Vinod Kumar is Managing Director of Tata Communications Limited and CEO of Tata Communications Group, part of the USD $108.8 billion Tata group of companies.
Vinod joined Tata Communications in April 2004, just when the company was embarking on its international growth. Vinod has been at the forefront of Tata Communications’ transformation from a traditional connectivity services provider, largely in India, to a truly global services provider – offering a broad range of managed communication and collaboration services as well as IT infrastructure services, successfully transforming Tata Communications into a truly global organization that delivers a new world of communications to its customers.
With over 20 years of experience in the global telecom industry, Vinod has an impressive track record in developing business strategies and creating fast growth organizations across the world. Prior to Tata Communications, he was Senior Vice President of Asia Netcom, responsible for generating top-line growth including strategy formulation, product marketing and sales.
Tata Communications hosted its 2016 Industry Analyst event in London,UK,in July. Roopa Honnachari, Director of BCS and Cloud Computing & Vidya Nath, Director- GIC met with Mr. Kumar for a fireside chat to talk about ICT industry in general, and Tata Communications’ initiatives for competing in the global communication services space in particular.
RH: Which are the new, emerging business models in your core business initiatives—network services, data center/cloud service, and managed services—that you think companies such as Tata Communications will have to consider? What will shape, define, and disrupt your industry?
VK: There is so much discussion about technology and being disruptive – all of that is important, but we should combine this with providing customer value. Our focus is 1) We have to do things that really matter to customers; make them happy and give them promises that we stay up and work, not just chase technology 2) Of course we also have to make money; this industry is not known for the best return on capital. You have to benchmark yourself if you like it or not, against manufacturing, specialty chemicals, hospitality, software, etc. When I look at anything that we do, I look at if we will be making money for shareholders, is the return on investments where it needs to be. I have gone on record with the board and investors saying we will hit 15% return on capital by 2018. Equally, we will never give up on the promise of providing great customer experience, which is what got us to the place we are today.
I am saying this when there is so much talk about SDN, NFV and SD WAN. We should deploy these technologies only when we are operationally ready to support them. I know some of the analysts disagree with me on that. But at the end of the day, I am answerable to enterprise CIOs who wake me up at 03.00 in the morning, because all of them have my mobile number. If the network goes down, it does not matter what technology you have deployed. Things have to be ready for prime time from a customer standpoint.
This is the way we think as a business. It is not that we are not pursuing disruptive technologies, or business models, but I do not want this message of what is most important to get lost.
RH: I do have one specific comment on SDN and NFV and I have seen this a lot in the North American market which is a little ahead of other regions. Many service providers are embracing these technologies because it helps them improve their operational efficiency. First, they are deploying it in their own network and seeing that it benefits their TCO, which they are then transferring it to enterprise customers.
VK: I agree 100 per cent on that, but at the same time, we find that there are technologies out there that do not keep the customer’s operational reality in mind. Business customers do not just opt for plug-and-play solutions, they want you to come and do it; they want you to manage it. They want you to take responsibility for making the solution work, as it evolves. In addition, when we evaluate things, we evaluate a little bit more rigorously, because we have an operational focus.
RH: Disruptive innovation (DI) and digital transformation (DT) are creating entire new markets, often displacing established market participants that are slow to embrace change. What are some key strategic imperatives that you are considering to embrace this change?
VK: On DT, there are CIOs moving their business from looking digital to being digital. I think it is very real, and not hype. Where we are focused on is, in creating an end state where the business environment would be dynamic. The application has to scale flexibly and perform optimally. Therefore, we can provide network, compute and storage that are available for an application in a self-serve and secure manner. In addition, it has to support public & private world. We do not believe a pure public world or a pure private world exists for us segment, which is customers of 5 million USD a month, and 5,000 employees and up, in more than five countries. For that world, I am going to put everything on us and sit back.
VN: How successful do you believe you have been in making Tata Communications a global brand? How many more years do you expect it will be for you to break through the clutter, and be truly perceived as a global brand?
VK: With over 70% of the revenue coming from outside India, we really should not be viewed as an Indian brand. However, it is not about us being perceived as an Indian brand or a global brand, it is being perceived by customers and associating your brand with the services you are trying to buy. It is critical for us that they do not view us as a wholesale only company, and understand we offer enterprise services—think of us when they think of cloud services or security services. Talking of brands, we are launching a brand campaign in India too. Why in India? Because in India, every CIO knows that we sell networks, but are not aware of a variety of other services. We need to create an association with the service, even in India we have to do this before we take it outside. Short answer to your question would be, we are quarter of the way ahead. We are probably four to five years away from getting automatic association with all the customers in our key markets. We really do not mind as much about SMBs, but the enterprise segment I was referring to earlier—5 Million USD and 5,000 & up employees—we want them to think of Tata Communications when they want elastic network, compute and storage services.
When you look at our numbers, in terms of our revenue split, wholesale is 55% of our revenues today, with the remaining 45% coming from enterprise. We expect that to change to 35% wholesale and 65% enterprise in the next couple of years or so.
Additionally, by regions, NA is 18%, UK & France is 14 %, the rest of Europe being 5 to 6 %, Singapore and Hong Kong – 10% and rest of Asia – 10%. In terms of enterprise, North America and Asia is getting traction, but partly because of its size, demand in Asia is still very domestic India market focused.
VN: India seems to be gaining momentum driven by its Digital India mandate. How do you perceive this opportunity, and what do you believe will be Tata’s contribution to India specific growth story?
VK: I think we are well positioned to be the enabler for the digital transformation in India; if it is at the government level or at the private sector; both for network as well as all the cloud enabled services. It is too early to call whether we will be an MVNO in India or not. What we will be is a global MVNE platform.
Coming back more specifically to your question, beyond network, compute and storage, where we will have the direct impact on digital transformation companies is with our IoT play in India. That is super exciting, the fabric that we have built which will enable us to go up and down the stack as we find opportunities. However, they will largely be industrial applications. Then, we open up our connectivity fabric with the platform on top or consumer applications to be built in. There are some consumer applications that we are looking at, if we are going to be doing it in the background or the foreground needs to be decided—on child safety, lockers, women’s safety.
VN: What is the relationship with the Government in terms of these contracts in the digital India context? Is it healthier than before in terms of the lifecycle of the project engagements as well as the kind of other associated issues with the Government?
VK: That is still there, that has not changed the digital India per se with the Government. There are quite a lot of conversations around smart city. We want to build an IoT platform regardless of all that. Once we build it smart city can be a part of it. To answer the question on a more generic basis, with this Government it is actually easier to have conversations in some areas. We have progressed quite a bit in a relatively short span of time.
RH: In general, what do you wish would happen on the technology, regulatory and economic front to help Tata Communications do better, globally?
VK: From our perspective, in terms of size and the countries we play in, we are actually not seeing any impact of economic volatility. That is because we really do believe that the digital revolution is real, and companies have to change their model, irrespective of whether they get it right or wrong they have to try it. So, we are seeing that demand side is quite strong.
From a policy perspective, I think net neutrality is an area where sooner you get clarity the better; we can make the move on the chessboard accordingly. We have a certain view, which is aligned with most of our telecom vendors. Their views are not aligned with the content people. It costs a hell lot of money – not as a consumer, when I speak as a businessperson, why should Telcos build massive networks and make it super scalable if you cannot make money from that. However, that is a policy issue that has to be looked at from the constituents’ perspective, but clarity on net neutrality will go a long way in many markets for us.
On the technology front, we are far ahead and there will always be new things coming in. We have to make money and keep customers happy.
RH: As a CEO, which communication service provider or technology company do you admire the most?
VK: None particularly stand out for me in the communication service provider space. Among the technology companies, I do admire Google and Microsoft, I think Google for the sheer scale of ambition and willingness to go after things, not just talk, but also really roll their sleeves up and try to change the underlying technology and the commercial model. Their eye on making a difference to the world, I think it is sincere. Microsoft for just the way they are pivoted under Satya Nadella. There are many case studies written on that for a long time. Case studies on culture and not a technology.
RH: As a CEO what keeps you awake at night from an internal organization perspective?
VK: It is the whole talent transformation and it is about how to transfer knowledge – our people may know a lot about customers, but they might not know enough about software, I cannot just hire 100 people from Infosys and IBM and say I have software people. They do not know anything about the networks and the telecom; we have to do a little bit of analysis. There is a massive organization restructuring, even our sales structure today having the classic segmentation of a service provider, next gen and enterprise. Second is of course making money for our shareholders—how do I get 15% return on capital, when the industry average is 6%? We have a plan to get there; it will not come by chasing every technology fad or definitely by copying our competition. Anyway, we want your feedback on any blind spots that we have on our strategy – this is a two-way street, right? Cheers.