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Cisco: Targeting double-digit revenue growth

December 07, 2010
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The rise in networking demand from businesses across India has prompted operators and vendors to plan huge investments in the enterprise networking space. Cisco, a major player in the global networking industry, is also looking to expand its India operations significantly. The $40 billion company, which primarily deals with corporates, is seeking higher levels of engagement with the country’s public institutions and political establishment through acquisitions and joint ventures (JVs) with other technology providers.

In July 2010, Cisco picked up a stake in the JV between Lavasa Corporation, a subsidiary of the Hindustan Construction Company, and Wipro to provide technology services to the township being built on the Mumbai-Pune corridor. The JV, Mycity Technology, will build the physical IT infrastructure and offer services such as building management and electronic surveillance systems to the Lavasa township, India’s first e-city. Cisco will partner with Wipro for the supply of information and communication technology products and architecture, and will propose the technology vision, products, services and solutions based on its service delivery platform.

Docking on Indian shores

One of the leading global internet networking companies, Cisco entered the Indian market as a strong player in the education and enterprise space, and helped to build the internet infrastructure in the country in the 1990s. However, with the dot-com failure, its enterprise business slipped and with its low stake in the telecom industry, Cisco remained a marginal player for a decade or so. During this period, its core business included routers and switches.

It began taking interest in the Indian market again only around 2003 as the IT, telecom and outsourcing industries were booming. Another reason for the company’s renewed interest in the country was the fact that its earlier markets in banking and manufacturing companies were nearing saturation. It was essential, therefore, to exploit new markets in India and China where telecom companies were witnessing high growth rates.

This called for streamlining efforts on all fronts. To begin with, Cisco India formed five vertical business groups – IT services, enterprises, service providers, government and defence, and small office home office/consumer. A 24x7 call centre to offer customer support was set up and a warehouse was maintained in Bangalore with a minimum inventory. The Bangalore centre soon became the inventory hub of Cisco’s entire product and technology range available in India.

Gradually, the company expanded its portfolio of solutions to advanced technologies and products such as internet protocol (IP) telephony, wireless, network security, storage, optical and home networking. It began offering networking solutions for large service providers as well as home networks. It strengthened its focus on Ethernet, wireless and value-added services  as the major telecom companies were rolling out countrywide networks and planning to diversify. The company formed alliances and partnerships with Indian telecom operators to promote the launch of IP telephony and IP-VPN services and invested in research and development.

Restructuring operations

In one of the biggest developments since Cisco set up its second global headquarters in Bangalore in 2007, the company is currently reorganising its operations along industry lines. The global restructuring will take place in a phased manner across different regions but will be especially significant to India, where it is being implemented in October, because of the proximity to its global headquarters in Bangalore.

“If there is a business problem, the Indian arm will work with the Globalisation Centre East (GCE) (Bangalore headquarters) to check if there are matching capabilities,” says Naresh Wadhwa, president and country manager, Cisco India.

Since its incorporation in 2007, the GCE has piloted initiatives such as smart connected communities, and smart connected healthcare and education from India. The smart connected healthcare initiative, which is being piloted in association with Apollo Hospitals, aims to reduce healthcare costs to $1 per month and increase medical reach in rural areas through telemedicine.

Growth momentum

With its traditional equipment business nearing saturation, Cisco is looking to maintain its double-digit revenue growth rate by expanding its target from business clients to the consumer segment. In line with this, it has launched a $599 home version of its telepresence videoconference system. However, industry analysts believe that the high price and a $24.99 monthly fee may make it tough for Cisco to win much of a following among consumers, many of whom use free, online video chat services like Skype. However, Cisco officials argue that their products are of ‘premium’ quality. The home telepresence product, “umi”, features a camera and a console that can be connected to a standard high definition television and works over high speed internet. It also allows unlimited calls, video messaging and video storage. Telepresence has become one of Cisco’s fastest selling products as companies seek ways to save on travel costs.

The company has further acquired home router manufacturer Linksys, cable set-top box maker Scientific-Atlanta, and Pure Digital Technologies, manufacturer of the Flip video camera.

Cisco also sees high quality videoconferencing opening up new opportunities like distance learning and remote medical care. “We plan to virtualise services into the home like e-commerce has virtualised with the advent of the browser, in ways that will enable the delivery of healthcare, education and government services,” says Wadhwa.

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