Interview: former Telstra executive Drew Kelton is now running Bharti Airtel’s enterprise services in its home market of India — and finding huge opportunity while he is getting used to the differences in Indian business
Drew Kelton: the enterprise and business-to-business IT and
telecoms market in India is worth round about 70,000 crore
rupees ($15 billion)
It’s just about a year since Drew Kelton moved from Australian operator Telstra — where he was managing director of international business — to New Delhi, to become president of the enterprise services division at fast-expanding Indian operator Bharti Airtel.
It was a significant move for someone who had been at Telstra for eight years, looking after its business activities in Australia, Europe, the Americas, Asia and the Pacific — though he was not alone in moving out of the senior management levels of Telstra in the last year or so.
“I had a great time at Telstra,” says Kelton. But he wanted “the opportunity of getting involved” in Airtel: “The opportunity has to be in emerging markets,” and he was attracted by the chance of working in a mixture of global and domestic enterprise at Airtel.
Group chairman Sunil Bharti Mittal was also a reason for making the move to India: “I was very inspired by our chairman,” says Kelton. “It was obviously the best thing for my career.”
And there’s an opportunity in India, because the market is lagging “by any metric” for enterprise services. And, Kelton has found in his first year in the company, it’s a market which operates differently from those he’s worked in so far in his career.
“The enterprise and business-to-business IT and telecoms market in India is worth round about 70,000 crore,” says Kelton, showing how quickly he has adopted Indian business terminology. A crore (of rupees) is 10 million, so 70,000 of them is 700 billion — equivalent at current exchange rates to $15 billion.
“The addressable business-to-business traditional telecoms market is about 30,000 crore,” he continues — so, getting on for $7 billion.
Bharti Airtel’s business share is “about 12% of the 70,000” — which works out at roughly $1.8 billion. “They’re big numbers, driven by a number of dynamics. The Indian market is very vibrant. The emerging middle class and the increase in domestic income is creating a consumer market.”
But in terms of telecoms it’s a highly fragmented business. “There are 17 key players in the telecoms market,” says Kelton. “Airtel is a full-service operator”, with services ranging from direct-to-home satellite TV to managed services for business.
Strong competition
There is “very strong competition” in each section of the market, from companies such as Vodafone which specialises in mobile, as well as two other large Indian operators, Reliance Communications and Tata Communications.
But “there is opportunity for a lot of people”, says Kelton. But there are challenges as well as opportunities: most people have mobile phones when they often don’t have DSL at home.
Kelton’s market territory is “the top 2,500 companies in India in terms of company size and scale and their investment in IT and telecoms”.
It’s hard, he readily admits, to get a good idea of the potential, because it is such a fragmented market, with much of it divided between a large number of pay-as-you-go mobile operators. “If I look up the billing records I can find only fixed-line voice, but I can look at my market share and decide what I think the customer’s total is, and how much is left. I want a fraction of the whole of the spend.”
But he’s finding that many companies are reluctant to give all of their telecoms business to one provider. “One thing that happens in India is that it’s a trading market, and telecoms is traded as well,” says Kelton. “Companies will say: ‘I’m not going to give all my business to you because I have someone round the corner.’”
But he’s starting to develop interest in arguments around total cost of ownership, focusing on core competences. “In Telstra we had a very strong programme for the whole of a business — aggregating everything together to provide a bundled solution, providing true value for money and giving added value.”
At Airtel he’s finding customers are not so readily accepting that argument. “For example, we get a request for proposals for telecoms service procurement from a bank, and then three months later an RFP to manage the router network.” In many countries such a bank would automatically bundle the whole thing into a managed services contract.
“We’re not quite there yet.” Companies like to give different parts of the business to different suppliers. “We are attempting to change that.”
It’s an education process. “You’ve decided that a hundred-site MPLS network is something that you want,” says Kelton. “How can I persuade you that managing that network is not something you want to do yourself? In Airtel, I’m already managing 500 MPLS networks.”
Why is there this difference in outlook? One reason, Kelton suggests, is that Indian salaries are lower than in developed Western economies. “The cost of people is not usually an issue. You can throw resource at the problem.”
Changing dynamics
But this is a temporary challenge, he believes. “As India Inc matures these dynamics will change dramatically.”
Kelton sees many signs that the world of business is changing in India. “We have just launched a hosted call centre and that is really taking off.” The hosted call centre gives much more flexibility for the workforce than traditional approaches. “People are working from home, not necessarily in a physical office environment.”
Kelton says there have already been some rollouts to customers. “It’s an economic proposition and it is really starting to get some traction.”
There’s another reason why, he adds: the traffic in Delhi’s road system. There are 16 million people fighting to get to and from work. Clearly, technology to help people not commute has real value there.
“There is also the fact that India Inc itself is growing up,” says Kelton. India is becoming part of the global economy and banks and other institutions are developing fast. “Companies, ourselves included, are facing growth.”
But down on the ground, running enterprise systems in India presents new challenges, he says, because of the diversity of technologies he will have to consider for large enterprises.
“Wireline coverage will typically account for only 50% of sites. Sites will include the use of wifi, WiMax and so on. Access in this market is key — and that has implications on quality of service for that access.”
The company’s range of technologies includes small-dish satellite systems — VSAT — for some remoter branches.
“It’s the reality of what you have to do,” says Kelton. And the challenges come long before you start installing the technology — but at the point when you start considering a 1,000-site survey in such a big country as India.
When the contract is won, Airtel has then to find partners to help build the network in each location. “We have an integration role, a service role.”
Data centre applications
At the moment one area that Airtel does not do is providing IT outsourcing. “We are hosting applications on our data centre, but can I manage someone else’s desktop? The answer is ‘no’,” says Kelton.
Why? “You have to be very prescriptive about customer-based profitability,” he explains. “One of the greatest skills is to identify not the business you do but the business you do not do — and deciding whether it makes sense.”
India “has good outsourcing companies so it’s hard to go to Wipro and ask to outsource their IT”, he smiles.
But strategic network outsourcing is a different matter. “When a customer is confident with an application outsourced to our data centre we are getting traction.”
Airtel’s data centre-based managed services are “at the incubation stage”, says Kelton. Data centres are still at the “buy versus build” stage. “We have data centres in all the major locations”, and services go from “basic real-estate hosting” and are “starting to move up the value chain”, he notes. “We are moving up the stack.”
But services like that are incremental to the telecoms, he notes. “For every $1 of carriage there is 20 cents of pull-through [in services] on that,” says Kelton. But he also looks at it the other way round. “The minute you take on managed services you need the carriage capacity.” So you get $4-$5 of carriage for every $1 of managed services.
Is Kelton looking outside India, to Indian IT companies’ traditional business areas in North America and Europe? No, he says. “I will be extremely prescriptive about where we go. There is no compelling reason for me to build in the US or the UK. I might have a direct customer, but it’s more likely I’ll have a direct relationship via BT Global Services or AT&T and so on.”
And Bharti already has 150 million customers in India and also has 50 million in Africa, from its purchase in 2010 of Zain’s operations south of the Sahara. “That’s quite an international proposition.”