EDGE: When did you first realize that there was a good business potential for the Internet?
ARAFAT: It was 1994. I was involved with the Internet when it was only in the educational domain and foresaw the power of the Internet in the sense that it could be a global, ubiquitous network,
replacing to a certain extent all the different forms of private communications.
EDGE: Other people saw the same opportunity, though. What did you do different in terms of execution?
ARAFAT: Well, really, when we saw all the business applications that were capable of being done on the Internet, what we really focussed on is the infrastrucutre that everyone needs to run their applications. This is an area where everyone needs it but nobody can afford to do it on their own. And this is where we saw the real opportunity.
EDGE: A lot of companies still fear outsourcing, or don’t want to let go of anything to do with IT. How do you convince them to hand it over?
ARAFAT: We are a bit different. Traditional outsourcing goes to a company and proposes to replace the IT department — fire all the guys and let us do the work for you. We in fact go with a different proposition. We don’t want to replace any people in IT. We only want to provide the underlying infrastructure: power, environmentals, fire protection, physical security and connectivity to the Internet. Yet the cost and complexity of going to multiple service providers is something most companies cannot afford. Then there is a whole host of other things that are necessary to doing business on the Internet. You need firewalling, back-up, load balancing, 7 x 24 technical expertise on site. It is a very long list, and if you look at the cost of doing that list, it is absolutely staggering. With the exception of a very few large companies, no other companies can afford to put that into place.
EDGE: So why does the CIO hand this over? Is it solely a question of costs?
ARAFAT: First of all, let’s talk about the first part of the group, the group that can’t afford it, which is 99 per cent of all companies. Essentially, it’s a question of whether you want 100 per cent up time or not. If you are comparing apples to apples, I can tell you, the savings are astronomical. A data centre like the one we have costs in the tens of millions of dollars, and the cost does not scale down linearly because of size.
EDGE: Do you stick by that 100 per cent uptime?
ARAFAT: Absolutely. Anything less than 100 per cent is not acceptable. It’s a written agreement in the form of a service level agreement. We have redundant everything.
EDGE: That huge power failure last August didn’t affect any of your customers?
ARAFAT: Within the data centre nobody got effected. That is the ultimate test. We’ve also had ice storms. These things do occur and you have to be prepared.
EDGE: Your business model seems to have changed, away from just providing infrastructure to hosting a company’s Web site and its online presence.
ARAFAT: It actually hasn’t changed. What’s really changed is the fact that the lines between front office and back office, and between online and offline have blurred to such an extent that you cannot distinguish them anymore. When you say, are they computing, or are they networking, or are they Web hosting, it’s all one and the same thing. Indigo, for example, uses the Internet for its stores as well as its online presence. It’s one big integrated system. If you walk into an Indigo store and ask the clerk to find a book, take a peek. You’ll see a Web browser tightly integrated with the customer service and the information systems. The Web site triggers the inventory system, which triggers the ordering system. All of that stuff is intertwined and this is what you will continue to see.
EDGE: So, what then, should companies be holding back in terms of IT? It almost sounds like there is not much left for the IT department to do.
ARAFAT: We don’t get involved in the application. The application is the core business of the customer. What we are saying is, outsource all the non-core competencies. If we are dealing with a financial institution, their core comptency is running that application, or the infrastructure that it sits on. There is still a prominent role for IT, in fact, a much more prominent role because everything is being computerized.
EDGE: Are you talking to CEOs and CFOs?
ARAFAT: It depends. Generally speaking, if I had to pick one person, it would be the CIO. But we talk to the communications department, system administrators, all the way to CEOs and to business unit managers who want to put together an application.
EDGE: The service side of the business is becoming very competitive and crowded. How do you differentiate?
ARAFAT:The first thing I want to tell you is that this is not a commodity business. This is a business characterized by a high level of service. Businesses entrust us with the crown jewels. This is not where they want to save a dollar or two, this is where they want to get the best service. No. 1 is infrastructure, of course. The next thing is expertise. Then there is reputation, and then they ask how much it costs.
EDGE: What about outsourcing on the business side, for example, taking over a call centre?
ARAFAT: That is a different business than the one we are in. It’s not good or bad, it’s different. We cater to the companies that want to stay in control of their IT departments and their destiny, and that is a different proposition. My personal opinion: I want to be in control of my IT destiny and the reason is because IT is one of the biggest competitive advantages any company can have.
Osama Arafat directed a number of emerging technology companies before taking the helm of Q9 in 2001.