‘The essence of our marketing strategy for the Asia-Pacific region-in one word-has been partnership’ – Mathew Kapp,President, Asia-Pacific, 3Com

-Mathew Kapp, President, Asia-Pacific, 3Com.

In an industry where changing
jobs is more of a rule rather than an exception, Mathew Kapp, President, Asia-Pacific,
3Com, can be called an exception. But then, instead of job hopping, Kapp has been doing
country hopping, having traveled across the globe in his 10-year tenure with the company.
Prior to his present designation, Kapp has been 3Com’s Regional MD for the UK, Russia,
Middle East and Africa. He was also MD of the company’s Benelux operations. Currently,
Kapp is looking after the company’s Asian business strategy and accelerating its focus
into the large enterprise, SME, carrier and consumer served market sectors. In an
exclusive interview to DATAQUEST, Kapp, who was recently in India, talks about various
issues relating to 3Com and the networking industry as a whole. Excerpts:

What are the trends in the
global IT market?

I think that there is a paradigm shift happening and the current information revolution is
definitely moving toward communication convergence. I think that the PC era is over. Of
course, not literally. PCs are going to be there, but as the mainframes do today. They
will continue to do the computing bit, but the traditional role of connectivity would be
taken over by a whole new form of appliance connection devices that have sprung up. These
devices are providing information access to people in a mobile fashion.

The other trend that is clearly visible is on the networking front. The network’s core or
the intelligent network of the telcos is becoming more stupid, if I may say so. The core
is achieving high speed using technologies like wide division multiplexing with
terrestrial fiber optic. This is changing the high-speed switched ATM packet based and
IP-based networks. So what’s happening is that the intelligence is moving out of the core
and heading toward the access point. This is putting the control of the networks into the
hands of the users. So even as the carriers are adding massive amounts of bandwidth to
their network, they seem to have lost control of it. Then the access too is becoming
faster and high speed with wireless and data being carried through fixed wire, DSL and the
cable network. This is creating high amount of competitive pressure for the carriers, as
the users are increasingly becoming more selective of the carrier service they want to
use. Globally, this is a very interesting development and it is evident from the price
wars, mergers and acquisitions in the carrier segment.

What are the focus areas for
3Com?

Our vision and core competency is in networking. We want to make networks or connection of
networks more ubiquitous. We want to take people from access to network, be it on a LAN or
a WAN. We extend our different solutions to the small and medium enterprises (SMEs) and
the large corporates to take them to the carriers smoothly. We have been very focused on
the ATM backbones for the LAN and the campus, for the Gigabit Ethernet and the remote
access. However, the one area where we are weak is the WAN segment where Cisco has a major
positioning in routers. Overall, 3Com looks at its business through four lenses. These
are: the carrier market and what all is happening in this market, the large enterprise and
where it is heading, the SME segment and how ecommerce and e-business are developing it.
Lastly, our focus is the consumer market and we are continuously evaluating the buying
habits of the consumers. We have around 7,000 developers for the Palm Pilot project with
over 1,000 applications.

What has been your marketing
strategy for the Asia-Pacific region?

The essence of our marketing strategy for the Asia-Pacific region, in one word, has been
partnership. We are partnering with the carriers to help them build the network
infrastructure and are helping them to bring applications suiting their customers. This is
important for the carriers and us as the business is going through a dramatic shift. As
the carriers are moving to provide higher bandwidth and their business moving to low
margin model, they are increasingly looking at new services on which they can build their
customer base. So we are partnering with these companies to help them capture fresh
markets with new applications like VoIP, fax over IP and wireless PDA. Similarly, in the
large enterprise segment, we are pursuing a deliberate approach to key large accounts
developing their campus and WAN with ATMs and gigabit ethernet. Our goal is to help these
companies move toward virtual private networks so that they can connect their remote
offices and employees.

Where does the channels fit into
your strategy?

Channels are very important for us as they serve our link with the SME and the consumer
market. We are partnering with the channels to develop a whole new range of services to
make the SME segment a high growth one. What happens in the SME segment is that the
customer, usually, does not have the necessary IT expertise and expects it from the
resellers. We help our channels, through the partner’s program, to develop the necessary
skills and capabilities so that they can add value to their business. The other objective
of developing our channels is to ensure that we give the best support and services to all
our customers. An example to this commitment is the introduction of the Palm Pilot in
India. We have deferred the launch of the product till we put the best infrastructure in
place in the country.

What effect did the Asian crisis
have on 3Com?

Yes, the Asian crisis has had an impact on our business in the region. We did not grow as
fast as we used to, before. Nevertheless, we have stuck to the course and continued with
our investments in the region. We have invested heavily in setting up our support
infrastructure and manufacturing and are looking at other activities to improve our
infrastructure in the region. Of course, we had to be very selective with our investments
and opportunities. We have put in around $70 million for the manufacturing plant in the
region. Also, we have invested close to around $15 million in sales and support
infrastructure. We have built a technology support center in the Asia-Pacific region which
has incurred an infrastructural cost of around $15 million and we are in the process of
further upgrading this infrastructure. So it has been fairly heavy.

What is the nature of the
investments made in India?

This is what we have been trying to work over. Our investments will be toward three key
areas of activity in the country. We will be taking some key initiatives in terms of sales
and marketing. The other area would be toward developing the support capability for
products and services that we may want to support at 3Com, outside the Indian market and,
lastly, to look at the opportunities of investment in India in services and software
segment.
The investment plan for India is in process now. The first step has already been taken
with the announcement of our 100% subsidiary. We think that this will give us the
flexibility to quickly move the investment we choose to do along the line. It will also
help us to look at investments to develop our local business and provide opportunities
back into 3Com in terms of services and software development. So the plan is being
finalized and that is the key reason why I am in India.

Do you think that the networking
market in India is mature enough vis-a-vis the others in the Asia-Pacific region?

Definitely. I think that a major thing happening is developing the national network
infrastructure. This is being driven by deregulation and opening up of the market.
Moreover, it is going to serve India’s goals toward building a $50-billion software
industry in the coming years. The reason is simple. As the communication infrastructure is
built, you are able to get very low-cost education and hence build a strong technical
resource base.

The other reason is that the country can have a cost-effective e-business transaction.
SMEs can quickly get into the worldwide market for business thereby developing the SMEs in
the region. The big thing I find about India is that the country is well placed to add
value and take away a major chunk of the global internet software market.

What is the marketing approach to
the Indian market?
Every market, particularly in the Asia-Pacific region, has unique characteristics. The
same holds true for India as well. Nevertheless, we feel that the importance of this
market is picking up. Our approach toward India is to ensure a situation where we can take
big local decisions quickly. However, we have to keep in mind the alignment to the global
strategic goals and carve out local strategy and tactics. So typically our goals are very
similar across the markets, though our strategies to execute may vary in each market.

Are you looking at any specific
segment in the market?

In India we are focusing on three key areas: carrier, enterprise and modem market. These
three are the hallmark of 3Com initiative in India. Though in the past we have not been
successful in the crowded modem market, this time around we have created a special
position for our product and the market acknowledges this. We feel that as the carrier
market opens up, it will create a huge business opportunity for 3Com. We are not focusing
on the consumer market, as we are apprehensive of the support infrastructure. Once that is
put in place, you can be sure of seeing some great action on that front too.

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