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Unencumbered networks

01 Apr 2010

Robin Hartendorp is not a man given to hype. He speaks quietly. His most admired person is David Lange because the late Prime Minister was a plain-speaking man with “a bit of mongrel in him” and he cared about the underclass. Hartendorp thinks the government’s Ultra Fast Broadband network is there to deliver a social good, not an economic one, and he says the regulation of Telecom has contributed little to his company’s success. He’s been Chief Executive of Datacraft, a division of international company Dimension Data, for 10 years. In 2006, when Telecommunications Review last interviewed Hartendorp, the company had 100 staff and a $40 million turnover. Four years later, staff numbers are 227 and turnover is $71 million. Profits fell to $972,000 to the year September 30th 2009, but Hartendorp claimed at the time this was due in part to a renewed programme of investment. His bullish outlook is that Datacraft will have trebled last year’s revenue by the end of the current financial year. The optimism is due to Datacraft picking up the pieces when the Government Shared Network fell over last year. The idea had been to create a communications network especially for government departments that would be run out of the State Services Commission. But when it was revealed that the network was losing money (one report estimated $700,000 a month), State Services Minister Tony Ryall pulled the plug. The Department of Internal Affairs took over the project, let it out for competitive tender, and Datacraft won the bid. Initially eight government agencies were on board the rebranded one.govt network. Since it went live in December six more agencies have jumped on board, including the New Zealand Police, the Department of Conservation and New Zealand Trade and Enterprise. “The reason it works over the other models that are out there is it’s transparent, people know what they’re getting, they see our performance,” Hartendorp says. “It’s simple: they pick a bandwidth number they want and they pay a rate for that and it’s really scalable – they can change to a different bandwidth, go back to another bandwidth – you cannot buy that from anybody else.” He says agencies sign up to a 10-year period but they can leave any time they like and they won’t be penalised. As the model’s success is predicated on scale, the more agencies that join, the more discount Datacraft passes on to its customers. With one.govt Datacraft is taking it to the big telcos Gen-i and TelstraClear and forcing them to cut their margins. “Our simple view is that we think we’ve pulled it out in terms of savings to the government of $10 million already; not just with our initial win, but the ones we have haven’t won,” he says. “It appears that people that pick the one.govt solution make enough savings on the voice side of the business to almost get that for free, because the competitors try to hold the business.” Buoyed by the success of one.govt Datacraft plans to launch a commercial version in June. The model’s appeal isn’t only due to scale; it’s also about simplicity. Hartendorp claims that one.govt agencies aren’t confronted each month by complex telecommunications bills. The simple approach to billing will continue when Datacraft launches a voice gateway and a video gateway in June. For example, the video gateway offering in partnership with Cisco and Tandberg will be packaged into small, medium and large meeting rooms. If a company opts for a small meeting room it will be able use that facility for a monthly tariff and the price will be the same whether staff spend 10 hours a day, every day in the videoconference suite or one hour a day every week. “It’s hard to justify buying a video conferencing system. People struggle to make the business case,” he says. “It’s not hard to say I’ll pay X dollars a month and I’ll have video conferencing and if we don’t make good use of it we’ll turn it off.” In the past bandwidth availability has been a barrier to videoconferencing, but Hartendorp says the network for one.govt is fibre based. So what is this network? At its core is national fibre backhaul supplied by FX Networks with regional and metro fibre connectivity provided by 20 local fibre companies, as well as Telecom Wholesale. Hartendorp says they’ve simply chosen the supplier in each area that offers the most bandwidth at the best price. “Telecom Wholesale has a really good proposition, but the regional fibre providers in some cases offer more bandwidth, which is very attractive to us and our clients.” While Datacraft has benefited from regulation that forces Telecom Wholesale to sell the company its data tails, Hartendorp says its success is not down to government intervention in telecommunications. “We’ve benefited from FX Networks building a new network, let’s be very clear about that. So the real advantage is that somebody has built a modern network that’s unencumbered. “You’ve got to remember Telecom’s old network is a plain old telephone network, which is designed to deliver telephone calls, and for years under the previous management regime it underinvested. Every time they say they’re investing they have to – if they want to sell a modern network, they have to put some money into it. That’s their problem, not ours,” he says. TelstraClear isn’t giving Datacraft much of a run for its money either. Hartendorp expressed the hope in the 2006 TR interview that the Aussie telco would grow to be a strong enterprise player, but that has not eventuated. “I don’t know whether that’s under-investment or whether it’s strategic of what it is,” he says. “They’re not as dominant as I thought they would have been.” As you might expect, Datacraft is on the hunt for acquisitions. It has ruled out competitor Axon (“Are they for sale?” he asks during the interview). Hartendorp won’t say what companies are in its sights, but he did offer some clues as to what areas they’re interested in – data centre infrastructure and capabilities, and Microsoft development. In terms of advancing the Communications as a Service (CaaS) model, Hartendorp says the next iteration is One Phone – that’s when the mobile phone replaces the fixed line so a company executive uses the same phone whether on the road or in the office. Hartendorp says they’re trialling One Phone internally, would like to go to market with a proposition next year and is open to talks with Vodafone in this area. Telecom, he points out, is more likely to want to protect its fixed line infrastructure. “Large fixed line carriers have a mobile offering and they still get a lot of money out of that, so I can’t see them rushing towards that to get rid of the fixed line carriage. It’s going to cannabalise their own market, so that’s why we have to look and see if we can do it,” he says. There are plenty of big clients still locked into deals with large telco players, but Hartendorp is patient. When the contracts come up for renewal, Datacraft will be there, ready with one solution to tempt them. Hartendorp has been around 10 years and he’s not about to heap praise on unproven newcomers. He thinks David Lange would have been a good leader in the market today, but when I ask about the National government’s role in telecommunications, he shrugs and points out they’re barely halfway through their first term – what have they done? The Ultra Fast Broadband initiative gets a short shrift; Hartendorp says it’s designed for a social good, not an economic one. “If there was a real benefit for the economy then the government would be saying it. They would say it’s going to increase our GDP by one basis point or something – have they said that?” he says, before adding “It’s absolutely the right thing to do for a social need.” So then I ask if Telecom’s CEO Paul Reynolds is impressive, and he replies with a question: “What has he done?” - by Sarah Putt