Cisco moves east, and IP moves everywhere

One year ago Cisco Systems Corp. opened its campus in Bangalore, India, formally called the Cisco Services and Globalization Center East. Now, Cisco East, as it is casually referred to, is seen as the company's second headquarters.The two-building campus provides workspace to almost 1,800 of Cisco's Indian headcount of 4,700 employees. The campus, which has impressive facilities - not only a huge cafeteria, a games room, and a gym, but also a small cricket pitch and badminton court - is adding a third building, and will eventually have 12 in total. Cisco will need the space: the company is planning on having 10,000 employees in India within the next few years."Outside of Bangalore we have a small presence in Mumbai and New Delhi, and some Scientific Atlanta people in Chennai," Leopoldo C. Scrivner, Cisco's vice president of human resources, told me during a tour the Bangalore facilities.Scrivner is part of Cisco's executive shift to Bangalore - the company expects 20% of its executives to be working here within a few years. He reports to Wim Elfrink, Cisco's executive vice president for services and chief globalization officer, who in turn reports directly to CEO John Chambers."I didn't come here primarily as a globalization officer," insists Elfrink, who is the senior executive in India. "I came here as a change agent."After briefings at the company's Bangalore operation it became clear that for Cisco globalization isn't an idea that's being pushed from California - it's a very real experience for the company and its executives."500 million people will be urbanized in the next five years," says Elfrink. "An expanding global middle class will create more buying power. Mobility will be the platform, and managed or hosted services will connect rural areas. Entire new cities will be built, and they will be built differently than in the past - they will include the fourth utility, the network."These cities will be IP-based, adds Elfrink, and will provide services from healthcare to entertainment, as well as enhancing the safety, security, and environmental sustainability of communities.Connecting real estateIn the early 21st century some of the most advanced real estate projects aren't in Europe, North America, or Japan - they're being built in places like China, Dubai and Saudi Arabia."The long term trend is toward greenfields urban development, and most of this is happening in emerging markets. That will include energy efficiency," says Thierry Martens, vice president of Cisco advanced services, who is also based in Bangalore.Martens splits a building's networking requirements into two areas. In one is the lighting, elevators, security, CCTV, sensors for heating and cooling, fire detection, access control, and energy management - most of which are on separate networks; and in the other is basic Internet connectivity and IP-based technologies such as digital signage, unified communications, and interactive media."On the proprietary networks people tend to lock you in for the long haul," Martens says. "The biggest opportunity is in newer developments; however, retrofits for older buildings often have an energy conservation component, where the ROI is easy to prove."Martens argues that from a capital expense (CAPEX) and operating expense (OPEX) perspective, money can be saved. For most buildings, the network is smaller than 1% of overall cost, but for a modern structure it might come in at 5%. "That doesn't make the network a primary driver," says Martens, "but it does put us on the radar screen.""With an IP backbone you can mix and match services," says Martens, adding that partnerships are always going to be part of the picture. "We have a partnership with Johnson Controls, and have made a major investment here in Bangalore in solutions testing. It's centralized here, and scalable, so that we can test technologies from Siemens and others before going to market with a solution."Global healthcare takes VisaIn casual conversation, and also on the demo floor, Cisco executives were very excited about the ability of new technologies to expand healthcare services in emerging markets - both as part of ‘health tourism' and also as a means of serving indigenous populations.Syed S. Hoda, chief of staff at the Cisco Globalization Office, put us through a brief introduction to diagnostic video technology. "It's important to see the facilities," he said as a volunteer ‘patient' in our group talked to a Cisco employee ‘doctor' via videoconference. "People need to feel confident in their care, and for that it helps to have one-on-one contact." In this instance Hoda is referring to first-world health tourism and, to a lesser extent, access by the affluent in emerging markets.Following the Cisco mantra that ‘the network is the platform', it's evident that there is great opportunity to extend communication-based health services to rural communities and the poor. Unfortunately, in places like India there is no broadband outside of the larger cities - yet. Given cost barriers, there is also no way for the services Cisco presented to be of much use to the majority of the population of India.No network, no platform, just humansToby Burton, vice president of strategic market development, also working out of Cisco East, is excited about the possibility for delivering network capabilities to rural communities - part of Cisco's global push toward what it brands ‘The Human Network'. Burton knows this will take some time."High speed penetration to rural communities in India is essentially 0%," he says. "I visited one business process outsourcing (BPO) site run out of a hut - it was set up by an NGO for HSBC. It was two days away from Bangalore. The employees were all women, and they were being paid half of what they might have made in Bangalore, which was still twice what their husbands made."Such a BPO site is, at present, not viable beyond the experimental stage - power was supplied by a rack of car batteries. However, for simple and local information-based services there is opportunity. In the example mentioned by Burton, the women were doing about 10 different functions, from taxi bookings to calling employees. At times there was a combination of data and voice services."For rural BPO three areas come to mind," says Burton. "Government services, education, and healthcare. From there we need to improve the supply chain and create local wealth. People would rather work close to their families than come streaming to big cities. Parents will spend on education, but in rural areas educational services are limited. There are 600,000 villages in India; the government is targeting 100,000 for Internet connectivity."In India the answer is going to be WiMAX- it was interesting to see the real interest in India for WiMAX as a viable technology for wireless broadband, given its sputtered start in Canada. It is not a cheap technology, and the average revenue per mobile user (ARPU) in India is only $4 a month, compared to $80 a month in mature markets. However, with over one billion people, the opportunity for organic growth is staggering - India adds eight million new cell-phone subscribers a month."Canada is a mature market," says Angel Dobardziev, practice leader for emerging markets at analyst firm Ovum. "WiMAX will compete with LTE, which is a natural progression from 3G. In places like Canada there is a lot of copper in the ground, and this enables fixed broadband at very competitive prices."In places like India, however, rolling out copper is not that viable. What this means is that mobile broadband rollouts with an ARPU of only $4 will require massive economies of scale and innovative business models."In order to be successful you really need to adapt," says Dobardziev. "Carriers in this environment will be forced to innovate to make money."TelePresence leaves the boardroomFor some time now Cisco has been pushing its high-end TelePresence solution. In India I was in TelePresence sessions that linked in California and Germany, and another one to Malaysia - the technology performed well, truly offering a sense of ‘presence' with the other participants. The sessions were conducted at the Taj Hotel in Bangalore, in one of the new rooms now being offered by Tata Communications for public use."This expansion of TelePresence suites will compliment enterprise deployments," said Mark Weidick, vice president and general manager for Cisco, speaking via TelePresence from San Jose, CA. "It will greatly expand the opportunity for collaboration."Peter Quinlan of Tata pushed the expansion as able to result in real business and social benefit. "It will add more leverage to previous investments and speed sales cycles," he said. "Now the telepresence argument moves from how to reduce costs to how to positively impact core business."It's expected that Tata will have 100 rooms available globally by the end of 2009. Costs vary around the world: £190 an hour in London, US$200 an hour in Boston, and US$300-US$350 for a room in India. One expects (and hopes) that these numbers will come down as the technology expands - at these prices the rooms would likely be used to provide a wow factor and to impress clients as much as to provide real business efficiencies.Certainly, Cisco seems to be in a race to the middle with TelePresence, as solutions from competitors Tandberg, Polycom, and HP begin to fill the same gap. It will be interesting to see if Cisco can maintain the price-point and value for this technology. I had a Wi-Fi connection at the hotel, and had a perfectly good audio-video connection on Skype with my daughter in Montreal, all for free. It could be argued that I wouldn't have risked such communication for business; however, SIP-based offerings over an increasingly robust Internet mean that cheaper solutions will give Cisco a run for its money.The global talent crunchAlthough we are heading into difficult economic times, and that usually means rising unemployment, Cisco and other technology firms believe that the demand will likely remain for networking professionals. It is estimated that the gap in the industry is presently between 12% and 20%. From Cisco's perspective, India is certainly part of the solution."Our globalization strategy is based on three things: growth, innovation, and talent," says Scrivner. Given the emphasis on the first two, it's not surprising that in Bangalore Cisco is looking for qualified professionals, not phone jockeys. Over and again executives insisted that labour arbitrage was not the only factor when Cisco considered setting up its globalization centre."We pay in the US$12,000 to US$18,000 range," says Scrivner. "That's competitive in this market. We are not the top paymaster - though we offer the whole package, including medical, transportation, and bonuses."In Bangalore, Cisco announced a new program for accelerating advanced certifications. Obviously, it is crucial from Cisco's perspective to get as many people trained up on its products as possible. Given that Cisco only employees 5% of all certified workers, with the rest taken up by partners and customers, the strategy is for new hires to get fast-tracked so that they can offer advanced technical and problem solving skills."Cisco will almost never sell directly," explains Mayur Sahni, a senior market analyst with research-firm International Data Corporation (IDC). "They would rather have a partner take it, and that includes support. The partner ecosystem is very competitive, which works to Cisco's advantage."As a result, Cisco's push to hire and fasttrack highly-qualified service professionals through its recently-announced global acceleration technology program (GTAP) is designed to backstop the channel and fill the gap as the ‘support of last resort' to Cisco's customers."For GTAP we just accepted the first 17 candidates," says Elfrink. "There were over 22,000 candidates. We pre-screened to 3,500, then 1,200 showed up. From there we winnowed it to 35 finalists and the last 17."Hello world: the end of globalizationHoda claims Cisco's plan is to so fully integrate global operations between east and west, advanced and emerging markets, there will be no need for a globalization officer."We should fade the position out in the next three to four years," he says. "If in 10 years we have a chief globalization officer, then we will have failed. Globalization should be imbedded into every function of the business, with everyone thinking and acting globally."By sending top executives to India, and by hiring for more demanding positions, Cisco hopes to quell some anxiety in the United States that jobs are being exported purely as labour arbitrage. The company has 66,000 employees worldwide; with 10,000 soon to be in India, and $1billion invested here, the company is betting heavily that Cisco East is up to the challenge."Today, roughly 80% of our revenue is from the mature markets of the world," says Hoda. "In less than nine years from now the split will be 50/50 between mature and emerging markets. This represents an ongoing and massive change."Cisco executives made much of the fact that Bangalore was only a five hour flight to 70% of the world's population, and that of the 100 new airports to be built in the next decade most will be in emerging markets."There is a 12 ½ hour time change between here and California," says Elfrink. "We can now run our operations 12 hours from the US and 12 hours from India."Maybe so, but Cisco's near utopian view of ‘The Human Network' is betrayed by the reality on the ground. Nearing the end of the first decade of the 21st century, India has 200 million hungry people, and only 30% of the population has a bank account.In my travels after the conference I ran into an American businessman of Indian origin who complained that it was impossible to get anything done due to rampant corruption. In fact, India's hot new book, the Man Booker award-winning novel The White Tiger, lays bare the reality of modern India as a corrupt and almost pathologically hierarchical society."It is a challenge culturally for people to take calculated risks," admits Elfrink, though he stresses that there are progressive trends in India that are becoming entrenched. This is particularly true with regard to gender equality: about 35% of graduates from engineering schools in India are female.

Cisco moves east, and IP moves everywhere

News | 10/28/2008 2:41 pm EDT

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