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March - 2005 - issue > On The Cover
Can Cisco change the face of network ?
Pradeep Shankar
Monday, February 28, 2005
After capturing 75 percent of the networking market in India, Cisco is growing at a phenomenal rate. Behind this enormous growth rate, emerges an interesting aspect: Cisco’s India strategy. It is uncharacteristically audacious and charming in its apparent simplicity. Ranganath Salgame, President of Cisco (India and SAARC) gives insight into the company’s new business strategy and focus in the Indian market.

“Our growth rate in India last quarter has been 100 percent year-over-year. We are certainly happy with the investment we have made. The mood is terrific…the economy growth is spectacular…it is a very exciting place to be,” says Gordon Astles, President of Cisco Systems for Asia Pacific Region. Thanking some 600 customers, partners, resellers and media personnel present here in Bangalore he seems to be packed with energy.
One can tell from his speech, both on and off the stage, India’s esteemed-position on Cisco’s growth map. The first blip of India’s importance on Cisco’s radar came when John Chambers, President and CEO of Cisco visited India in 2001. He had then said that “less than one-half or one per cent of his business comes from India. I think it’s going to be five or 10 per cent.”

Chambers is right since Cisco India is in line with his predictions. Since his visit, Cisco India’s revenues and market share have grown consistently—higher than any other MNC in the country. Today, India is one of the top three markets for Cisco and contributes close to three percent of Cisco’s $22 billion revenue.
Consistency is a factor Chambers and Astles seem to highly favor. They believe India will continue to be one of Cisco’s fastest growing markets, and Cisco can create a market especially for them.

Cisco’s investment in India is significantly increasing from the initial $200 million in 2001. Recently Chambers stated that the decision to invest in India had “paid off handsomely.” Chambers’ enthusiasm is a reflection of Cisco India’s balance sheet and market share. From 37 percent in 2001, Cisco India is commanding an impressive 75 percent of the market share, monopolizing the network equipment market. Cisco is not only seeking to capture market share, but is also trying to mature the market and acquire a larger share while continuing to maintain its domineering status. “It is flying on the spectacular updraft of the increasing IT infrastructure spending by Indian enterprises,” network analysts say.

As Indian companies compete with rest of the world and try to reach the global market, it is very important to have a global state-of-art IT infrastructure. But Indian companies are still spending less than one percent of revenue on IT infrastructure, while their counterparts are investing eight percent. Here is where Cisco foresees as an opportunity, or in plain words, to give birth to a market as a whole. And Cisco is sure that technology companies in India will be liberal in their IT budgets, especially on network, in the next few quarters which in turn help them acquire the market they might possibly create. What does such a growth engine mean for Cisco?

Rangnath Salgame, President of Cisco Systems, India and SAARC, amiably explains the strategy. “We want, Cisco to essentially e-enable India in this millennium. We want, Cisco to be the underpinning technology to e-enable India and become super power of the world. We want, to grow this market strategically for the long term and do things radically.”

Resonating with what Cisco aspires to be while preparing for the next decade is observed in the reshaping and transformation occurring in the past year—2004. Yet it has changed its go-to market strategy from a geography-based structure to vertical-focused model—some strategy change during the course of implementation. It has formed four separate vertical business groups that will focus on Enterprises, Service Providers, IT Services, and Government.

Networks kill Networks
Cisco’s network is currently the king of Indian corporate data network. But that is not all, inching to expand into corporate voice and video-conferencing network is what Cisco believes to be its future. The competition is minimal from vendors, because the recent shakeout in the industry that swallowed a few players. For example, Enterasys once a leader is crumbling with inefficiencies. 3Com another strong contender on the enterprise side exited the space, making joy to joyous. “So there are cases where customers have migrated from 3Com to Cisco,” says Ranajoy Punja, Vice President of Marketing. However, one competitor to rub Cisco’s shoulder is D-Link—entering the high-end space the company has kept Cisco’s watchdogs sleepless.

Everyone at Cisco acknowledges that D-Link, with about 5.4 percent market share, has performed fairly well Even 3 Com, with 4.2 percent market, caters to the SMB space more efficiently than Cisco, especially with pricing. However, they are not making a dent in Cisco’s business. “They are fairly well trenched in the lower-end of the market because of their pricing points. We need to gear up by having products that are easy to deploy and support, while providing better distribution channels,” says Jangoo Dalal, Senior Vice President- Enterprise Business. “Some of the D-link customers who are now moving to sophisticated solutions are now opting for Cisco. Also, as customers move from unmanaged to managed switches, Cisco wins.”

Cisco has broken into its customers’ niche so rapidly, that it either acquires them or quickly develops products. Recently, Cisco monitored and altered its messaging and value proposition for the SMB segment, where many have just commenced building their infrastructure. Thrust on increasing channel strength by focused training and introducing specialized products for this space has helped Cisco gain traction in this segment.

The Cashcow: IT Services
If enterprise business seems to be beneficial for Cisco’s future health, it is India’s IT services, call centers and BPO companies that pour money into Cisco’s exchequer. Most IT companies are waiting to enable a robust network that ultimately cuts distances and allows remote project execution. Cisco is a clear winner in this game as it seized the opportunity early on. In fact this vertical contributes a larger share to Cisco India’s kitty compared to the telecom vertical. This is quite unique to India alone.


B Ashok, Senior Vice President of IT Services is pleased with the increased network spending. He says that growth in spending is faster than the growth of the vertical; customers are demanding higher layers of network everyday. “Every customer of mine showcase their classy networks to get premium on their contracts.”

Cisco had no foothold in the contact center arena were Avaya and Nortel holds a iron-grip in call centers and BPO operated on TDM network. But competition and opportunity knows no bounds Cisco plunged into the market with IPCC product (IP Contact Center)—potential market grabber. The key is to convince players in the market to buy the IP network concept. Cisco has been fairly successful on this front. The good news for Cisco is that Avaya is talking about IP communications, which will drive Cisco IP phone deployments. For call center the company is also customizing its IPCC products hoping to out do competitor.

Telcos ring of Opportunity
Indian call centers and telecom companies are spending billions of dollars on their networks. The absence of legacy systems allows for leapfrogging technologies. Cisco desires a piece of the vast market for telecom equipment and services sector as well. With a limited number of telecom players, including Bharti, BSNL, MTNL, VSNL, and Reliance, Cisco understands the importance of business communication—having a strong, targeted, one-on-one relationship. “Selling product to telephone companies requires proof that our product is not only reliable, but that it employs the latest technology as well,” says Sudhir Narang, Senior Vice President, Service Provider. This is where the company’s sales team becomes involved. Over the last six months, Cisco has doubled its sales force and beefed up channel team strength.

Equipment vendors like Lucent, Nortel, Ericsson are not only leveraging packet technology by partnering with Cisco, but in turn helping Cisco as channel partners by creating inroads into the telecom space. Cisco’s international experts play a key role in introducing the expertise in cutting–edge technologies like metro-Ethernet and MPLS. They also instruct how this will integrate with the service providers’ framework and benefit the architect.

One interesting thing which could escalate Cisco India on the company’s charter would be selling its high-capacity router, the CRS-1. Starting at $450,000 with capacity to handle 93 trillion bits (93 terabits) of data per second, it will be used to reinforce the backbone of a typical Telco. While technically impressive, analysts question whether Cisco can quickly persuade phone companies venture on its first router designed specifically to meet their need for downtime-free reliability.

Tsunami of Broadband
With broadband set to take off, Cisco also wants to sell broadband modems to households along with a gear that hooks computers together. Cisco is collaborating with leading broadband provider Tata-VSNL to switch from copper wire-based broadband networks to Ethernet and fiber networks with half the installation cost. “With Cisco’s system, we have provided one million lines, but it is easily scalable to 10 million, and that is critical for our business,” says Shashi Kalathil, Chief Operating Officer of Tata Indicom Broadband Services. Like Tata-VSNL, Cisco has joined hands with other service providers.

Buying Pattern
In the network industry there are two significant types of buyers—a buyer who looks at network as a total system and prefers to deal with primary vendor. Other buyers believe in purchasing best-of-breed solutions from various vendors. The majority of decisions by buyers, proven by market share numbers, are regarding network as a system. When customers calculate TCO (total cost of ownership) for network products it includes upfront costs and operational costs as well. Cisco’s selling point is offering the lowest TCO compared to its competitors. With intelligence built into the network by embedding security and also capable of supporting voice, data and video, Cisco claims that it has the lowest TCO.

Indian customers appreciate Cisco’s contributions. Along with its marketing power and product portfolio, Cisco India offers service expertise in network design and implementation, as well as incomparable technical support and professional services.

The Vertical Gurus
Cisco India also utilizes a wide range of vertical specialists from Cisco’s offices in the U.S and Europe. Typically, these are professionals with several years of experience in a particular industry segment. Cisco hires them as full-time consultants, where they fuse their expertise with Cisco’s technology. These specialists not only aid Indian customers gain global insight but also drive Cisco India’s sales.

Such initiatives help customers maintain and optimize technology operations too. Namasivayam Gajapathy, CTO of Transworks says, “They are very good at resolving glitches in a speedy manner and their R&D and service supports are incomparable.”

“For large value customers who evince interest to step up their game and want to play globally, these vertical gurus are brought early in the sales cycle,” says Dalal.
Last year, Cisco gained a large order from BSNL, which is laying MPLS foundation by connecting 70 locations.

Such consultation has aided Indian companies to compete with multinationals. Banking-vertical specialists are assisting Cisco India to sell the concept of multi-channel banking by contacting customers through different channels such as the Internet, call centers, mobile phones, ATMs, kiosks or the traditional branches. Most Indian banks have implemented this concept. For instance, SBI is applying IP network technology across 9000 branches using Cisco’s solutions. This IP network enables SBI to not only offer multi-channel banking services but also significantly cuts down communication costs.
Dalal observes that traditional manufacturing houses, which invested on capacity in early 1990s, have exhausted their first round of capacity investments. “A substantial part of their new investments is on IT infrastructure. We have great successes in IP, security, video from traditional organizations,” he continues.


Logistic Support
Cisco India has a competitive edge with a bountiful supply of spare products as well. Cisco’s central Bangalore warehouse and seven fulfillment depots across the country ensures that customers can procure spare parts with minimum turnaround time—something that its competitors cannot match. Earlier, a customer in Dehradun was forced to wait at least four working days to procure a spare part. Now Cisco’s Delhi depot can ship this within 24 hours. For important customers within city limits, especially software development centers and BPO companies, spares are often shipped within four hours, based on the service level agreement.

Cisco has evolved a complex algorithm that forecasts the minimum spare in a depot based on the installed product base in a region along with the failure rate. “It is this kind of committed service that we offer has kept us ahead in the race,” says Salgame.

Prince of Networks
Salgame is an inspiring leader who displays true company loyalty. The team of executives around Salgame is key to the evolution and execution of Cisco India’s strategy. To meet any one of them results in being witness to a determined sense of an infectious optimism, passion, and a confident belief system. They augur well together. This is an act that Salgame calls participative leadership, which entails engaging the team to define the future and collectively owning and building the path to fulfill the company’s vision.

“Betting big was the key to our success. We did, in a big way. We dared to dream,” says Salgame. Cisco’s story is an unusual tale of corporate success. Despite the struggle of passing through several regimes, Cisco managed to pinpoint all crucial business areas. Cisco consistently defeated competitors like 3Com and IBM simply with the non-technological factors of insight, innovation, and customer focus.

With a shrewd blend of marketing, technology, and service support, Cisco has maintained its leadership position. However, Cisco executives are not complacent of the growth they are witnessing.

They are closely watching rise of Huawei in China. Huawei has gained a lot of share from 3Com, Nortel, Dlink—all of who have lost shares in the Chinese market. It is apparent that Huawei is designing switches especially for the third world, which is not only technologically superior but also low cost. Sooner or later Huawei will enter India and other SAARC countries in a big way. And the Armageddon would begin.

But for now, Cisco is clearly the prince of India’s networking industry. Cisco’s technology, employees, and its competition are fusing to enable Cisco to be the most important company shaping the future of communications. Cisco is succeeding with a kinder, gentler image, and emphasizes satisfied customers and employees.

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