Good news and good sense are usually in short supply in the unpredictable world of Indian Telecom.
Courts cancel licenses en masse, balance sheets bleed red from sky high debt, regulators fiddle while the sector burns and most consumers can’t seem to find a mobile connection that lasts through a call.
But far from the madness of it all, behind a long road flanked by concrete-and-glass structures and young technology professionals smoking in small huddles outside them, stands a massive building that may be the best news I’ve seen in a while.
electrified intruder-sensing fencing, recently transplanted palm trees and a phalanx of security guards, it is the Tulip Data City – a massive data center measuring nearly a million square feet, making it Asia’s largest and the world’s third largest. The hulking tower can seat 12,000 server racks and over 1500 people, using up nearly 100 MW of power at peak in the process.
It’s owned by Delhi-headquartered Tulip Telecom, a company that has cannily and progressively moved up the Telecom value chain in India since getting its first big break in 2003 installing wireless radios in Kerala’s Malappuram district. I first wrote about Tulip and Col. H.S Bedi, the retired Army colonel who heads it, two years back.
Back then the surprisingly foresighted Bedi was just beginning to transition Tulip from being primarily a low-bandwidth wireless connectivity provider to a high-bandwidth fiber-optic enabled one.
Bedi’s goal was to introduce his own fiber-optic connectivity first in the central business districts (CBDs) of India’s leading metros, and then the top 100 cities. Doing so would allow Tulip to become a more complete telecom services provider to enterprises, in many cases competing directly with the likes of Bharti, Reliance Infocomm and Tata Teleservices.
When I met him yesterday at his newly inaugurated data center, I asked him how the plan had fared.
“We had initially planned to connect just the CBDs but found the demand so strong that we laid over 20,000 km of fiber-optic covering 300 cities. That gives us the largest intra-city (within a city) fiber network in India,” he said.
From Fiber to Cloud
With the addition of the massive data center, incidentally it’s fifth, Tulip is now attempting to segue into the next higher level of services in Telecom: managed services and data centers.
“Over 75 percent of the Forbes 500 list are now our customers. And many of them don’t want to deal with multiple vendors for connectivity and infrastructure,” says Bedi.
By vendors he means managed infrastructure providers like HCL, Wipro, IBM and HP.
“Because they are not telecom providers, they cannot legally sell bandwidth to customers. So if a customer has to choose either us or them when trying to reduce their vendors, it has to be us,” he says.
The Bangalore data center is Tulip’s Rs.900 crore (that is the amount it is estimated to have spent on it) wildcard entry card into this game.
Through it Tulip plans to offer a suite of infrastructure services like managed services, network security, server hosting and soon, its own cloud offerings.
Analysts expect the third-party data center market in India to grow at a compounded rate of between 25-30 percent over the next five years, thanks to robust demand from virtually all major sectors. Reports also suggest Tulip is expecting a steady state revenue of Rs.950 crore from the data center, which should happen in four years.
Asset-Light, Common-sense Heavy
Though Tulip’s bets appear audacious, in reality they are often conservative and textbook examples of expansion.
“My business model always has been that investments should follow (customer) orders,” says Bedi.
So unlike most of his peers who invest billions of dollars in pursuit of often ephemeral markets, Bedi prefers to line up customers for Tulip’s services before incurring the capital expenditure for the underlying infrastructure.
So it scopes an anchor customer for its connectivity in a new city before spending 1-2 months laying down the fiber-optic that will deliver it. And instead of spending serious money laying inter-city (between cities) fiber-optic, it cannily chose to lease that capacity from other operators thanks to the glut in supply there. In contrast, intra-city fiber is usually in short-supply.
As a result of these moves, Tulip has been able to increase its addressable market tenfold from Rs.1400 crore to Rs.14,000 crore within just 3-4 years.
What is Tulip’s expansion strategy, I ask Col. Bedi. “We prefer to keep learning on the ground while moving forward,” he says.