VENDOR PROFILE. Tata Communications Ethernet Portfolio and Strategy IDC OPINION. Nav Chander

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1 VENDOR PROFILE Tata Communications Ethernet Portfolio and Strategy Nav Chander IDC OPINION Global Headquarters: 5 Speen Street Framingham, MA USA P F IDC believes that the market for global Ethernet services is evolving into a second phase of offerings now that major Ethernet service providers have had several years of experience, Ethernet technology has matured, and many service providers' Ethernet services have achieved MEF certification. Wireline telecom service providers are racing to implement their global Ethernet WAN service offerings with more service options, higher bandwidth rates to 10GbE, and a strategy to support demand for hybrid Ethernet WAN and MPLS VPN services. IDC expects that there will continue to be further refinements to existing Ethernet WAN services this year to keep up with this increased demand for Ethernet WAN services from enterprises. Tata Communications is poised to become a leading provider of these Ethernet WAN services. Other positives for Tata Communications include: Significant investment in Ethernet network infrastructure. Tata Communications has made significant network infrastructure investments in India and globally and is well positioned to compete with the Ethernet WAN offerings from AT&T, Verizon, Orange Business, and BT in the coming years. Common next-generation Ethernet (NGE) architecture. A common nextgeneration Ethernet architecture for India and globally makes it easier for customers to have the same set of service offerings across all markets. IDC believes Tata Communications has one of the most comprehensive global Ethernet WAN service portfolios for switched and dedicated Ethernet P2P, P2MP, and MP2MP services and is well positioned to capitalize on offering addon services for service monitoring, usage-based bursting, and application performance features in addition to class of service (CoS). Extensive India Ethernet WAN. Tata Communications has the most comprehensive Ethernet WAN offering within India for dedicated and switched Ethernet services backed by strong SLAs. Betting the future on Ethernet Provider Backbone Bridge (PBB). Tata Communications' decision to choose Ethernet PBB technology as the Ethernet backbone technology is a bold move, even with vendor support from Cisco Systems. Possible competitive advantage in emerging markets in Asia, Middle East, and Africa. IDC also believes that Tata Communications is very well positioned in marketing its own network with extensive Ethernet WAN coverage to priceconscious enterprises in emerging markets within the Asia, Middle East, and Africa regions. Filing Information: September 2011, IDC #230191, Volume: 1 United States Business Network Services: Vendor Profile

2 IN THIS VENDOR PROFILE This IDC Vendor Profile examines Tata Communications' Ethernet service offerings within the Indian and global markets and reviews the existing Ethernet network infrastructure that it has developed along with the implementation of its secondgeneration Ethernet network. SITUATION OVERVIEW Company Overview Founded in 1986, Tata Communications (formerly VSNL) is a part of the $83.5 billion Tata Group, India s largest conglomerate, and is emerging as a leading global communications provider that has undergone a critical transformation over the past three years to globalize its service offerings. For fiscal 2011, Tata Communications recorded gross revenue of US$2.6 billion, an 8% increase from fiscal 2010 and with approximately 73% of revenue coming from outside India. The Tata Communications brand, launched in February 2008, encompasses VSNL, VSNL International, Teleglobe, CIPRIS, and Tata Indicom Enterprise Business Unit into one umbrella brand. Headquartered in India, the provider has offices in 80 cities across 40 countries and has about 6,400 employees globally. It has four main lines of business wholesale voice, data solutions (including managed services), broadband, and the investment arm, through which it owns a majority stake in Neotel, South Africa's first converged communications network operator. Tata Communications' core business foundation is based on a global infrastructure, which includes the following key assets: An undersea cable network that represents one of the world's largest and most advanced networks spanning more than 210,000km of submarine cable networks connecting between Asia, Africa, the Middle East, the United States, and Europe A tier 1 IP network that provides a seamless Internet backbone worldwide 42 datacenters and colocation centers that represent over 1 million sq ft of space International wholesale voice network that enables support of over 40 billion of international wholesale voice minutes in 2011, a 25% increase over the previous year, enabling the leadership position in international wholesale voice On an aggregate basis (including investments in consortiums), Tata Communications has about 500,000km route of terrestrial fiber and cable networks and carries over 8Tbps of lit fiber capacity. In addition to being the leader in subsea cable network, 2 # IDC

3 Tata Communications continues to aspire to be one of the top 10 global enterprise providers, and its increasing share of the IP backbone traffic positions the company as a highly experienced IP/MPLS network provider. Tata Communications continues to grow its network footprint globally and within India and operates the sixth-largest global tier 1 IP backbone with over 400 POPs and a large global MPLS network that supports IP VPN and virtual private LAN service (VPLS) Ethernet services and transmits 1,600Pb/month of IP traffic. The service provider plans to target the top 2,500 global companies, focusing on those with connectivity requirements to India and other emerging markets, while also focusing on Ethernet WAN, managed services, cloud, and business video services. The Ethernet WAN services expansion follows on the heels of Tata Communications' extensive capital investment in tier 1 global MPLS and IP backbone infrastructure and diverse terrestrial and undersea fiber optic networks. Company Strategy Tata Communications is building a separate public IP global network infrastructure to handle the very large volumes of limited QoS packet traffic, similar to the wholesale voice network business model, and a converged private MPLS/IP core to support higher-value enterprise Ethernet and MPLS VPN related services. Ethernet WAN will be positioned as the core Layer 2 technology for the private IP network with requirements for large amounts of bandwidth for sophisticated customers running their own enterprise applications or MPLS networks. Tata Communications' WAN Ethernet strategy is to offer a wide range of Ethernet service options to meet different customer requirements. Tata Communications will continue to market both wholesale global Ethernet WAN services to other carriers and enterprise Ethernet services to midsize and large Indian and global firms, leveraging its established and successful carrier IP and wholesale voice business model. The company s commercial strategy is to be able to offer differentiation by offering more usage-based and burstable services to customer segments where dedicated services are not required. Tata Communications provides five types of Ethernet WAN services across various Ethernet platforms: Dedicated Ethernet, which provides dedicated bandwidth and managed CPE option for point-to-point Ethernet private line (EPL) and multipoint EP-LAN services Priority Ethernet, which provides a switched EVPL point-to-point or point-tomultipoint service including four classes of services and allows for bursting Priority Stretch, which offers EPL with flexible bandwidth with usage-based billing Virtual private LAN service, a switched EP-LAN for multipoint-to-multipoint service 10GbE for EPL service with either 10GE LAN or 10GbE WAN PHY 2011 IDC #

4 Tata Communications' Dedicated Ethernet is one of the few providers to offer an E- LAN service with dedicated bandwidth. Tata Communications' Dedicated Ethernet services are MEF 9 and 14 certified and have been enhanced to support 10Gbps and to provide online monitoring (for customers choosing the managed option) for better network visibility and management. Tata Communications' global Ethernet network is expanding to 67 countries in FY12 from 56 countries and, with upgrades to Provider Backbone Bridge in the core in 24 nodes and an already strong VPLS offering, Tata Communications continues to invest in upgrading its Ethernet/MPLS infrastructure to support more VPLS and PBB technology, which will enable more switched and burstable Ethernet services for global sites as Tata Communications migrates from Ethernet over SDH (EoSDH). In India, the metro and regional Ethernet backbone upgrades during the past few years include a regional 11-node Ethernet backbone giving Tata Communications a strong three-tier network architecture to connect enterprise customers across 130 metro networks within India and to other global sites, with a set of consistent service SLAs. Tata Communications will continue to market both wholesale global and enterprise Ethernet services, leveraging its established and successful carrier IP and wholesale voice business model. Background: Five-Year Ethernet Plan Tata Communications Ethernet WAN services began in The initial Ethernet service was a metro and national point-to-point Ethernet private line service in India launched with Ethernet over SONET/SDH. Tata Communications expanded the services to include EVPL metro and WAN services within India. In 2006, Tata Communications began offering international WAN services between 16 major international cities, and in October 2006, Tata Communications became the first company to achieve MEF 9 certification for a global Ethernet service. Multipoint services followed, with dedicated and mesh Ethernet private E-LAN services known as Dedicated Multipoint and VPLS (Ethernet over MPLS) launched subsequently in 2008 and 2010, respectively. In the summer of 2008, Tata Communications began a two-year process to identify the requirements for its next-generation Ethernet technology platform, which would become the company s global core Ethernet network and which would enable Tata Communications to transform its Ethernet services into a market-leading offering with significant differentiation and time-to-market advantages. Tata Communications believed that at its 35 40% annual growth rates, the company's existing generation of Ethernet networking technology platforms would reach a limit where their opex and capex costs exceed their pricing. This second-generation platform also had to scale to handle the extremely high growth rates for Ethernet within India and support the global expansion of Tata Communications Ethernet services for the next 7 10 years. Tata Communications evaluated alternative networking technologies such as MPLS-TP and H-VPLS from equipment vendors and concluded that neither of these technologies would easily 4 # IDC

5 support Tata Communications' requirements for scalability, multipoint Ethernet, and multicast forwarding as well as Ethernet Provider Backbone Bridge technology. In 2010, Tata Communications began the transition away from its Layer 1 SONET/SDH network and deployed Ethernet Provider Backbone Bridge technology on the Cisco ASR 9000 platform for both future metro and core Ethernet services, initially in 24 nodes within its global network. The provider chose the Cisco PBB solution over a hybrid IP/Ethernet solution, thereby eliminating the network layer, to scale its core network to support a flexible set of point-to-point and multipoint Ethernet services. Why Is PBB a Significant Move for Tata Communications? With an eightfold growth in Ethernet circuits in service during the past four years, Tata Communications is betting on continued high Ethernet service growth rates and a strategy of offering dedicated and burst multipoint Ethernet services. By choosing Provider Backbone Bridge technology, an IEEE 802.1ah approved standard protocol that routes traffic over a provider s network without losing a customer s individual virtual LAN (VLAN), Tata Communications believes that PBB's VLAN scaling capability of 16.7 million VLAN services gives it a significant competitive advantage compared with other Ethernet service providers that are limited to 4096 VLANs. PBB, also known as "MAC-in-MAC," adds an additional service tag with a 24-bit address space included and used to separate customers, leading to a more scalable solution. The use of a separate Medium Access Control (MAC) header for both service provider and customer also means there is a clearer and stronger demarcation between the customer and service provider networks and makes this closer to an MPLS implementation. This can simplify the operation of the Cisco ASR 9000 Series Ethernet switches, which do not need to learn or interpret customer MAC address learning, improving multipoint switching performance. PBB's "deterministic protection" (where a fixed path can be configured to handle traffic in case of congestion or failure on a given circuit) improves resilience. Tata Communications believes this yields a better opex cost model for service management. As the first global provider to go the PBB route across its core network, Tata Communications is taking a calculated risk that PBB will meet Tata Communications' future Ethernet network expansion requirements and is going to be around since it is supported by a tier 1 vendor like Cisco. Tata Communications' PBB network will have nodal diversity to take the place of SONET's self-healing capabilities, starting initially in Europe, followed by support on the East and West Coasts of the United States, Japan, and finally in Singapore, which account for 80% of Tata Communications' traffic. Tata Communications believes this resiliency capability to switch to another node in another city is a competitive advantage compared with other carriers that use an additional rack of equipment housed in the same facility, especially if there is a fiber cut IDC #

6 Positioning Ethernet Services for Wholesale Customers Tata Communications' biggest advantages for its wholesale service provider customers 30% of its customer base will be the ability to buy bandwidth in 50Mbps. It is expanding its product set to include burstable bandwidth to scale from 1,000Mb to 10,000Mb in 500Mb increments. Dedicated and switched high-bandwidth Ethernet services like 1GbE and 10GbE have CoS capabilities and SLAs for intercarrier traffic requirements and applications like storage networking. Tata Communications' extensive Ethernet backbone and footprint in India enables Tata Communications to partner with other global Ethernet carriers that have a strong MNC footprint and that need access to serve their customer locations within India. Differentiating Point-to-Multipoint Ethernet Services Tata Communications' implementation of PBB will help the company scale to support very large point-to-multipoint Ethernet WAN service deployments because it doesn t require customers' MAC addresses for service routing, like other types of Ethernet networks do. Most Ethernet networking equipment limit the number of MAC addresses that can be handled in a MAC lookup database, and every technology except PBB uses the customer's MAC address to forward the frame. The high growth rates for multipoint Ethernet traffic will exacerbate performance issues for Ethernet service providers that do not address this issue because of the extremely large number of MAC addresses that are managed. Tata Communications is taking a longer-term view of its Ethernet service business and is addressing this now before it becomes an issue, similar to Verizon Business' implementation of PBB for its U.S. metro Ethernet backbone deployed with Ciena (former Nortel) switches back in Another security benefit of Tata Communications' decision to implement PBB for multipoint services is the use of a unique service identifier, which decreases the amount of forwarded MAC information that has to be stored in MAC address lookup databases, which also helps protect enterprise and wholesale customers from distributed denial-of-service (DDoS) attacks usually launched against specific customer MAC addresses. Ethernet WAN Value-Added Services Tata Communications offers a managed Enterprise SLA Option to Ethernet WAN customers by installing equipment at the customer CPE, which enables Tata Communications to provide an end-to-end link SLA for service uptime, packet loss, latency, and jitter including local access on networks from other service providers. Ethernet WAN performance monitoring of the entire network is being enhanced to support customer-specific performance monitoring, which then can be sold as an addon service. Tata Communications is investing in Web portal tools for customers to be able to view and access the customers' service performance. Customer self-provisioning of service bandwidth changes is something that is not available. 6 # IDC

7 FUTURE OUTLOOK Tata Communications has stated its ambition to become a tier 1 global service provider in the next three to five years, focusing on emerging markets. The provider believes that emerging markets is its competitive edge over the existing global tier 1s (i.e., AT&T, Verizon Business, Orange Business Services, BT Global Services, T- Systems, and Cable & Wireless). Tapping its experiences in its home markets of India and South Africa, as well as its footprints, it has established presence in other emerging markets including China, Southeast Asia, the Middle East, and Africa. Tata Communications believes that it is in an advantaged position to assist multinational and growing Asian enterprises with their go-to-market WAN strategies into these emerging markets. Tata Communications is well placed to target MNCs with operations in multiple sites in India as well as India-based enterprises expanding their operations abroad, with the extensive global coverage into 56 countries, expanding to 67 countries in Tata Communications' global Ethernet WAN services portfolio complements its global MPLS VPN offerings and Tata Communications' ability to reach many emerging and developed countries directly with its own expanding network footprint ensures a higher degree of customer experience. End-to-end performance for high bandwidth, low latency, and mission-critical applications is essential. This will be tested as Tata Communications faces more direct competition with the other service providers. Value-add Ethernet WAN services, like service monitoring, application monitoring, and performance management that provide "stickiness," will become essential for Tata Communications to remain competitive. Tata Communications' significant investment in a next-generation Ethernet network using PBB technology is an aggressive move to be the first mover in implementing a highly scalable native Ethernet WAN network throughout India that mirrors Tata Communications' global next-generation native Ethernet WAN network, given that there is an alternative MPLS-TP technology enabling service providers to converge their MPLS networks to a single infrastructure to support both IP-based Layer 3 networking services and Layer 2 Ethernet transport services. This new Ethernet network will be capable of supporting larger traffic flows of up to 10GbE between datacenters and larger sites. Tata Communications plans to support PBB in the core Ethernet network, using Ethernet over SDH to provide connectivity into smaller locations. Tata Communications will continue to operate a separate global MPLS/VPLS network for GVPN and Ethernet. IDC is expecting to see higher growth rates for switched Ethernet traffic as enterprise customers shift some of their WAN requirements from predominantly more expensive, dedicated point-to-point services to more economical and flexible, shared point-tomultipoint and multipoint services, which could make up as much as 35 40% of service providers' revenue within the next five years. Tata Communications is taking a longer-term view of its Ethernet service business and is addressing the scalability issue for point-to-multipoint services now before it becomes an issue, similar to Verizon Business' implementation of PBB for its metro Ethernet backbone deployed with Ciena (former Nortel) switches back in IDC #

8 Tata Communications will have to demonstrate to the market that PBB can overcome the perceived issue that provisioning Ethernet services using PBB is more complex than alternatives such as MPLE-TP, resulting in longer lead times for provisioning of Ethernet enterprise services. An opex case study to compare and analyze the two technologies is something IDC recommends Tata Communications should consider. ESSENTIAL GUIDANCE Advice for Tata Communications Tata Communications' significant investment in Ethernet WAN network infrastructure bodes well for the carrier. IDC predicts that the continued trend where today 30% of Fortune 1000 MNCs are based in Asia bodes well for ICT data services like Ethernet and MPLS. Tata Communications is well positioned to leverage its own network assets and its global brand in Asia, where Tata Communications is perceived as a strong emerging carrier that is capitalizing on the Ethernet WAN service growth. Tata Communications will need to carefully assess competitive Ethernet WAN opportunities with new MNCs to see if Tata Communications has sufficient brand equity and in-country support in Europe, North America, and Asia to compete with Verizon Business, AT&T, Orange Business, and BT. Positioning Ethernet reliability, flexible bandwidth choices, and a highly scalable Ethernet backbone with distinct Ethernet WAN service offerings is a result of Ethernet PBB, which is a key enabler of these capabilities. Tata Communications will need to invest in more marketing tools and educational Webcasts to explain and highlight the benefits of this technology choice to the enterprises, given that there is an alternative MPLS-based MPLS-TP technology that is a proposed standard with quite a bit of industry momentum including from Cisco. IDC recommends that Tata Communications clearly communicate to its existing customers the role of the three major Ethernet platforms in use, Ethernet over SDH, MPLS/VPLS, and PBB, for the next months and any transition or loss of functionality. It is also important to differentiate each of the Ethernet service offerings and be careful not to get into PBB versus MPLS technology ideology with enterprises and rather focus on key applications like low-latency trading or datacenter virtualization. Also, IDC believes many of Tata Communications' customers will also likely require hybrid Ethernet WAN and MPLS solutions that combine MPLS VPN services at some locations and Ethernet WAN at others, as evidenced by IDC's 2010 U.S. WAN Manager Survey where more than 58% of enterprises said they already use hybrid network services. IDC believes Tata Communications' decision to implement now rather than wait for the dust to settle on the MPLS-TP standards is a good move. Tata Communications' phasing in of PBB starting with several global sites and now expanding into India gives it time-to-market advantages. Class of service (CoS) is a key part of Tata Communications' existing Ethernet priority and VPLS offerings and is currently scheduled to be expanded to its PBB network in 8 # IDC

9 2012. IDC believes this capability on the PBB infrastructure is important for enterprises, and it is essential that Tata Communications have a consistent CoS policy across existing and next-generation platforms. IDC recommends that Tata Communications closely work with Cisco to ensure that this feature is implemented on the Cisco ASR 9000 platform as early in 2012 as possible. Tata Communications' ability to offer both wholesale and enterprise customers an end-to-end latency SLA is a good feature and speaks well to the reliability of the Ethernet network. IDC believes that Tata Communications will have an advantage. Tata Communications' customer-specific Ethernet service monitoring is a very good step in ensuring higher value-added revenue and better stickiness. LEARN MORE Related Research 2011 Tata Communications Global Industry Analyst Summit, New York City: Business Strategy and Outlook (IDC #229368, July 2011) Copyright Notice This IDC research document was published as part of an IDC continuous intelligence service, providing written research, analyst interactions, telebriefings, and conferences. Visit to learn more about IDC subscription and consulting services. To view a list of IDC offices worldwide, visit Please contact the IDC Hotline at , ext (or ) or sales@idc.com for information on applying the price of this document toward the purchase of an IDC service or for information on additional copies or Web rights. Copyright 2011 IDC. Reproduction is forbidden unless authorized. All rights reserved IDC #