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IT services, future growth engine for Sify



Raju Vegesna

Sify Technologies Ltd. (formerly Satyam Infoway), which caught the imagination of the public in the late 90's by breaking into the unexplored Internet field to become the country's first private Internet Service Provider (ISP), is now looking at positioning itself as an ICT (information, communication and technology) company.

According to its owner Raju Vegesna, who is also the Chief Managing Director, the future lies not in telecommunication alone. “It will be a convergence of information technology and telecommunication,” he says. This will see many IT and telecom companies get into ICT services. To tap this opportunity, Mr. Vegesna has decided to transform Sify into an ICT company. Towards that goal, the company had already begun setting up data centres and had invested in a fully-owned software solution company called Sify Software Ltd., an entity that provides application for enterprise segments.

Sify, which survived rough times in the last six years, has identified services such as network, IT and software to propel its future growth. The company is also looking at developing these products by investing more funds and doing smart expansion, he says.

Network service

In an interview with this correspondent, Mr. Vegesna said network service was available in 650 cities. The plan was to grow this number to 1,000 soon. The company was investing in submarine cables. They would go operational by the second-half of the year from Mumbai. Similarly, Sify, he said, was betting big on IT services. It had already set up five data centres across the country and also created managed services. The software service would primarily aim at providing application for the enterprise segment. “Sify, as it enters Phase-III, will see more investments and new game plan,” says Mr. Vegesna. When Satyam Infoway was launched in the late 90's, it was the first Indian company to list on the Nasdaq stock market in the U.S. and did a high profile acquisition of dotcom company India World for over Rs.400 crore. Sify was visible across the country through its Cybercafes (Sify Iways).

Then it went through a series of ownership changes before it was acquired by Mr. Vegesna in 2006. The fixed assets of the company stood at Rs.900 crore as on date. An investment of Rs.200 crore is planned for the current financial year (2011-12) and a like amount for the next year.

M. P. Vijayakumar, Chief Financial Officer, said Mr. Vegesna held 86 per cent equity. Mr. Vegesna had agreed in October last year to bring in Rs.400 crore by subscribing to fresh capital. He had already brought in Rs.100 crore. “He will bring in the unsubscribed portion of the capital as and when we need funds for expansion,” he said. These investments would be made in a phased manner, Mr. Vijayakumar said.

“This will primarily go to add data centres, buy international bandwidth capacity, expand network and invest in managed services and people. The last mile connectivity for a consumer business is done by business partners and, as a result, Sify's investment will be on network alone. These investments into enterprise business will benefit consumer business largely,” he added.

Mr. Raju said cybercafé business was a great strategy when Sify was launched. Since there was limited personal computer (PC) penetration, the cybercafé model was well received in metros. In the wake of rising real estate price and PC penetration in metros, however, the demand for cybercafés came down. During 2006, the number of cybercafés was 3,000. This came down to 1,900 by 2007-08.

Expansion

In order to expand the market for public Internet access points, Sify would introduce a different model, a connectivity model. Under this model, the charges would be shared by the outlet owners. Sify would provide applications through cloud — Sify Mylife. The company, he said, would also enter Tier-II and Tier-III cities. It planned to set up another 1,000 cybercafés by the end of March 2012. Today, the size of the consumer business is around Rs.40 crore out of a total of Rs.700 crore businesses.

On the portal business, which fetches Rs.13 crore revenue, he said Sify had decided to piggy-back on Gmail's platform for its mail and Indiaplaza platform for e-commerce business. This would reduce the cost of business and enable Sify to focus on sports, movies and finance, he said.

On the access business, he said in spite of pressures from telecommunication companies (Airtel, BSNL and Reliance) which offered DSL (Digital Subscriber Line) at a throw-away price, Sify planned to come out with products such as broadband to home, voice over IP for both home, SOHO (small office and home office), SMB markets and IT services for high net worth individuals who require storage facility for document management through cloud.

Mr. Vegesna said the enterprise business was growing nearly 20 per cent annually. It was a profitable business and required huge capital expenditure since it needed data centres. So far Sify had constructed five data centres. Nearly 90 per cent of its current business came from enterprise services. As a brand, Mr. Vegesna wants to take Sify globally. It has offices in the U.K., Dubai and Singapore. There was huge market projected in developing countries of Africa, Asia and the Middle East.

SHANTHI KANNAN

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