BA Systems: Enabling Managed Services
Date: Tuesday , September 30, 2008
In technology there is no question of being small or big. Think about how Michael Dell thought he could beat a giant like IBM. What matters is to build a robust product with intelligent selling strategy, with the right price in the right time for the right audience one can deliver. This is the message, Bangalore headquartered router company, BA systems is conveying loud and clear. “In the networking space, Ciscos or Junipers of the world may be pioneers. But there is always a better way to do a thing. And we have done that,” says proud PJ Singh, Founder and CEO, BA systems.
Veterans in the networking technology Singh and Krishnan Sunderam, Founder and VP Technology, had a strong reason to feel happy when they sensed the opportunity to sell router products, if they build it better than the incumbents had, in emerging markets like India. They found that in market for routers in India has been growing at 15-18 percent compared to the growth of about 5 percent in developed countries. In fact, this was the economics behind company’s decision to build products for India. They also knew the ‘sensitivity’ of these markets, where it’s not just human tendency, perhaps the business propensity also, to go for some thing that is better and cheaper, if offered.
However, it was not a starry road ahead for this duo to effortlessly chase their dreams. Networking stalwarts like Cisco, Juniper, Nortel were already highly belligerent in snapping up most of the market share in India. Yet, the duo founded BA Systems in February 2005 to bet on their proficiently crafted “the best for less” strategy to sell their unique router products, they built exclusively for emerging market, which then went on to become the first Indian Enterprise Core and Edge managed router manufacturer for enterprises within four years of its inception.
Also, over the years the role of networks has evolved from basic connectivity among users to access applications that support business processes using the bandwidth that existed outside the network. “With organizations in emerging markets facing the demand for increasing scalability of infrastructure, integration of complex technologies, security threats from hackers and viruses, and escalating costs of systems integration, networks are bound to offer increased and diverse functionality,” opines Singh. Actually, this fact also led the BA team to build innovative router products.
Taking on the Incumbents
Just look at the market dynamics. The global enterprise routers market is presently estimated at $4-billion. Edge, PC based, Wireless, ADSL, Broadband, XDSL and Core routers make up most of this industry. However, if we consider the growth of router market only in India, it grew by 26 percent to $452 million during 2007-08 from $360 million in the previous fiscal. The dominant player Cisco holds about 80 percent of current market share. However, due to BA’s uniqueness it is now ranked no.4 Router Company in India.
But how to take on the biggies? Betting on such a dynamic market where big sharks are always scouting to swallow tiny fishes is certainly a daunting task. Perhaps even the best of the management practices will not help in such a scenario. The only way to address such situations is to adopt ‘strategy games’ based on their prospective customers’ requirements. “Though these major players have smart technologies and great marketing machines, their technology is not custom made. There are instances of several Indian companies asking them to design custom made products for India. Despite being big and smart, they take long time do that. Hence we believe that there is always a gap here to deliver cost effective and easily customizable networking solutions for needs of the emerging markets,” reckons Singh.
There are companies who want to upgrade their networking infrastructure, but cannot do it immediately because of huge cost associated with it. Going for name brands is cost prohibitive for them. Explicates B Jagadish, Vice-President, Sales and Marketing, BA systems, “We give enterprise customers a product that addresses their needs at an affordable price. Plus, leveraging a combination of new packet processing software and embedded management utilities, BA’s products allow IT managers to align network resources to applications, thereby reducing both CAPEX and OPEX significantly for multi-site deployments.”
Not Just the Cost but Enabling Managed Services
“We believe this is the way enterprises will fulfill their networking needs by buying a service from their trusted service provider rather than buying hardware, software and hire network engineers to maintain it. This turns part of their IT CAPEX to OPEX. This also enables enterprises to focus on their core business and not worry about having an extra department. We enable service providers and our channel partner offer these services to their enterprise customers” says Singh.
“So we were able to compete with this strategy of offering better, custom made solutions at an affordable price and leveraging the channel,” says Singh. The sole motto of BA, which also has an office in Sunnyvale, U.S, is to promote its high quality products and solutions to verticals like mid-sized and large enterprises, service providers, education, hospitality, health care and other sectors through their channel partners by enabling them to manage the network infrastructure of their customers, which is absent in the products offered by BA’s competitors. The uniqueness of BA is its ability to offer ‘Managed Services’ for its Channel Partners and service providers to generate incremental annual revenues beyond the first sale. This is essentially BA Systems’ technological innovation and disruptive business model.
Today, BA has enabled its several channel partners to manage the networking infrastructure of companies like HTMT Global, Taj Group of hotels across India, ITC Hotels, Motilal Oswal, and many more. BA’s routers are not just simple routing. These are actually managers of the companies’ networking infrastructure.
Hence BA is betting on an exclusive strategy wherein it plans to take on this emerging market called ‘Managed Services’ by enabling its channel partners and service providers with a complete solution beyond basic networking solutions. In simple terms, Managed Services refers to Channel Partners being able to offer services and managing the services. For instance, BA has built the product in such a way that it can enable their channel partner to know how much of allotted bandwidth his customer is using, to give information about traffic and such other details, which could help the end user to use his resources optimally. “Managed Services is the key feature of our product and also the differentiator,” states Singh.
Furthermore, this also includes activities like managing key challenges of enterprises or institutions, who like protecting their communications infrastructures from an increasing number of security threats including viruses, worms, information theft, and data sabotage. Hence enterprises that are looking for a cost effective network security solution could leverage the BA’s offering that will closely integrate networking and security services at the device and network levels. It will manage all networking infrastructures to provide secure connectivity, threat defence, robust trust, bandwidth bundling, management systems, network management and analysis and support for multiple WAN Interfaces and fail over between multiple ISP bandwidth service providers. “Despite such a value proposition, a customer can avail the product for far lesser CAPEX than it’s rivals, whose products normally does not offer such features, and to get such a feature, customers have to buy an extra device or software which is expensive,” claims Jagadish.
So, the difference here is that instead of buying just a bandwidth from an Internet provider and purchasing router or network management services from a separate equipment vendor, BA’s products enable channel partners and service providers to offer a whole bundle in one shot, as a service, along with a contract to manage enterprises’ infrastructure. For an end customer, it eliminates the need for multiple devices, eradicates the hassle of dealing with multiple vendors and saves operational expenses, as BA’s package will manage the customers networking infrastructure, thus reducing the manpower cost for the customer for the same.
BA’s plan is to partner with Internet service providers (ISPs) and build up a customer base, which the ISP knows, and familiar with. Singh attributes this strategy to a well-known and tried strategy to get to end customers by partnering with established brands i.e., top service providers who want to offer managed services beyond selling bandwidth. Besides, the company’s go-to-market strategy is to build direct relationships with national system integrators (SIs), Network Integrators (NIs), telecom equipment vendors and regional distributors servicing SI-VAR (value-added-resellers) in local markets. What attracts all of them to partner with BA is the lucrative deal over established brand names. And unlike with big brands, all these selling partners are free to choose their customers. The company offers better ‘net margin’ than their competitors to its partners along with enabling them to sign a remote management contract with their customers. “The big guys like Cisco, Juniper or Huwaei cannot do this,” affirms the confident Jagadish.
Currently, the company operates with 30 channel partners in India and has three national SIs and two ISPs directly. The company is further working on this to form partnerships with some of the top ISPs and hopes that it will successfully implement this strategy completely by next year.
As of now the company has partnered with firms like Wi-Fi Internet services provider Microsense, Net 4, Netmagic, Allied Digital and many others as authorized solution providers to offer such services and to rapidly grow market penetration in Indian markets. BA systems already has over 60 plus of High End Enterprises Networking customers in its kitty. “For partners, such an arrangement helps to get continuous business. It will not be ‘Once sold, it’s over’ kind of business,” explicates Singh. Moreover, “Our end customers can interact with us directly if needed. That is the way we keep our relationship with our customers. Whereas it’s not the case with our competitors,” he adds.
Building the Technology
It was early 2004, when Singh and Sunderam, were casually discussing over a cup of coffee, about a latest white paper, which theoretically proved that by leveraging FreeBSD technology, popular open source version of the BSD OS, Pentium processors could achieve delivery of more than one million packets per second of data over a network. At the same time another white paper came up which proved that one could have parallel search algorithms within one’s software process engineering. The true breakthrough was when they finally succeeded in achieving “million packets per second” level using Intel architecture and pure software engineering on a prototype. There were other technologists around them who helped to get from concept to prototype and then launching the company. The group realized that this technological breakthrough could help them to build cost effective networking solutions to address the needs of emerging markets, a major technological obstacle of building the solid technology around that was surmounted. Now the IP is protected by patent. On the contrary, BA’s competitors have expensive proprietary ASICs and cumbersome software to achieve similar performance.
BA titles its offering as next generation managed routers. These are multifunctional integrated software capable routers, which has all functions of a gateway. These are carrier grade, reliable, and robust, multi-process router with Modular Router operating system with inbuilt Firewall, VPN, QoS, IDS, IPS, WEB, URL and Content Filtering facilities. Since emerging markets such as India are cost sensitive markets, which are being BA’s primary focus, they built the whole technology leveraging open source platform and integrating it with FreeBSD technology, and their own Intellectual Property (IP) developed at Allegro Networks, a networking venture founded by Singh and Sunderam prior to BA Systems.
Says Jagadish, “The BA router products deliver multi-tasking functionality with guaranteed performance under heavy load.” Unlike the conventional enterprise products, which are device-centric, the technology is built in such a way that BA’s routers enable configuration of routing, security and traffic management resources by application and interface, thus eliminating the need for single function network appliances.
The company claims that its routers are embedded with element and network management capabilities to maximize the performance across multi-site networks. “The key attributes of BA’s products include deterministic performance enabling dynamically part network resources to guarantee application performance; embedded EMS/NMS tools through which the product features can be remotely accessed and proactively managed; and application specific configuration that enables custom routing, security and traffic management configurations by application and interface,” informs Jagadish.
Carrier Class Routers for Enterprises
Notably, BA is able to compete with the bigwigs because it brought the features of carrier class routers for the enterprises, which added value to the offering and also for the investment made by the customers. The carrier routers are sophisticated devices that are capable of simultaneously managing multiple protocol engines, forwarding millions of packets per second and enabling revenue generating services. Usually they are used in stressful operational conditions. Hence, BA’s solutions not only reduces customers’ CAPEX and OPEX, but also address the power to implement IP networking services with minimal disruption and maximal remote control from a central location. And this was achieved by combining the high performance and carrier-grade reliability of the BA Systems Operating System (BOS) with a central management application—BA Systems Element and Services Management Supervisor (BESS). “Probably it will take several years for our competitors to reach this level despite their size and access to the resources. And we are already there,” informs Jagadish about the competition.
BA claims that its routers are more cost effective than its competitors. The company believes that they were able to achieve this level because they have built huge horsepower on their device. BA’s routers processor speed is 10 times faster and they give preloaded 512 MB RAM and 256 MB Flash Memory which is expandable upto 1GB and 2GB respectively, which is four times the memory capacity than their competitors. Along with this, the products have distinct features like real time remote diagnostics, SLA probes and third party device monitoring services.
“More importantly, even if these biggies decide to slash their price to our level, we have defensive technology which will help us. We have built this product leveraging Intel and open source ecosystems, so whenever Intel releases new chip, price for its previous chip significantly goes down. The advantage for us here is that we will wait for Intel to move upscale and also to keep on competing with AMD aggressively every quarter so that we get the price advantage that can be passed on to the customer,” chuckles Jagadish.
The India Advantage
“Gone are the days when people used to think that whatever built in India was not of world class quality,” says Singh. Hence, when BA System decided to sell their products for Indian market, the logical choice of location for manufacturing was also India.
Currently, BA Systems works with India based contract manufacturers. “Though countries like China or Taiwan offer more cost effectiveness compared to India, when it comes to volumes India has cost as well as the quality advantage,” declares Singh.
The company is building a skilled technical team in India to become the new worldwide router supplier. Today it has a research and development center in Bangalore. Says Jagadish, “We see great opportunity in the telecom sector and believe that Ethernet and broadband would be the areas where we can maximize our focus.”
The Road Ahead
“We are targeting the Asia-Pacific market since it is growing manifold in the Enterprise segment of routers,” believes Jagadish. BA has already sent its first router shipment to China, Bangladesh, Vietnam and Middle East. Funded by eminent VC firms like BVP, Silicon Valley Bank, and Gold Hill, BA plans to enter into other BRIC (Brazil, Russia, India, China) countries first and then attack APAC, North America, and Western Europe region by partnering with Original Equipment Manufacturers (OEMs) after conquering the India market. But, for each market the company plans to conceive different marketing strategies according to the needs of the customers.
“We aim to capture 10 percent share of routers market by 2010,” the CEO makes clear the company’s next ambition. The company expects a very healthy growth percent, specifically in the managed routers segment, which are enterprise core/aggregation and enterprise managed edge.
With such a concrete technology, strong selling strategy and a favorably acceptable cost proposition to the enterprise customers, BA Systems aspires to achieve the place next to Cisco and Juniper in India within three years. “We’ll achieve that too,” concludes Singh.
BA Systems At a Glance
Headquarters: Bangalore, India
US Office: San Jose, CA
CEO: PJ Singh
Investors: BVP, Silicon Valley Bank, Gold Hill
Capitalization: $12 million