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Sify Technologies: Enterprise remains the mainstay of the company’s business

November 25, 2015
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Sify Technologies, a leading information and communications technology (ICT) solution provider in India, has come a long way since its foray into the country’s telecom market in the late 1990s. Over the years, Sify has modified its product offerings, delivery channels and business models to better cater to the evolving needs of the Indian telecom market. It started as a pure play internet service provider to leverage the internet boom of the early 2000s. Thereafter, the company expanded its business operations by launching cybercafés across the country. However, when the demand for these cafés later declined, it shifted its focus to the enterprise segment.

In fact, the enterprise segment has emerged as the mainstay for Sify’s business growth in the Indian as well as international markets. The company has launched several services targeted at this segment, including hosting, voice and security solutions. It has also forayed into the cloud computing market and is amongst the top players in the segment. It offers public, private and managed cloud services. Recently, Sify launched cloud services targeted at small and medium enterprise segment in Kerala. The circle has the largest digital service penetration in the country and therefore is more prepared to adopt new age technologies like cloud.

The increasing adoption of cloud services is the top growth driver for Sify Technologies. With huge amounts of data being generated across a host of mobile devices, cloud storage is no longer an option but a necessity for medium- and large-sized organisations. Cloud services, together with convergence and virtualisation, have opened up new growth avenues for Sify in recent years.

In the coming years, government initiatives in the form of the Digital India and Smart Cities projects will bring new business opportunities for the company. Digital India has resulted in increased interest from the government sector to deploy IT solutions and services. The state governments are aggressively pushing for IT deployment and demanding multiple services. All these developments will work in favour of companies like Sify Technologies. During the quarter ended September 2015, the company witnessed robust growth in the public sector business and enterprise segments.

Operational and financial highlights

Sify’s telecom data network infrastructure reaches out to over 1,300 cities through its 38 data centres. Of these, six are Tier III data centres across the cities of Chennai, Mumbai, Delhi and Bengaluru. In addition, the company has licences to operate national and international long distance services, and offers VoIP backhaul for international carriers. It has also partnered with various submarine cable companies globally.

During 2014-15, the Middle East-North Africa cable system became operational at Sify’s cable landing station in Mumbai. With this addition, Sify now has access to over five cable systems for carrying traffic on the Mediterranean and Atlantic routes. The addition has enhanced Sify’s internet capacity by over six times.

Technology integration services added more than 110 new customers under its network integration, security and data centre, and unified communication service segments. Multiple data centre and disaster recovery infrastructure build projects for PSUs and government entities contributed significantly to this business.

Sify has an expanding base of managed services customers, both in India and overseas, and is India’s first enterprise managed services provider to launch a security operations centre. The company’s North American market is beginning to gain traction with increasing demand for its managed services.

On the financial front, Sify Technologies Limited reported a net profit of Rs 133 million during the quarter ended September 2015, a 48 per cent growth over the Rs 90 million reported during the corresponding quarter in 2014. Revenues grew by 18 per cent to Rs 3.71 billion from Rs 3.16 billion during the same period. The capex during the quarter under consideration stood at Rs 669 million. A significant share of Sify’s revenues is currently derived from enterprise services comprising telecom, data, cloud and managed services, application integration, and technology integration services.

Challenges and the way forward

While the company charted growth on the operational and financial fronts, it faces stiff competition from its peers. This is reflected in the small share held by Sify in the country’s total internet subscriber base. As of March 2015, Sify had 5,134 internet subscribers, accounting for a minuscule share of the country’s total internet base, which stood at 302.35 million.

While the company is betting big on the cloud market, the maturity of the public cloud in India continues to be low. Moreover, this market has in recent years witnessed interest from several companies, resulting in the entry of a number of new players. The growing competition from emerging domestic public cloud providers such as Tata Communications, Netmagic, NxtGen, Nxtra Data and CtrlS poses a significant challenge for Sify.

These challenges notwithstanding, the business prospects are promising for companies like Sify. The Indian IT industry is undergoing a major shift from traditional hardware-dependent business models to virtual platforms and multi-point/multi-device access. This shift, coupled with the government’s increased focus on ICT, will provide significant business opportunities to Sify going forward.

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