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Issue of May 2005 

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Who’s networked

Networking is business critical

Rangnath Salgame, President, India and SAARC, Cisco Systems, says that although Indian enterprises are at a nascent stage of technology adoption, the IT market will grow. A sound network will make or break the success of every business. by Soutiman Das Gupta

What stage of the technology lifecycle are Indian enterprises currently in? Are they in a nascent, mature or developing stage?

Indian enterprises are currently in a nascent stage in terms of technology adoption. According to one study, Indian companies spend less that 1 percent of their total revenues on IT, while Fortune 500 companies spend about 8 percent.

According to one study, Indian companies spend less that 1 percent of their total revenues on IT, while Fortune 500 companies spend about 8 percent

Five years ago such statistics did not matter because Indian companies were not competing globally. We had a closed economy where productivity was not paramount. Product quality was not given much importance. Now however, in a free global market scenario, Indian companies have to compete with world-class companies even in the domestic market. This means that they have to get their information infrastructure on par with global standards before it's too late to regain marketshare.

Indian companies that are market leaders, forward-thinking and bold have begun to invest heavily in building their networking infrastructure because they know that networking provides them with an edge over rivals and is the underpinning of success.

Which industry vertical has generated the highest amount of revenue for your organisation?

We have divided our business into segments based on customer feedback and what the market looks like. They are IT services, service providers, government, defence, enterprises, SMBs and channels.

The government and defence segments are small in size, but the others are relatively big and growing quickly. Spending in the service provider segment happens in chunks; the deals are larger and the buying is cyclical. Buying among IT services companies is not cyclical but a continuous process, so in one quarter a certain segment will register a lot of growth, while in another it may not. However, if you look at it on a yearly basis, all cylinders are firing synchronously and all business segments are doing well.

Which segment is set to register the highest growth this year?

We believe that all the business segments mentioned earlier will grow phenomenally, not only this year but for quite a few years from now.

However, the automobile manufacturing industry is growing fast and we have our eyes on it. I'm not saying that it's growing faster than other industry segments, but it's coming up well and has already shown a lot of promise.

Even a couple of years ago, the automobile industry did not show many signs of being competitive in the domestic or international market. Today, companies such as Bajaj, Tata Motors and the TVS Group have got their act together and have geared up for many advancements. They all want to compete on an international level, and against the global players in India. They also realise that to be more productive it is necessary to increase their IT spending.

The IT services companies will keep investing in IT because it is part of their basic business model. The whole outsourcing industry was created for two reasons—cheap and qualified labour, and networking infrastructure. The latter has made India successful in the IT services market, and this market continues to grow for us.

I believe that this interest in networking is only the beginning, and networking will drive future successes. Overall, it is good for the Indian economy and also for Cisco.

The core market for networking devices has slowed in developed countries such as the United States. Do you think that the market in India will reach a similar saturation point and slow down? If yes, when will that happen?

The Indian market may someday reach a saturation stage and slow down. However, it will not be in my working lifetime.

If you look at the long-term economic growth of the country, it will be at an average rate of 5-7 percent, if not higher, for the next 20-30 years. There will be significant growth in GDP, which will demand continuous investments in IT infrastructure.

GDP, IT investments and productivity are correlated. So if GDP is driven by IT investments, the productivity of the nation goes up and the nation gets stronger.

The market estimates that you will achieve $1 billion in revenue by 2007 in India. Do you feel you can achieve it?

Overall, we're doing well and are on track. The last fiscal was a significant and breakaway year for the Indian market. We gained significant marketshare across all product categories.

GDP, IT investments and productivity are correlated. So if GDP is driven by IT investments, the productivity of the nation goes up and the nation gets stronger

In the routing category we maintained a marketshare of about 90 percent. In the switching category we gained a 15 percent marketshare, which increased our total switches' share to about 71 percent in February.

All our new products in areas such as IP telephony, wireless and security have about 45-50 percent marketshare—when about 12 months ago we didn't have any products in that space.

Other networking equipment manufacturers have made separate market figures based on edge, core and access devices. What about your organisation?

Rather than looking at the differentiation between edge, core and access devices, it's important to look at what the customers want and what their behaviour is.

If you look at some of the deals we have struck, such as the one with VSNL, you'll see that it's an end-to-end infrastructure deployment project, all based on Cisco technologies and solutions. A few companies may choose to buy a couple of devices from a different vendor, along with our equipment, and deploy them. If you look at our overall marketshare there has been no change in our position.

What strategy do you have for Indian SMBs which look for quality IT infrastructure but have issues with affordability?

In our experience, the SMB market's primary focus is not cost, but performance and value. If they use solutions from a company such as ours, which provides value in innovation, R&D and after-sales support, the issue of affordability is addressed with long-term savings and benefits.

Soutiman Das Gupta can be reached at

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