"The SMB Segment Holds Maximum Appeal"
Oct 05, 2007 1407 hrs IST

Naresh Wadhwa, who formally took charge last month as president and country manager of Cisco, India and the SAARC region, shares his thoughts on Cisco's strategic and tactical initiatives in a wide-ranging interview with N. Raghavan

What precisely are your immediate priorities for the Indian market and the SAARC region as a whole? Cisco India is witnessing robust growth and our aim is to grow the overall networking market and sustain leadership. Over the recent years, IT and networking have become strategic to organizations and is now a critical part of the CEO's agenda. We'll deepen our verticalization strategy, adding more sub-verticals like retail, education, and real estate, depending on our understanding of our clients' business and their requirements. Another focus area is educating our clients about networking as a platform for business transformation. The other priority is to improve market penetration by enhancing our logistics and support and taking Cisco capital (the equipment leasing arm) to the Small and Medium Businesses (SMBs). We're also automating internal processes so that our people can spend more time with our customers to help them understand how networking can transform their business. We'll also offer services as a value add for our customers to help them understand their technology requirements in today's business scenario. Which particular market segment holds the greatest appeal for Cisco in India, and the reasons why? With approximately 50-60% of IT spend in the country expected to come from the flourishing SMB segment by 2008 (Source: NASSCOM), it's clear that there is a huge market waiting out there to be tapped and companies are focused on addressing it. In 2004, Cisco decided to focus on SMBs as a key vertical and today it's the fastest growing segment in India and worldwide. We recently unveiled a multi-pronged strategic SMB roadmap, which includes customized products/solutions, SMB focused partner network, increased awareness among SMBs, and financing schemes like the recently launched Easy Lease program. Traditionally in the SMB space, companies with unique regulatory requirements and Quality of Service (QoS) needs had been the early adopters of networking technology. Today, the emerging industry verticals are showing increasing rates of technology adoption - education, manufacturing, retail, automotive, and IT-enabled services are key focus verticals for Cisco. How pronounced has been Cisco's shift from a provider of core networking technologies to a slew of advanced technologies such as IP, telephony, network security, etc.? As networks become more complex and as the threats proliferate, advanced technologies will come to play a much larger role in the entire network. With nearly 80% of the market share in core technologies, Cisco has identified unified communications, network security, wireless, storage as advanced technologies and is today in a leading position in several of these areas. Advanced technologies account for 20% of our revenues in India, as enterprises increase spends on network security, wireless, and unified communications. These areas are driving Cisco's next phase of growth. Among networking technologies, which ones hold the maximum potential from the Indian market perspective? A recent study estimates Indian companies will increase spends in security to protect their IT infrastructure from heightened risks due to the growing trend of mobile workers. In the wireless space, the growth is expected from increased spending by education, large enterprises, SMBs, and the government in particular, which is exploring large wireless projects to improve broadband connectivity. India is one of the fastest growing markets for unified communications in Asia Pacific. Advanced technologies such as security, unified communications, and wireless offer great potential in the Indian market. Which are the key areas where Cisco is working closely with Microsoft? Related question: Cisco and Microsoft are, at the same time, competitors. So how does this cooperation angle work? Does this cooperation extend to the operations of both companies in India? Microsoft and Cisco have announced deeper collaboration around 7 key areas: IP architecture, security, management, wireless and mobility, UC, connected entertainment, and SMB. We're business partners and work together in many areas, and are competitors in others. Globally, Microsoft and Cisco have jointly participated in endless scenarios of customer-driven interoperability for over a decade. In the past year, we've accelerated many areas of collaboration. Our customers are asking for a deeper commitment to highly interoperable technology environments and more clarity on how the companies are working in unison on their behalf. Could you outline the strategy that governs Cisco's increasing investments in India? Cisco views India as a highly strategic market - both from a business, talent, and innovation perspective. To leverage India's large pool of engineering talent, market opportunities, and supportive government, Cisco has identified India as central to its globalization strategy and intends to develop it as a global resource hub and to utilize learning from India to tap emerging markets. Our Indian operations are also expected to grow significantly over the next few years. The increased investments in India are toward R&D, our new campus in India, marketing and support, venture capital, and Cisco capital, which helps companies protect their technology investments with flexible financing. Cisco plans to acquire more Indian companies in SMB space. What kind of fit do you look for in such initiatives? Cisco is open to acquisitions and investments in companies that strengthen our offerings; if we see a technology out there that we believe has great potential, then we're open to acquiring it. In percentage terms what is the contribution of India to Cisco's revenue, and how do you perceive it growing over the next 3-5 years? India is one of the fastest growing markets for Cisco globally. With the domestic networking and IT infrastructure market experiencing double-digit growth, India will continue to be a key market for us. We don't share country-wise revenues but it's clear that India's domestic market will continue to grow. More important will be India's role in our emerging markets strategy; we believe India will play a large role in driving our next wave of global growth in Asia, Eastern Europe, Latin America, Middle East, and Africa. A number of Cisco's top executives, from almost every function overseas, are being relocated to India. Do you see this trend accelerating? Broadly, is there resistance within to this relocation? If you consider global trends, emerging countries will produce over 50% of future GDP growth of the world, which is very different from the last century where developed countries produced about 70% of the world's GDP. India is strategically located with easy access to almost 70% of the world's population and most of the emerging markets including China, Indonesia, Malaysia, Taiwan, and the Middle East. Cisco is looking to utilize India as a platform, to innovatively globalize and scale worldwide functions. How do you perceive the way the Internet is changing - and how Cisco is gearing up to meet changing end user requirements? Several trends are driving Cisco's technology vision today. We believe the second phase of innovation and growth will come from the democratization of the Internet. Today, the Internet is moving beyond its traditional role of connectivity and is enabling newer forms of collaboration. Virtualization technology will drive the Internet boom allowing companies to better utilize their computing with less costly physical infrastructure. Cisco is looking at new ways of enabling collaboration with technologies such as Web 2.0, telepresence and providing enterprises, SMBs, SP, and consumers with a richer set of experiences. Globally, Cisco spends 10-15% of its annual revenue on R&D. Could you quantify your R&D spend and the research focus in India? India is a key element of our global R&D strategy. Today, Cisco's engineering teams and strategic partners in India are involved in various aspects of research and product development across all of Cisco's offerings. How is Cisco's globalization center in Bangalore shaping up? India presents high growth potential and our globalization center in Bangalore is helping us leverage the opportunities and advantages India offers. Key business functions, including sales, finance, human resources, marketing, engineering, and customer support, are already being represented here. We're on track with regard to our plans to increase headcount to 10,000 over the next 3 years. Opportunities in emerging markets are being explored out of India and the country will play a key role in our emerging markets strategy. What is the status on the pilot project for manufacturing IP or business phones? Are more such manufacturing units on the anvil? We're jointly engaged in rolling out IP phones from our pilot manufacturing facility in Chennai with Foxconn, one of our key partners globally. Like our operations in other parts of the world, we engage in contract manufacturing. We'll ramp up based on the demand for products and our learnings from the Indian market.