investments for the longer term. We have three segments within the enterprise space — the core business, a smaller media and entertainment division, and NextGen accounts which include social media players such as LinkedIn, Google and Facebook. We have created a whole enterprise segment around servicing the needs of these companies, and helping social media firms to globalise their business. Another thing that has helped our business grow is that Gartner, the world’s leading IT research and advisory company, named Tata Communications as a ‘Leader’ in its 2014 Magic Quadrant for Global Network Service Providers. From being a niche player, we have been recognised as an industry leader, which has enabled us to participate in new opportunities.

What are the challenges confronting the business in North America?
One of the major challenges was that the Tata name is not so visible in North America. All our major competitors continue to invest globally in places such as Africa, India and China. We need to be aggressive, both from a brand and solutions perspective. Today the market is reacting favourably to who we are as most of our large customers now recognise the Tata brand.

Will you be investing in building the brand in North America?
We have started doing so. We ran a pilot test along the west coast by putting up digital billboards, advertising the Tata Communications brand. Our aim was to elevate the brand. The billboards came up at the entrance to the San Francisco International Airport and along a busy 15-mile stretch through Route 101 in Silicon Valley near San Jose, where most of our technology customers are located.

It is difficult to spend money in brand building when you are not a consumer products company. You need to be selective. A few years ago we became the official partner and connectivity provider to Formula One (F1). But F1 is not as big in America as compared to Europe or Asia. We are looking at possible partnerships with other events such as the PGA Tour to help elevate our brand.

What innovative practices have emerged from your North America operations?
A lot of innovation is emerging around how we collaborate while using the internet. We have consciously created a corporate philosophy around the ease of doing business. We call ourselves the Singapore Airlines of the telecom industry and want to be seen as a company that is easy to do business with. We distinguish ourselves by our innovation around cloud services, the internet and the lifecycle of customer experience.

Fact file: Tata Communications

  • The North American operations of Tata Communications began in 2004 as VSNL International.
  • The company has offices and data centres in Herndon, VA; Matawan, NJ; Burlingame and San Jose, CA; and Montreal, Canada.
  • North American operations contribute to 20 percent of the company’s global revenues of $3.2 billion.
  • Tata Communications employs about 480 people in the US and 250 in Canada. The average employee age is around 35 years.

 

This article is part of the cover story chronicling the Tata group's history of doing business in North America, featured in the January 2015 issue of Tata Review:
Tata Consultancy Services: 'United States is a hotbed of digital progression'
Jaguar Land Rover: 'North America is a critical market place for JLR'
Tata Chemicals: 'We are investing in the technologies of tomorrow'
Tata Steel Minerals Canada: 'Tata Steel navigates subarctic challenges'
Tata Technologies: 'We have to get to a billion dollars quickly'
Indian Hotels Company: 'We are the keepers of heritage and legacy'
Tata Global Beverages: 'The team is excited about the opportunities ahead'
Tata Elxsi: 'We are unique among engineering service providers'
Tata Interactive systems: 'Content creation is as important as packaging it'
Tata Sons: 'We promote the group's business in North America'