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India enters the networking market
By agencies
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Friday, 06 May 2005, 19:30 IST
BANGALORE: Following in the footsteps of China's Huawei Technologies and ZTE, a couple of Indian companies are trying to get a foothold in the global market for networking gear.
Though most of its sales to date have been in its home country, Tejas Networks, which is based here and specializes in Ethernet-over-Sonet boxes, has started to sell equipment in North America. Rather than sell the gear under its own name, Tejas serves as an original equipment manufacturer, or OEM, for multinationals, which put their own brand name on the products, CNET reports.
"OEM is going to become a way of life for them. It is the only solution," said Sanjay Nayak, CEO of Tejas. "They have less money to spend on R&D."
Tejas, which has received $29 million in venture capital funding from Intel Capital and Battery Ventures, among others, will hit a run rate of $100 million in revenue within 18 months, Nayak predicted. So far, Tejas' equipment has been installed in the networks of 20 Indian carriers and five overseas carriers, it said.
"If you use a cell phone in Mumbai, there's an 80 percent chance it went through us," Nayak said. "We have the opportunity to become a half-billion dollar company in the next five years."
Meanwhile, Telsima is coming out with a broadband switch for wired and/or WiMax traffic. The company expects to hit a price point that will come to roughly $150 per user, less than the $350 per user cost a similar product from a North American manufacturer might run, even if the North Americans used some overseas labor, said M.T. Karunakaran, CEO of Telsima.
"If we can hit $150, it will trigger WiMax. Carriers will look at it to connect towns and villages," Karunakaran said. "The primary focus is India, but we would like to build a global company. We are talking to a reseller in Japan."
Besides the usual factor--lower development costs--the push into networking comes because of the conditions of the Indian telecommunications market. On one hand, it's incredibly small.
Manufacturers are also tweaking their products for broader acceptance. Motorola, for instance, recently released a $40 phone. Monthly cell service averages run about $4 to $7. Home broadband costs $10 a month.
To meet this demand, telecommunications carriers will have to install a lot of switches and routers. But because it's India, the equipment will have to be cheap. Even though North American companies have moved research and development operations to India and China, Nayak says Tejas can still undercut them.
The company also has a comparatively small sales and marketing staff. Flextronics, which opened a contract-manufacturing center in 2000, assembles the systems.
Being local, of course, helps. A watershed moment for Tejas came when it won a large contract with Indian Railways. The railway, the largest in the world, is scrapping its diesel trains for electric ones. Inside the power lines, it's installing fiber-optic cable, which it plans to lease to regional carriers.
Tejas worked with officials at the Telecom Engineering Center, which sets the technical specifications for government projects, to expand their regulations so the company could bid on the project against established competitors.
"We really got under their skin," Nayak recalled.
Still, one of the biggest challenges is getting over the credibility hump. Product companies in India remain somewhat rare. When Tejas started, most potential customers assumed it was repackaging technology from a Western vendor.