Beyond outsourcing, India as an innovator

Cisco Systems, the San Jose, Calif.-based router maker, has made a billion dollar bet on India. With that one giant poker chip, the company has shifted the focus from India as outsourcer to India as an innovator. It is also a realization that India is a big market, perhaps not as big as China, but equally lucrative in the long run. The company plans to triple its staffing, start a $100 million venture fund and at the same time fund a $10 million rural broadband project. Rest of the money is going towards a R&D center.

Dan Scheinman, Cisco’s senior vice president of Corporate Development, says that in past two years Cisco’s India sales have grown 50% per annum, and are likely to grow 30% annually for next three years. “We see India as a source of technology, and innovation,” Scheinman says, “And we will use India as a base for developing technologies in routing, network management and software that will keep us globally competitive.”

As a market, India was smaller than many U.S. enterprises a number of years ago. But today, the nation has made incredible investments in building world-class communications networks. As an indication of that, in the fourth quarter of our 2005 fiscal year, Cisco saw a 75 percent year-over-year bookings growth in India. (Cisco website)

But that’s only part of the reason why Cisco is getting serious about India now, after nearly eight years of low key presence. Scheinman points out that Cisco started in India and China from different ends of the spectrum. While in China it started with a $300 million venture fund, it has only now going to make VC investments in India. (Indiagames is one of its first investments in the country.) My sources say that there is some serious start-up activity in India around chips, especially in the area of DSPs and Network-related chips.

Cisco goes after markets that have three characteristics: customers who are leading edge technology adopters, talent that is willing to adopt and massive infrastructure build outs. India has all three. India is one of the fastest growing telecom nations, and is fiercely contested. From Chinese vendors like Huawei and UTStarcom to European giants like Siemens, Ericsson and Nokia, everyone wants a piece of the action. Cisco, is simply taking a more long term view of the market.

Cisco is not the first one to come to that conclusion – Qualcomm, LG Electronics, and Samsung have been taking Indian markets more seriously than their peers. Intel, Texas Instruments, and Advanced Micro Devices have been pushing hard, as has Nokia. There is word that even Apple has been scouting the market more seriously. Folks like Oak Investment Partners have set-up a venture fund focused on retail opportunities in India.Tim Draper, flush with his Skype-billions is headed to the spice bazaar as well. (Perhaps it has something to do with this?)

Related link: India Page @ Broadband Wiki