Establishing connectivity in rural areas has never been the most enviable of market opportunities. A costly network roll out, coupled with a small pool of end users, usually leads to serious questions over the ROI.
Yet in India, MPLS VPN service provider Tulip Telecom has struck upon a lucrative business opportunity deep in the heart of the country’s rural regions.
The company has emerged as one of the country’s largest MPLS VPN service providers and has deployed a nationwide network by utilising wireless on the last mile. This, it claims, has successfully bridged the large digital divide between metro and rural networks.
In the public spotlight
While this is certainly a bold statement, it is one that has gathered strong support from the Indian government. The company has completed a large number of projects in the public sector, in particular working alongside the Indian government on its National e-Governance Plan, which aims to make all government services available to Indian citizens via electronic media. It is through such collaboration that the company dramatically changed trajectory from its previous incarnation as a software reseller. This pivotal moment came some 10 years ago when the company, then called Tulip Software, became involved with a project in the South Indian state of Kerala which aimed to establish the country’s first wireless district.
"What started off as a small experiment in the state of Kerala made us realise that wireless is an excellent technology for supplying last mile access where infrastructure is limited. It gave us a huge focus and after that we began leasing bandwidth to multiple operators on the backbone and creating our own PoPs," says Deepinder Bedi, executive director at Tulip Telecom.
Tulip Telecom has since gone on to complete a number of e-Governance projects in other Indian states, including Haryana, West Bengal, Assam and Madhya Pradesh. Meanwhile it has also evolved from a domestic MPLS VPN service provider to offer international connectivity for high-speed data customers, as well as offering IP-based infrastructural solutions. According to Frost & Sullivan the company is the largest data connectivity service provider in India, with a market share of approximately 30%.
Its international presence can now be felt through six PoPs; one on each of the east and west coasts of the US, one in London, one in Singapore and two in India. The company has also found that it has been able to easily transfer its expertise in delivering last mile connectivity to remote rural areas in emerging markets.
"Having demonstrated our last mile prowess in a fast growing economy like India, it was only logical to extend the same model in the other fast growing regions on the world," says Bedi. "Countries in the African continent are at the same stage today as India was five to seven years ago. Given that these countries are looking at setting in place the basic skeleton on last mile connectivity, in order to ride the bandwagon of economic growth by inclusive growth on their economies, the demand for such offerings has been stable and steadily increasing."
At the centre of revenues
Adding to the company’s growing portfolio, early last year it made the high profile acquisition of India’s largest and the world’s third largest single site data centre. The 900,000 sq ft facility in Bangalore becomes the company’s fifth data centre, joining other locations found in Delhi, Bangalore and Mumbai. It is operated through a wholly owned subsidiary of Tulip Telecom called Tulip Data Centre.
The tier 4 data centre aims to help Tulip meet a rising customer demand for collocation, managed hosting and data storage. It is also a deliberate play to strengthen the company’s foothold in the enterprise data services marketplace.
"We have secured some key data centre customers such as HP and IBM," added Bedi.
The acquisition has been described as a "great contributor" to the company’s revenues, which Bedi says stands today at approximately $600 million. He goes on to add that in the next two years, the company aims to push revenues to $1 billion. "Data centres are going to be a strong area of growth for our managed services," says Bedi. "This growth is primarily going to come by enhancing our product portfolio, establishing strong network infrastructure and ensuring we have a strong set of people."
Vertical thinking
Bedi believes data centres in India are poised to witness exponential growth in the near future. This, he says, will be driven by Indian enterprises which are increasingly recognising the need for data security and data management. Disaster recovery services, he says, are becoming of particular importance to enterprises both large and small. Pointing to the hosted data centre market experiencing CAGR of 18.4% in 2011, Bedi adds "data centres as a service will be a growing trend in the near future".
Bedi also goes on to highlight the increased need for managed services and cloud computing. "The managed services business is increasingly becoming a key focus of service providers since it commands a significantly higher tariff, typically more than double, potentially leading to a higher margin business model," he says.
To illustrate this, he points to the relationship between large banks and telecoms providers, which have traditionally used captive data centres but are now considering collocation as an option to meet short-term urgent requirements such as new site and local market requirements.
Along with the public sector, the financial market has also helped drive demand for the company’s network expansion into rural areas. Tulip has worked alongside most of India’s major nationwide banks, as well as developing working relationships with world cooperative banks, in order to supply basic financial services into remote areas. "They want us either just to provide connectivity to the region or create the right product portfolio to meet the demands of their core banking connectivity," he says.
Such developments in India are being driven by a proactive regulatory environment as the government hopes to increase access to connectivity across the population. It seems Tulip has found the right solution to help them achieve just that.
Tulip Telecom
History: Tulip Telecom first commenced operations with four employees on May 19 1992, as a software reseller. By 1994, the company had emerged as one of the top three software resellers in India and began exploring the system integration business. In 1999, the company emerged as the largest reseller for Cisco in India, having established itself as a hardware equipment company, and five years later began establishing its VPN network across India. In 2005, Tulip connected 25 cities across India on its MPLS VPN and went public through an IPO. Tulip launched its first data centre in New Delhi in 2007, a year in which the company’s network expanded to 800 locations. By 2010, Tulip had established a global reach, with 1,700 locations, and commenced international connectivity services across five continents.
Chairman and managing director: Lt. Col. Hardeep Singh Bedi
Employees: Tulip has over 3,700 employees across India, of which 70% are technical staff.
Customers: Tulip has over 2,200 clients. Frost & Sullivan ranks Tulip as the largest data connectivity service provider in India with a market share of 30.6%.
Revenue: The company reported 2010-11 revenue of $423 million.
Network: Tulip Telecom’s network reaches 2,200 locations across India. The company has a total of four data centres in Delhi, Mumbai and Bangalore and offers international connectivity across five continents.
Products and services: Domestic connectivity, international connectivity, internet access, data centre, managed services, system integration.
