'Recession won't impact funding of companies with strong Indian focus'

NEW DELHI, INDIA: Indian IT companies across the board are feeling the heat of global economic slowdown and are relatively going slow on expansion plans. The recent quarter results are a strong indicator to this trend.

Among the very few companies, which are belying this trend is NetMagic Solutions, a carrier- neutral managed IT services provider.

Founded in 1998, NetMagic Solutions specialises in Internet Data Centers, Managed Hosting, and Network Operations & Remote Infrastructure Management.

The company has been able to attract foreign investment to the tune of Rs. 80 crores ($20mn) and has a massive Rs.100 crore expansion plan on the anvil.

The company is also aggressively looking out for new acquisitions in the next six to eight months.

Sharad Sanghi, CEO & MD, NetMagic, in an interaction with Idhries Ahmad of CIOL, explains why NetMagic Solutions hasn’t been affected by weakening dollar and shares insight into the company funding, expansion and acquisition plans.

Sharad is an industry veteran and has been involved in setting up Internet backbones and provisioning Internet services in the industry from 1990.

Sharad also talks about the latest trends in outsourcing managed services and company’s mandate to Go Green.

CIOL: Brief us about the recent $20mn investment that NetMagic has been able to pocket. How does NetMagic envision using these funds in line with company’s expansion plans?

Sharad Sanghi: This $20 million of funding to NetMagic was done by Fidelity International and Nexus India Capital.

For a start, we will be using this round of funding to expand our footprint in the domestic and international markets and build a nationwide network of data centers.  We will be building on our existing data centers in Mumbai and Bangalore and our virtual data centre in the United States.

We plan to set up four new data centers in Mumbai, Delhi and Chennai.  This will help NetMagic expand footprint of data centers across India.

We are also looking at Remote Infrastructure Management in US. In case of US we will be just managing customers not host them. The hosting will be done out of other data centers.

CIOL: Is Netmagic looking at another series of funding in the coming quarter?

Sharad: No immediate plans for additional funding for two quarters.

CIOL: Does expanding footprint also entail acquisitions. Will we see NetMagic acquiring some companies in the near future?

Sharad: At NetMagic we look at inclusive organic growth strategy, however if a good company that augments our skill set, provides healthy customer base, comes along, we are not averse to acquire that.  We will be open to companies associated with managed services space like application management or security management.

Having said that, NetMagic is also looking to scale organically in other regions. We expect to add 150 people in next 12 months.

CIOL: Weakening dollar has put tremendous pressure on margins of Indian IT companies.  How is NetMagic’s faring in response to the recession?

Sharad: See, majority of our business in domestic and we have not been impacted really that much. The rising rupee hasn’t had effect on our margins till now. However going forward and as we scale up, we may see an effect on the average revenues per user.

However our focus has been providing quality 24x7 services to manage data centers for businesses and to reduce their data center operations costs and free up their internal resources.

We believe as long as we are able to help enterprise maintain 100% business continuity, we will be able to garner revues. Market uncertainties tend to cancel out.

CIOL: Will funding for IT services companies take a hit because of the impending recession in US economies?

Sharad: Funding plans of companies that depend on US markets for revenues will definitely get impacted. However, companies with focus on Indian markets and appropriate business models won't have problems raising funds although valuations can take a hit based on overall sentiments.

 

CIOL: Outsourcing of key business processes like managing data centers didn’t get much traction in the beginning. How do you see enterprises waking up to the thought of having their data centers and security managed by other companies?

Sharad: See, we have come a long way from the time when customers were very reluctant to outsource their managed services. There were worries around security. All of that has changed.

Companies now see benefits in outsourcing their data center management and other processes.

This is because fast growing enterprises are finding it difficult to manage properly the data centers resulting in down time, loss of revenue that affects business continuity.

Then again, the burgeoning costs related to data centers to power, cooling and security issues are pushing enterprises to outsource their data center requirements. Companies are also finding it difficult to retain resources that have the skill set to run hosting business.

Outsourcing data center management has become essential for businesses needing to reduce overhead, increase operational efficiencies and gain a competitive edge.

NetMagic is capitalizing on this opportunity and helping availability and security of business data around the clock.

CIOL: NetMagic brands itself as a carrier- neutral managed IT services provider. How does one define carrier- neutral managed IT services provider and how has it helped company garner more market share if compared to competitors?

 Sharad: We allow customer complete flexibility in opting for the leased line provider of his choice to connect to his servers at the data centre.

He is not saddled with a service provider simply because the data centre cannot allow him to terminate any other fibre to their network.

We had a customer who used both BSNL network as well as Reliance network. Now mater who is the network service providers we provide services irrespective of the service provider. Enterprises not to be locked with a particular network provider and hence can reduce costs.

CIOL: Green Data centers are is the most talked about these days. How does NetMagic look at the whole concept of the Greening data centers?

Sharad It is a very important issue for NetMagic. It is not only a CSR thing but at NetMagic we are seriously concerned about the issue. Energy efficiency is right top on our radar. We have adopted green technologies for our data centers and there is strong mandate for green data centers at NetMagic.

Netmagic is also investing big amount on research and development to make data centers green, well powered, designed and with better cooling technologies.

CIOL: What have been the major highlights for NetMagic in the last 2 quarters, viz customer acquisition, revenue, net profits; geographical break up will be useful

Sharad: Last two quarters were very important for NetMagic. We acquired top-end large enterprise customers in telecom, banking and online portal sectors. Mumbai data center was fully booked in this period with expansion in new facility completed to a large extent. 

We acquired a US based customer for RIM services with over 100 devices and our geographical expansion in Bangalore yielded good results. Fund raising also concluded paving way for expansion of data centers.