Cisco bets big on innovations, solutions


2 May 2011
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BANGALORE: Five years ago, with a grand plan to conquer the East, networking giant Cisco Systems opened a front in Bangalore, and posted its trusted generals to lead the march.

What it did not plan on was fighting a Chinese dragon - rival Huawei Technologies - which is chomping away at Cisco's market share. To its credit, Cisco now admits the threat and is gearing up to take the spectre head on.

"Some of Huawei's weaknesses are very serious. And we're going to call it out. Not just here, but globally," said Anil Menon, Cisco's president - globalisation. "We are going to beat them in solutions and innovations." San Jose-based Cisco, which sells routers and switches among other networking equipment, set up its second global headquarters, called the Globalisation Centre East, in Bangalore in 2007, for better access to this part of the world, both in terms of talent and market opportunities.

Menon, who reports to Cisco's chief globalisation officer Wim Elfrink, hints at Cicso's battle plan, by referring to solutions, a known Achilles Heel for Huawei, especially in the enterprise market, a Cisco stronghold. Huawei excelled at selling lower-priced gear, aided by generous credit lines from state-owned Chinese banks, which it offers to clients to purchase merchandise from them but pay later.

However, it is yet to catch up in marrying managed services and equipment to offer complete solutions package. Menon declined to reveal anything more about his strategy to take on Huawei but called that firm's policies "unethical", without elaborating. However, he was quick to add that it is not a China issue . "We work with several Chinese companies and they're totally okay," said Menon. A spokesperson for Huawei called the comments unfortunate and said the firm has "great respect for Cisco".

"We are very concerned about any claims or actions that are not based on any evidence of wrong-doing on Huawei's part," said Scott Sykes, vice-president - corporate media affairs, Huawei. Beside solutions, Cisco is also betting on innovation, an area where analysts say Cisco did not live up to the expectations set at the time of its globalisation drive into Bangalore.

Except for a new router ASR 901 designed in India for mobile operators , innovation has remained more or less on paper. While Cisco used to be a dominant player, rivals such as Juniper Networks, Hewlett-Packard and Huawei have been steadily eating into its market share, according to Naresh Singh, principal research analyst at research firm Gartner.

Juniper has roughly 9% market share in the router and switches segment and is looking to double its share, while Huawei has a 10% market share, data from research firm Infonetics Research show. In routers and network switches, Cisco's share has fallen to 55% from 66% five years ago, IDC data from last year show.

"Its rivals now attract clients with quality equipment at favorable prices," Gartner's Singh said. Such market share erosion raises the question whether the globalisation efforts have indeed paid off. Senior executives - such as globalisation chief Elfrink - once moved to Bangalore has since returned, making observers wonder if Cisco continues to have faith in Bangalore-based globalisation agenda.

"Some things may not have gone exactly the way we thought it would," says Menon. "We have made changes. But show me anything that has exactly gone to script." And this is not the first time Cisco is training its guns on Huawei. Last month, Cisco chief executive John Chambers called Huawei "a more significant networking competitor than Hewlett-Packard.

Chambers went a step further to say that Cisco wouldn't stop at protecting its home market - the US - but will aim to beat Huawei in their home market China as well. It remains to be seen if Cisco and Menon can walk the talk when it comes to taking on the Chinese rival.

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