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We Offer One-Stop Solutions

NTT Com is gung-ho about India. Competition poses no worry as it is confident of its pricing
and range of services



NTT Communications (NTT Com), a wholly-owned arm of Nippon Telegraph and Telephone Corporation,
provides network management, security and solutions. The company operates around 160 data centres
globally. In January 2012, NTT acquired India-based Netmagic for $128 million. Earlier, IT/ITeS and
telecom companies used to be major customers for data centres, but the exploding e-commerce sector is
now a big part of the companys growth. Akira Arima, president and CEO, NTT Com was in India recently
to inaugurate the companys eighth data centre in Bangalore. He spoke to BW about the companys global
ambitions and the challenges of operating in India. He was joined by Sharad Sanghi, MD and CEO of
Netmagic.

Excerpts:
Despite being a large player, you are over-dependent on the Japanese market. Will the focus and
investments shift to emerging markets like India?
Akira Arima (AA): Right now, 80 per cent of our revenues come from the Japanese market. But this will
not grow further because of the shrinking population. So, we are focusing on markets outside Japan. We
are significant players in North America and Europe, but we realise that they will also not grow fast
enough. So, our focus is on emerging markets, especially in Asia-Pacific (A-PAC) areas like India, Singapore,
Malaysia and Thailand.

You are in all three parts of the business traditional hosting, managed services and the cloud. Which
part is growing fastest?
AA: Obviously, the cloud (because of the lower base from which it started). In Japan, about 10 per cent of
companies are using the cloud, but that will grow faster in future. India has been an early adopter and
many companies are already using the cloud here... more than even other A-PAC regions.


Isnt it also because Indian companies, being smaller, are ready to experiment more?
AA: I dont think so

How does your cloud offering differ from what Amazon, Google or Microsoft offer? AA: Not only do we
offer cloud servers, we provide data centre co-location, network management, security, and the entire
range of solutions, including cloud-based application services. We provide a one-stop IT service to the
customer. NTT Data, a group company, offers application services.

Do you have a joint go-to-market strategy with it?
AA: Sometimes, we partner with NTT Data, but generally we collaborate with Accenture, IBM and Infosys
for application services in India. There is no compulsion for the customer to use NTT Data for application
services. We are happy to work with everybody.

The Indian data centre market is estimated at
$1.2 billion. You have retained the Netmagic
brand here. Has Netmagic benefited because
of NTT Coms global relationships?
Sharad Sanghi (SS): Whether it is a Gartner or
an International Data Corporation (IDC)
estimate, the Indian market is in the same ball
park range as you mentioned. Netmagic is not
only addressing the Indian market, thanks to
NTT Com, it is also offering services like remote
infrastructure management (RIM) to NTT Data
centres and NTT customers across the world.
So, globally, we compete with HCL Infosystems,
Wipro and TCS.

Running data centres is a capex-intensive business, where investments go in upfront and returns come
later. With eight data centres, what are the challenges of operating in India?
SS: Yes, it is capital-intensive upfront while returns come over time. We set up our data centres in a
phased manner, so that we do not have to use our entire capex upfront, and we actually grow along with
the customer. Power availability is a big challenge, and another can be the government interference on
providing an effective cloud policy. Talks are on. Hopefully, the policy will allow service providers to self-
regulate, and will also protect national security. But, that challenge has not yet come.

In India, have small and medium businesses taken to the cloud more quickly?
SS: In the cloud model, there is no capex, there is only operational expenditure (opex), and you pay as you
go. That is the essence of the cloud. That is something we have done with multiple small and medium
businesses.

Netmagic in India competes with the likes of CtrlS, Reliance Communications, Tata Tele, Sify and others.
Globally, NTT Com is known as a top-notch and premium service provider. What is the strategy in a
price-sensitive market like India?
SS: The pricing that we offer in India is very competitive. On the cloud, NTT Com has two offerings: one is
a premium offering and the other is a service called Cloud N, which is for the kind of market you just
mentioned. Our pricing is more on the lines of other global service providers in India like Amazon or some
of the Indian players mentioned. I think, our capabilities are far superior in terms of depth of service
provided. There are only a few global players who have a range of services similar to what NTT-Netmagic
has. Most Indian players only scratch the surface. Whether it is Amazon or NTT, there is a significant
research and development (R&D) budget which focuses on product innovation. We have created product
offerings that are unique. We brought 10-15 services to India which are the first of their kind tiered
storage, for example. And this was possible only because we invested in innovation, R&D and technology.



This sets us apart from the other players in India.

In the past few weeks, a fierce price war has broken out between Google, Amazon and Microsoft over
cloud services. Since the data centre market is a commodity business, price is key. How does NTT Com
compete with others?
AA: We are not focused on price competition; we are more focused on other scenarios like providing
value through one-stop solutions. Also, we have the capacity of customising to suit a users needs, unlike
our competitors.

SS: What NTT-Netmagic offers is more enterprise-grade, mission-critical, high-uptime and high-service-
level solutions; basically, it is a one-stop shop. It is purely an enterprise-based service that comes with the
requisite support.

In India, the e-commerce vertical is doing well. But globally, telcos, banking, financial services and
insurance (BFSI) are the segments that are still growing and contributing to NTT Coms revenues...
SS: While e-commerce is a large segment for us, BFSI is our number one vertical. IT and IT-enabled
services, the partnerships that we have with Accenture, Cognizant, Infosys and IBM, contribute to a
significant portion of revenues.

Wherever Toyota, Honda and Suzuki go, you automatically follow?
AA: Our biggest contribution comes from the manufacturing sector, mostly Japanese multinational
companies. Wherever they go, depending on the market, NTT follows.

For large enterprises, does a captive data centre make sense as compared to opting for a service
provider like NTT Com or anybody else in the market?
SS: If you look at it purely from a co-location perspective, one can argue that when its a very large
requirement, captive may be a better option from the perspective of economies of a scale. But when you
look at it from the point of the clients core focus and from managing infrastructure services, then
outsourcing makes a lot of sense. If its a large IT company, whose core focus is IT, then captive makes
sense. Google, Microsoft and Amazon started out hosting with someone else, but given their scale and
requirements, they soon got their own data centres. But for manufacturing companies, the core focus is
not IT. So you have to look at it in a holistic fashion. It could be a hybrid, they could outsource everything,
or build their data centres and outsource the management. AA: In Japan, many financial institutions have
own data centres. But they began to switch to our data centres because it was more economical.
Commercially, we could explain to them the cost benefits of outsourcing over running their own data
centres. Besides, the management hassles of a data centre like recruitment of manpower could be
avoided.

Apart from remote infrastructure management, where you have an edge, what else are you leveraging
in India?
AA: In the field of systems management services, we need Netmagics talent for the next global seamless
cloud. We currently have an enterprise cloud; the next version of the enterprise cloud will have a lot of
inputs from Netmagic. Remote infrastructure management, software development and product
innovation are the other areas where Netmagic is contributing.

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