Emerging markets are frontier of growth for global technology
A dusty suburb of Bangalore could have a bigger impact on Cisco’s future than its headquarters in San Jose.Wim Elfrink’s calendar is choc-a-bloc with customer visits. Last week Efrink, Chief Globalisation Officer, played host to the technology team of Goldman Sachs, an important Cisco customer. Some weeks before that folks from IBM and ANZ stopped by to check out the latest wares that Cisco has to offer.
The Globalisation Center East, inaugurated by CEO John Chambers in November 2007, attracts customers, partners and Cisco employees from around the world. Elfrink’s office says that at least a 100 customers and 20 VPs from Cisco have visited the new Cisco Campus in the last two months alone. “If you are in the Cisco top management and you haven’t been here that is not a good sign,” says Elfrink, emphasising just how important Bangalore is for Cisco.
Ever since the 55-year old Elfrink, along with his wife Kate and two children, moved from San Jose to Bangalore eighteen months ago, there has been intense speculation and interest in Cisco’s Bangalore operations. One of Cisco’s five executive VPs, the 55-year old Elfrink, runs a successful $7.5 billion services business and is a key member of CEO John Chambers’ leadership team. There has been speculation in the international press that he could one day go on to succeed Chambers at Cisco.
Elfrink isn’t here alone, accompanying him are 16 senior executives from the US and Europe who run global functions like HR, finance, manufacturing and alliances. Carefully handpicked this team is a mix of Indian-Americans, Italians, Dutch and other nationalities.
Some like Leopoldo Carrillo Scrivner, VP, HR rejected plum posting in a place like London to be here. Others like Pascal Turchi, senior director; strategic alliances have moved three small children from an expensive school in Paris to an international school in Bangalore. Quite a few have even left college-going kids in the US to be here.
What are these senior executives doing in a country that contributes less than 3% to Cisco’s revenues? Why is Cisco so bullish about Bangalore?
That India and other emerging markets are the next frontier of growth for global technology companies such as IBM, Microsoft and Cisco is a well-known fact. So when in October 2005 John Chambers announced an investment of $1.1 billion in India it was treated as business as usual. Cisco’s India subsidiary, now worth $1 billion in revenue, has been growing at 30% annually.
But for Cisco this globalisation center is much more than growing the India business. It’s an experiment, which could change not just the way Cisco works and looks but also pave the way for other multinational companies eager to make a mark in the East (see box).
If Cisco gets it right it will create a new corporate entity, the likes of which have never been seen before. It will create an organisation with not just one but multiple nodes of innovation, leadership and influence. “In networking lingo it means a shift from a client server model to a peer-to-peer structure. That has an exponential impact on productivity,” says Jonathan Ballon, VP strategy and planning, adding that in time Cisco will open such centres in other parts of the world including China.
Elfrink calls Bangalore Cisco’s second headquarters, which will give Cisco a foothold in the emerging markets from where the company hopes to get 30-45% of its future growth. Emerging markets, a cluster of 129 countries ranging from Dubai to Kenya, contributes 10% of Cisco’s $34.9 billion turnover. “This year you will see products and services coming out of this center, which will have material impact on Cisco’s revenues,” says Elfrink. But to do that Chambers has to first re-organise the company and change its corporate culture. In November 2007 he told ET that Cisco was shifting from a San Jose driven command and control structure to a collaborative body. To do something as drastic as that, Chambers needs someone like Elfrink who understands how Cisco’s insides work and has the authority to change that.
Collaboration is a business imperative. As Cisco moves from selling boxes and routers to more application and solution led selling, it finds itself in a completely new territory. While selling boxes is transactional, solution selling is relationship oriented. Key customers like telecom companies are demanding that their equipment suppliers now also learn to run and operate their networks. The Middle East countries, flush with funds thanks to rising oil prices are building hi-tech mega cities with billions of dollars in investment. Cisco sees an opportunity to sell the network as the fourth utility in these cities.
On January 20, 2008 Cisco CEO John Chambers signed a deal with the Saudi Arabia government to build a high-tech smart city which will need an investment of $8 billion. Cisco will provide the network architecture for the city which will have interconnected buildings managed over a secure network with centrally controlled data, voice, video and mobile communications. Cisco says that there are at least 9-12 such smart city deals in the pipeline. “Bangalore to Dubai is a three hour flight, it makes it a whole lot easier to support engagements from here,” says Scrivner.
To fulfil this demand Cisco is leveraging its partner’s skills and manpower ability. In October last year Cisco signed key strategic partnerships with Wipro and Satyam, two of India’s largest software services companies.
Wipro, Cisco’s only strategic partner in the East, will service key wins like the mega city project in Saudi Arabia. Through this partnership Wipro hopes to increase its engagement with Cisco from $150 million currently to $1 billion by 2010. “The advantage of the globalisation center is that instead of waiting for a project manager in San Jose, we can just talk to someone here and settle things faster,” says Achuthan Nair, VP, Wipro Technologies.