We are using India to create disruptive business models

Cisco did it once about a decade back. It changed the way
communications happened across private and public networks. CEO, John Chambers,
feels the time is ripe for a disruptive change again. The second phase of the
Internet, he says, will have collaboration at its core, and Cisco wants to
dominate that space and drive in what direction it moves. That could mean
competing with Microsoft and Google, but he is "not focused on
competition"

For him, the big boxes, collaborative applications such as WebEx,
Telepresence, unified communication, a globalization center in Bangalore,
putting social networking concepts to drive business productivity are not
individual pieces of opportunities, but all part of an integrated strategy to
make a disruptive change happen again. India will play an important role in that
change, not just as a labor base or a market, but also as a center of
innovation, where new ideas could be created, tested, and taken to the world.

In a discussion with Dataquest, he explains how he is connecting
what seems to the rest of the world as disparate dots and, in particular,
explains why he chose India to play such an important role in his strategy.
Excerpts

Why is every companyincluding Ciscoacquiring social
networking companies?

Not many companies are acquiring social networking companies for changing
the thought process. We are using social networking as the next productivity
model. So, you will see us not only acquiring social networking companies, but
also taking a lot of concepts from successful social networking sites and
building them into processes that will drive the productivity of our company.

If you think about what Cisco does, we are usually very, very
effective in catching market transitions. So, it isnt social networking
separate from TelePresence, separate from unified communications, separate from
YouTube. It is going to be new business models delivered by the network,
virtually around the world. Other people may be acquiring social networking
companies to moneytize these kinds of things. That is not what we are after. We
are after business process change.

Why the transformation from Cisco Systems to Cisco? Has the
infrastructure growth plateaued?

Let me break the question into parts. I think there have been two phases in
the Internet explosion. Phase I was when the Internet was used to order online,
customer self-service online, and employee self-service online, and when it came
to India for back office, and to China for manufacturing. It drove productivity
for a decade and Cisco benefited hugely from that. It also began to redraft the
process change. Now, what is interesting is that productivity has slowed down in
the last three years. What seems to me is that we are about to enter the second
phase of the Internet.

Phase II will be built around convergencedata, voice, video,
and mobility. It will result in dramatic transformation of business models. How
we deliver our support to our customers will be done primarily out of Indianot
back office support, but primary support. It will deliver virtually around the
world.

Just as in the first phase, Cisco started putting to use many of
the capabilities of that time, for business, such as beginning to do consumer
self-service online. Many of the things that our children started, such as the
wikis and YouTube, will now go into the business. And we think that will drive a
decade of productivity. Now this is in theory. Remember, we were the one to
predict the first phase of the Internet accurately. We first did it ourselves,
and then we readied the way for the next decade with our customers. Had someone
invested a dollar in our company when it was started, today it would be two
hundred and fifty thousand dollars. So, it has been very consistent throughout.

What Cisco does well is that it catches these market
transitions...

We are entering a market transition where the network will become a platform
for all kinds of communications. And, the buzzword is about collaboration. It is
not about one-to-one productivity change; it is many together. So, it is about
how we collaborate seamlessly with our customers and with our partners such as
Infosys, Wipro, and Tata.

To answer the other part of your question, we said five to six
years ago that you needed to think about 100% network growth. No one in the
world believed it. We built our products that time to cope with that growth.
Today, most of our customers feel networks will grow 50-100%; but 100-200% is
given; and no one is saying 200-500% isnt possible. And the killer app is
videotelepresence, virtual meetings, etc.

So, I think it is all the three things happening at the same
time. You first have convergence of data, voice, and video over common
infrastructure, not separate ones. The second thing is the Internet entering its
second phase, built around collaboration. And, the third thing is that as this
grows, this will cause dramatic change in business models.

You had the option of doing that without getting into those
businesses yourself. What explains acquisition of, say, an application services
company like WebEx?

One of the mistakes that many companies make is that they think if they
understand one market, they can move into another market. Almost no high tech
company in the history has ever done that successfully. And, if you move into
another market, do you get a minimum 40% market share? Do you get very good
profits in it? Do you grow your overall market share? Under these scenarios, 90%
of the acquisitions fail. There are probably only two or three high-tech
companies in the world which have two to three major product lines where they
are the #1 player, with good profit and very good growth. Cisco has two dozen.
So, we understand how to enter the market and how to understand what our
sustainable differentiation is.

"To be able to show you how to do it, we do it ourselves first. Last time it took us four years; this time around, it will take us twelve months"

WebEx is the #1 player in conferencing, with a 40% market share.
And, we did not do it as a standalone application. We clearly did it to tap
telepresence. These are not separate pieces. These are really integrated
together. It is like being able to watch a sporting event like a cricket match
together when your family is spread out throughout the country. This changes
everything. This is going to be a huge wave. We are very clear that we are
approaching it architecturally, not as individual products or single markets. To
be able to show you how you to do it, we do it ourselves first.

That is what you did last time around as well

Exactly. It is the same principle. The only difference is that the first
time it took us four years. This time, it is going to take us twelve months. We
have worked on collaborations. The technology part is actually very easy. So, we
worked on collaboration as a company for almost four years. The first couple of
years were hard. People were not used to shift from command and control to
empowered teamwork. We would not have been able to come to India without unified
communication and telepresence.

If you are successful in what you are pursuing, this could put
you in direct competition with the likes of Microsoft and Google. In fact, you
are already competing with Microsoft

I look at it a little differently. This may surprise you. But, I have never
focused on competition. I have focused on getting market transitions right and
being there three to five years ahead of our competitors.

But, to really answer your question, if the network plays the
primary role, and intelligence resides in the network, then the network becomes
the platform for all forms of IT and communications. And, whether it is in
consumer or business areas, most of our peers will move in that direction. The
action will shift to the network. Almost all forms of productivity will be
network enabled, directly or indirectly, with scope for collaboration. We intend
to lead in collaboration. We intend to lead in network. We intend to lead in
home too. Yes, we will have a number of new partners and a number of new
competitors.

So, where do India and the much-publicized globalization center
fit in?

Five hundred seventy five thousand engineers a year is a huge number.
Compare that with the US, which has 60,000 a year. I know there are different
skill levels. But, if the top 5% of your population goes to this industry, that
is what I am after. You combine that with an environment where it is going to be
one of the largest global economies by 2025, with a culture that knows how to
innovate and one that knows how to partner, has a young population, and a
government that is open to new ideas, I think it is a unique combination. What
Cisco is going to do here is not labor arbitrage. We are going to approach it in
a different way. We are here to enable disruptive business models. That is the
reason I am here.

I think what we are going to do in India is first we will prove
it in India; then it will go to developing countries; then, it will go to
developed countries. This is the model for Cisco in India. This will be a
globalization center, Cisco East. And, it will probably develop our second world
headquarters.

What most companies have done here is labor arbitrage. We are
using India to create disruptive business models. We will have 20% of our top
talent by 2015 in India. But, why did you choose India?

We came here to partner with a country that understands how to partner. That
is a huge advantage for India. Your competitors do not understand how to do
that. You have democracy, English speaking capability. But, we are also seeing a
country that is beginning to innovate. In terms of weaknesses, like it is in all
democracies, the ability to argue back and forth means things take time to
happen. But, in the end, that probably wins.

A countrys future depends upon its education system, its
infrastructure, innovation, catching market transitions, and supportive
government. India has all the above. Even in infrastructure, which is still
evolving, it is not following the US and Western Europe, but skipping a
generation.

You look at the area of catching market transitions. India will
be an example that emerging markets will follow on different business model
changesthe ability to cut out the middlemen from the retail supply chain,
straight from farmers to retail; the ability to charge one cent per minute for a
voice phone call and still make profits; the ability to climb up in the services
value chain, from back office to other high value areas. We are here to partner
with Indian companies in those changes together with them.

Shyamanuja Das

shyamanujad@cybermedia.co.in