The networking major's drive to beef up India operations is gaining momentum. But the real threat to its dominance of the Indian market will come from global upstarts.

By Suveen K. Sinha

Everyone working for Cisco Systems (NASDAQ: CSCO), including CEO John Chambers flies economy class. Not that the top dog of the network community, with revenues of $19 billion, cannot afford business class travel for its employees. As Manoj Chugh, 40, the company's President (India and SAARC countries) puts it: ''We are a frugal company. We want to stretch every dollar.'' Make that rupee, too: India is the second-fastest growing market for Cisco, after that of South Korea.

Indeed, Voice & Data magazine's estimates show a 143 per cent growth in the company's revenues to Rs 360 crore in the last financial year, giving it the top position in routers, switches, and remote access servers (Net infrastructure products). Routers contributed 45 per cent to Cisco's India revenues; switches, 35 per cent. Large companies accounted for 45 per cent of these revenues; service providers (telcos and ISPs), another 45 per cent; and small and medium enterprises, the remainder.

Customers for the company's range of over 150 products and 5,000 variants include systems integrators (companies that help other companies wire their insides by selling them packages of hardware, software, and applications) like Datacraft, Wipro Infotech, IBM, Compaq, Tata Infotech, HCL group, CMC, and Global Telesystems. Three distributors-Tech Pacific, IngraMicro, and Dlink-and a network of 500 re-sellers help Cisco cater to the market. And all of the Rs 360 crore has come through orders placed on line, bettering the global figure of a little over 85 per cent.

The Smorgasbord Approach

Cisco's customers in India include companies wiring up their innards, old-world service providers like VSNL and MTNL, and the Department of Telecommunication Services, and new world service providers like mobile phone companies and ISPs.

To these customers, and others like them, Cisco provides the entire range of Net operating working systems (See What Exactly Does Cisco Make), while some of its rivals like 3Com have chosen to focus on specific areas. Explains Vijay Yadav, 35, Country Manager, India, 3Com: ''The point of ingress in commercial and consumer networks, and carriers and ISPs are our focus areas.'' Cisco, though, is a believer in the width of range. '' No one wants to go to 10 different people for doing the same thing,'' points out Chugh. The frugality of flying economy class also manifests itself in the company's pricing: Cisco works with the thinnest of margins. ''Their pricing is very-very competitive,'' says the CEO of a national ISP.

The all-things-to-all-people approach may be relevant at a point in time when lucrative markets, like domestic (and international) long distance telephony are just being opened up to the private sector. Then there are other growth drivers like powering broadband and multi-media networks. Research organisation IDC India estimates the Indian data communication equipment market to grow to about Rs 3,000 crore from the 1999-2000 base of Rs 1,234 crore. Cisco won't necessarily get all that incremental business. Nortel, Alcatel, and Lucent are buying up data networking companies to chip away at Cisco's Net home base. And 3Com already boasts of five of the national ISPS-VSNL, Satyam, Mantra, Tata ISP, and Caltiger-among its customers.

The IP Advantage

Cisco's strengths lie in Internet Protocol (IP) switching. And that is critical in the network economy. Explains Atul Kunwar, 37, formerly Country Manager of 3Coms India operations, and now, CEO of Bharti BT Internet (Mantra): ''In the networking industry, the clear preference is for IP.'' Still, Cisco is aware that it will have to beef up its local operations. That could explain its decision to invest $150 million in India over the next two years (on top of the $75 million it has already invested), and create its largest research & development centre outside the US in Bangalore.

The company has already won a $10-million contract from dot to supply equipment for a nationwide Net backbone, a cable-based infrastructure that will allow ISPs to offer high-speed access to their customers. The magnitude of that order isn't all that large, but its impact will be. Cisco's equipment meet open standards; that means any ISP connecting to the backbone can do so using the equipment of its choice. Given Cisco's marketing over-drive, though, no one should be surprised if it becomes the choice of many ISPs. Satyam Infoway placed an order with Cisco right after the award of the contract. Cisco will also be uniquely positioned to cash in on commencement of 3G (third generation mobile technology) service, which the government is mulling over. As the 3G platform evolves, Cisco's packet-switching technology could catch on. Most mobile networks use the same circuit-switch technology that fixed line phone companies use. That certainly can't cope with the volume of voice and data 3G entails.

So much for organic growth. Chugh doesn't rule out that of the inorganic variety either: ''We do not rule out acquisitions or strategic alliances anywhere in the world.'' Cisco, after all, has traditionally grown through M&As (it has gobbled up close to five dozen outfits since its first acquisition in 1995). The real threat to Cisco's dominance of the Indian market, though, will come from global upstarts, like Juniper Networks, which has beaten Cisco to some high-profile contracts in the US market. In mid-July, Juniper opened up an office in New Delhi, its sixth in the Asia-Pacific region. Chugh doesn't talk much about the competition though. With new markets opening up, it is still business as usual for the man.

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