Top10: CISCO: Fending Off Competition

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India is considered as the second key market after China in Asia Pacific for Cisco, due to huge network infrastructure deployment by enterprises. Cisco has been growing in double digits every year in India. It witnessed a growth of around 29% last year, and announced a whopping $1.1 bn investment in the country. The investment is very much in tune with technology explosion happening in India.

CISCO
Area of Operations: Voice and data networking, network security, storage, wireless products
Address: Cisco Systems India, Birla House (East Tower), 7th, 8th, and 9th floor, 25, Barakhamba Road New Delhi 110001, India
Tel: 011 55611000
Fax: 011 23766126
Website: www.cisco.com/global/in

As part of its overall plans in the country, Cisco Systems divided its operations into four separate vertical business groups that focus on IT services, enterprises and SMBs, service providers and government. Overall, the company generated revenue of Rs 3,178 crore last year. It is now eyeing other verticals as well, that include healthcare, education, textile, retail and pharma.

Cisco has seen an upsurge in spending by enterprises and carriers for the upgradation of their networks. The deregulation in the telecom industry has led to a rise in investment in Internet infrastructure. Cisco has become the main beneficiary of the investments made by some of the big telecom companies such as BSNL, Bharti and Tata Group, which rolled out their broadband networks last year.

The company, last year, increased its focus on advanced technologies that includes IP, security, wireless and storage. The major deployment of these technologies happened in the ITeS sector, followed by telecom and government.

The company in conjunction to basic network (routers, switches and access points) has added layers of other applications too. This includes IP telephony, storage and networking security. The company sold 1 lakh IP phones till December 2005, which was almost double of those sold last year.

HIGHLIGHTS

Announced $1.1 bn investment in India
Sold 1 lakh IP phones till December 2005
Generated revenue of Rs 3,178 crore last year

Cisco garnered major share in LAN, routing and switching segments, with market shares of 80%, 83% and 77.5% respectively. In security, the company has around 48% market share, while in wireless, it has a market share of 35.3%. In IP PBX, the company has around 20% market share. The company did business of Rs 893 crore in routers. It has almost wiped out competition in this segment. The switching business generated around Rs 1139 crore, while voice solutions contributed around Rs 137 crore. The revenue from WLAN was around Rs 45 crore. Security business contributed revenue of Rs 189 crore.

Cisco also grabbed SWAN deal for eight states. It is one of the largest e-governance projects that Cisco is handling currently. The NIB II expansion deal was the biggest service provider deal that Cisco bagged last year. As all major banks are Cisco customers, it has got expansion orders from them. But significant adoption was done in co-operative banks.

'We are growing faster than the industry'

How was Cisco's performance in FY 2005-06?
Cisco India's performance has exceeded our expectation. We have not only gained market share in core products but also in new technology products such as security and enterprise voice. The market has responded well to our products and technologies and all this has helped Cisco India to grow faster than the industry.

PRESIDENT, (INDIA AND SAARC)
Rangnath Salgame

Cisco has performed well in core products but how has been the performance in advanced technologies?
Investment in advanced technologies has paid off as we have significant market share in security, voice, and WLAN. We are growing faster than the market.

In security, we are at number one and have shown tremendous growth. In the last couple of years, the focus was on TDM and players such as Avaya and Nortel were active. But now, with large call centers opting for pure IP, Cisco has demonstrated its potential and has also gained tremendous market share. Deregulation is setting in and enterprises are realizing the potential of IP. This has made enterprises move towards IP, and we have around 50% market share in this.

How do you foresee the Indian market in terms of technology adoption?
The Indian market has arrived, and it is has a long-term future. Network has become mission critical investment for companies in India and is considered strategic. So companies are now looking for partners. We at Cisco have a solid technology proposition as we provide one stop solutions ie we have the breadth as well as the depth of products. We are also minimizing risk of execution, and providing excellent after sales support.

How is Cisco geared up to tap the SMB market for technology products?
Cisco India is moving very well to tap this new opportunity. The key is not about technology, but the whole set of offerings, which help in ease of use, ease of installation, and ease of operation. SMBs look at total cost of ownership in terms of value, cost to maintain, and technology support. Cisco provides value in each of the categories as it provides total solution.

We plan to strengthen and expand our channel reach through Ingram Micro and Redington from 1,500 channel partners that we have presently. We will also support innovative marketing program to reach SMBs in different locations.

How do you see growth on managed services for Cisco India?
For managed services, it is early stages. This market has just started last year and continues to grow at a healthy pace. We have good relationships with service providers as well as corporates and we plan to leverage it. Managed service is small in size but it is picking up and growing at a healthy pace.

In 2005, Cisco announced an investment of $1 bn. When do you plan to cross $1 bn mark in terms of revenue?
For long-term sustainable market opportunity, we have plans to invest around $1.16 bn in the next three years. We were the first company to have made $1 bn commitment to India. We are very bullish about the Indian market and will continue to work for long-term sustainability of Indian market.

Cisco's channel partner strategy evoked both envy and criticism from its competitors. The company went through the restructuring and expansion of its channel, and currently has two distributors, nine SIs and around 4,500 resellers.

Unlike China, where companies such as Huawei and ZTE are quite strong, in India, Cisco faces no competition at all.