New Economy: Making Sify Stick

Making Sify Stick
(Contn.)

K-starting e-Commerce

A.V.Ram Mohan, President, B2B e-com In both B2B and B2C segments, e-commerce will play a key role. Sifymall has about 150 brands e-tailing through it, although transactions are almost negligible. When e-tail picks up, Sify plans to use its network of iways as pick-up and return points for retail consumers. Logistics, however, will be managed by the supplier or outsourced to a third party. ''There are payment issues that need to be sorted out. Once that happens, we expect transactions to go up,'' says Zacharias. That sounds good, but it is still on paper.

In b2b, Sify is playing for higher stakes. Its B2B marketplace, Sifywebex, has 10 channels, ranging from automotive to chemicals to plastics (See scroll bar below). The idea is to create a platform where a range of industries can not only transact, but also exchange information. Already, SeekandSource.com-an exchange for buying and selling industrial products and services-boasts 45,000 members. ''We want to make tools available for companies to transact over the internet,'' says A.V. Ram Mohan, President of Sify's B2B e-commerce.

Mohan reckons that it will be another year before any significant transactions take place on the Webex. Unlike some other B2B sites such as auctionindia.com, Sifywebex does not plan to charge a transaction-based fee. Instead, it will charge a flat fee. While that may help attract users, the Webex's success will depend on the nature of companies that list and transact on it. A sales force of 400 (33 of the employees are on Sify's payrolls) and some business partners are working on building the right mix of users.

e-Business solutions is another area where Sify is consolidating its presence. It has about 300 customers to whom it provides a range of services, including banking and financial solutions, supply-chain management (sell side), and e-marketing (Customer Relationships Management and brand building). Given that there are other successful competitors like WiproNet, IBM-Global, and MindTree, a lot will depend on how Sify chooses to play its cards. Says Pratik Gupta, Analyst, Salomon Smith Barney: ''Sify will have to pick the right business partners to be able to lead in the segments it has chosen to compete in.'' Ram Mohan, however believes there is room for all.

Biting Off Too Much?

Sure, but is Sify spreading itself thin by trying to be an integrated player? Of the $217 million the company raised from NASDAQ, $173 million has already been spent (See Where The Money Went). That leaves $44 million in hand, which CFO Santhanakrishnan says is enough for the whole of this year. Its accumulated losses, on the other hand, are about $35 million (Rs 163 crore). What's more worrying, however, is that its revenue is not growing as fast as its losses.

But for a company like Sify, every dollar that is invested in growing a currently non-revenue generating business (like Sifywebex or Learnatsatyam.com) is a loss. Some analysts blame it on Sify's integrated play. Says a Delhi-based private equity manager: ''There are significant downsides in trying to do everything.'' Others, like the former chief executive of a high-profile dotcom based in Delhi, see significant upsides to the company: ''Sify has been systematically getting into all spaces.''

Now, it is mulling tapping synergies with parent Satyam Computer to offer infotech-enabled services such as business process outsourcing. It already has a portal Serwiz.com up and running, and a tie up with the Institute of Software Research International (ISRI) at the Carnegie Mellon University to build a service capability model along the lines of capability maturity model (CMM) used by the software industry. The idea? Gain credibility as a services platform.

What Ramaraj himself expects of all this investment is to act as an entry barrier for competitors two or three years down the line. ''The cost of competing in the internet space is expected to become prohibitively expensive five years from now,'' points out the Sify chief executive.

There is something attractive about the company's integrated strategy, especially in an environment where it isn't still clear where money can be made on the internet value chain, but the risks are proportionately higher. Much much higher. Come December 31, 2001, investors will have a fair idea if Ramaraj is on track.

R. Ramaraj: "We want to be No. 1 or 2"

In his two-day old uncluttered corner room in Tidel Park, CEO R. Ramaraj spoke to BT about Sify's yesterday and tomorrow. Excerpts

The dotcom crash: We could see it coming, but the speed at which it hit us was a surprise. For the moment, the pendulum has swung to the other extreme. I am glad that we got adequately capitalised while the market was still receptive.

On his team: It is clear that we needed to attract good professionals to manage growth. If you look at our top management team, all its members have successful track records in managing brick-n-mortar businesses. We wanted a team that would focus on profitability and manage costs.

On integrated internet play: India is going to be the fastest-growing market in Asia, simply because our base is negligible. it is a key driver of the economy, and a lot of people (companies and individuals) are going to spend time and money on it. As a company we want to be best positioned to offer that value. We want to be No. 1 or 2 in the segments we are in, because the market will sharply differentiate between the leader and the laggards.

On profitability: We need to be profitable in a hurry. Which means we need to enhance revenue, cut costs and improve efficiency. In the past, we had been focusing on growth. Now, the single focus is profits. And part of the reason why we hired people from brick-n-mortar businesses, is to get that profit mentality.

On B2C rationale: We have to build a country-wide network to provide connectivity to corporates. Theoretically, corporates use the bandwidth between 9 and 5 during the day, and retail users after 5 pm. Therefore, you are optimising your resource. B2C has become a challenge because the revenue from subscribers has fallen sharply in the last nine months. There is no level playing field between VSNL and the private ISPs.

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