Sharad Sanghi of Netmagic On Why The Mumbai Market Is On ‘Cloud’ 9

Sharad Sanghi, CEO of Netmagic Solutions, a cloud computing services provider,  is a great conversationalist. Apart from sharing interesting insights about the nascent cloud industry in India, Sanghi quips with jokes at regular intervals (sorry but we can’t share the jokes with you as all of them were off the record).

So much so that it’s easy to get carried away and forget that one is talking to an entrepreneur who has spun magic by building India’s leading homegrown cloud solutions provider — Netmagic. His startup, launched in 1998, was acquired in 2012 by Japan’s NTT Communications Corporation, a subsidiary of Nippon Telegraph and Telephone Corp, one of the largest telecom companies in the world.

The core of Netmagic’s offering comprises IT infrastructure hosting services; the company is increasingly expanding its cloud business, which Sanghi says has been doubling in terms of revenue over the past couple of years.

“All our services serve the end goal of providing machine-critical support to customers that host with us. So, if you look at it, we manage operating system databases, web servers, and provide security and disaster recovery services to our clients,” says Sanghi.

The company recently inaugurated its two hyper-scale data centres worth $144 Mn (INR 990 Cr) in Mumbai and Bengaluru with a total capacity of 13,600 sq m, which will scale up its data centre capacity by a whopping 70%.

Such heavy investments are usually a barometer of the future demand that the company expects and how well its business has been doing over the years.

But the demand foreseen tomorrow is showing today.

India’s public cloud services market is expected to reach $4.1 Bn by 2020 and the country is second only to China as the largest and fastest-growing cloud services market in the Asia-Pacific region.

“Growth is unprecedented, the new data centre in Mumbai has gotten completely booked within less than three months since launch. I am not saying it’s all occupied, but clients who take up large spaces (on the cloud) also take space for expansion and they give you a reservation fee for the potential expansion. We are already planning our next facility in Mumbai. The new Bengaluru data centre is also almost sold out,” says Sanghi.

Here are excerpts from Sharad Sanghi’s interview with Inc42.

Inc42: What is the core need that Netmagic solves?

Sharad Sanghi: We provide IT infrastructure hosting services, so we host customers, their machine-critical applications, and their websites in our data centres. We also run our own cloud hosting service in India and have now expanded that to include a multi-cloud hybrid platform where a client can choose the cloud he/she wants to use.

Inc42: What’s the secretsauce to the success of Netmagic?

Sharad Sanghi: We are pioneers in the area we operate in and there is a lot of faith and trust with us. Compared to some of the large telcos in our space, we are still a very nimble company and we now have the backing of NTT, which is a Fortune 500 company.

Some new players have come out but they don’t have the financial backing that we do, so that puts us in a unique spot. We have been constantly innovating. When we saw competition from the likes of Azure and AWS in India, we turned it into an opportunity for us to provide a platform that will enable customers to operate across multiple cloud platforms through a single pane of glass. In India, no one has launched a service like this.

These guys (global hyper-scalers) have a cookie-cutter model that they want to grow across the world and to provide in-depth services locally, they need a local partner. We have now partnered with all three cloud service providers — AWS, Azure, and Google — and will soon be partnering with Alibaba Cloud as well.

Inc42: You have said in the past that Mumbai is the top city in India when it comes to cloud demand. Why so?

Sharad Sanghi: Along with being the financial capital of the country, the reason why Mumbai is seeing a huge demand in cloud services is that it has the best power infrastructure in the country. Data centres are very power-intensive and companies such as Tata Power provide electricity round the clock. From what I understand, if you compare the uptime of power in Mumbai, it is better than even in New York. Last year, we had only 43 minutes of downtime in the entire year, which is not the case in any other city we operate in.

Mumbai also has an international cable landing station and, hence, connectivity with the rest of the world is better.

Inc42: You have invested $144 Mn in two centres — one in Bengaluru and the other in Mumbai — what will drive the demand for them?

Sharad Sanghi: If you look at Mumbai, the biggest demand we are seeing from is from the global hyper-scalers and we are also seeing a lot of demand due to the data localisation policy, wherein companies will have to save a copy of all customer data in India. Also, if your servers are in India, the roundtrip time for your customers to connect is faster.

We see a lot of demand for the cloud, especially because of migration from SAP to HANA — a lot of manufacturing companies are moving to HANA. We see a lot of demand after the Walmart-Flipkart deal, wherein there is a revival in the ecommerce space, more investments coming into that space, and more aggression in terms of marketing and sales. The advent of Reliance Jio has made high-quality broadband available, which has also helped a lot.

Inc42: Could you share some business metrics around your hybrid cloud offering?

Sharad Sanghi: Our overall cloud offering would be about 20% of the total revenue. It’s small, but not insignificant, and is growing at a good rate considering it was launched in 2011. Other business segments also growing fast. The cloud business is growing close to 100% a year and, overall, the company is growing between 30%-37%.

Inc42: Who are your competitors?

Sharad Sanghi: In the public cloud space, our main competitors are global hyper-scalers, but we co-partner with them as well. In data centre colocation, our main competitors are companies such as Tata STT, Sify, NxtraData from Airtel, and in managed services, companies like Wipro.

Inc42: What does your clientele currently look like?

Sharad Sanghi: Global hyper-scalers, IT services companies, manufacturing companies, media companies, we have a lot of ecommerce companies and have over 2,000 customers in all.

Inc42: According to a Gartner report, a majority of the IT spend in India will continue to be on traditional services. Do you think we are moving fast enough?

Sharad Sanghi: I am seeing rapid adoption of the cloud; even some of our banking customers are using the cloud, although not necessarily for core services but for customer-facing applications.

‘Fast enough’ is relative, but the kind of demand we see for cloud services now, especially with all the hyper-scalers here, is a lot more. We are seeing a healthy growth in the cloud. There are concerns about security for clients from the banking community, but with the maturity of the offerings and also with more sophisticated security infrastructure, a lot is improving for them.

There are two types of companies in our world — one is a cloud-native company and then you have your traditional enterprises like banking, manufacturing, etc. The traditional companies are the ones that usually go for the hybrid cloud offering.

Inc42: How is the Indian cloud market different from that of China?

Sharad Sanghi: Their (China’s) market is double the size of India, they are still growing at 70%. We are at about 50% but I think that will change very soon and we will close the gap. The demand is mainly because of gaming, video, and commerce, and Alibaba Cloud has played a big role there, also local language adoption is very high.

In India, the government is proactively supporting (growth of cloud services); also, with smart cities coming up, the opportunities will increase.

Inc42: What are your views on data localisation?

Sharad Sanghi: I don’t believe that the government should force anything on anyone. Having said that, there are obviously concerns about national security. If sensitive data is stored overseas and there is a data breach then there is little jurisdiction for the government to bring it under control.

In India, the government wants sensitive data located here and it’s justified to some extent, but we are fine if that policy wasn’t there. The intent is to not promote local data centres, the intent is to have some control of sensitive data. It is not something we have lobbied for.

Inc42: Just curious — have you looked at cryptocurrency and are you interested in mining it…you certainly have the infrastructure capabilities?

Sharad Sanghi: I would not dabble in cryptocurrency today, I like blockchain and am following news around the technology. We looked at Bitcoin mining about a year-and-a-half ago and the thinking at that time was that we have so much cloud infrastructure that could be utilised, but I think it’s not attractive and the margins today have anyway come down.

I would be very surprised if cryptocurrencies have a future in India.

(This interview has been lightly edited and condensed for clarity.)

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