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Cover Story
Casting the net wide
Cisco is going hammer and tongs after the Indian SMB market,
says Kusum Makhija.
Cisco launched its SMB class of solutions in November 2004. Since then, it
has been adding products to its portfolio. Although the company had products
for the SMB segment earlier, it has always been known as an enterprise-class
vendor. Says Ranajoy Punja, Vice-president, Marketing, India & SAARC, Cisco,
“We have seen IT adoption increase manifold in the last couple of years,
and the SMB segment has emerged as the biggest spender on IT. Hence we decided
to have a focussed approach towards it as a vertical.” Cisco so far has
followed a two-pronged strategy. The low-end market for switches and LAN cards
is being taken care of by its subsidiary Linksys (see box), while the rest of
the SMB market is being looked after by Cisco itself. Certain big mid-market
clients are being handled by its large SI (system integrator) partners.
First off the block
The fact that SMBs were the first to recover after the IT slump four years ago
hasn’t been lost on Cisco. Notes Punja, “SMBs worldwide have been
adopting IT in a big way, and the Indian market particularly has been very pro-active.”
Increasing competition with global players is forcing Indian SMBs to leverage
IT as a business productivity tool.
The company says it has a 74 percent share in the LAN, small routers and switches
market, and 50 percent share in the security space across all segments. “Our
marketshare in the SMB segment is similar to the overall numbers,” informs
Punja. According to IDC figures for Q1 05, SMBs constitute 20 percent of the
total routing and switching market in India, and Cisco has a share of over 40
percent in this space.
The primary focus for the company here will be routing and switching products—the
two top-selling product ranges—followed by IP telephony and wireless. According
to Punja, “The Indian SMB market is still in a build-up stage where foundation
technologies experience the strongest growth. This explains the growth potential
for switching and routing followed by security.”
IDC says that Cisco’s ISR (integrated service router) range, which has
been around for some time now, is doing quite well, and security is the fastest-growing
segment for the company. However, Nareshchandra Singh, Manager, Communication
Research, IDC India believes that, “Security in the SMB segment may not
really be a big space right now. Besides, players such as D-Link, Netgear and
3Com are giving the company competition in the switch market.”
Trickle-down features
Cisco says it has incorporated some features and functionalities of its enterprise-class
products into its SMB range of products while ensuring that they are easy to
deploy and manage, and are cost-effective too. “The advanced features and
foundation architecture of our high-end routing and switching products have
been incorporated in our SMB portfolio as well,” affirms Punja.
Cisco has integrated service components in the box (not as an add-on) to suit
the requirements of the SMB market. In terms of product development, the company
has enhanced its service support capabilities. The old simplified version of
the SMB products did not have security and WAN. With its new range of SMB-class
solutions, Cisco has overcome that problem.
“We have re-engineered our products to suit SMB needs, and have incorporated
features such as a simple GUI capability, and voice and wireless functionality,”
informs Punja.
The ISR range of products is a hit among SMBs as it has an easy-to-manage user
interface with advanced security features. Capabilities commonly demanded by
SMBs include ASA (Adaptive Security Appliances) with a modulation firewall.
On the switching side, the 2900 series of low-end switches is really in demand.
| Linksys, a division of Cisco, which makes wireless
and networking hardware for the consumer and small office home office (SOHO)
markets, has launched a range of new wireless networking products and services.
These include Wireless-B Notebook Adapter, Wireless-B Access Point game
adapter, Internet video camera and Bluetooth USB adapter. The rollout of
these products will be across nine cities in India.
Indian situation
The Indian SOHO market is
weighing its options on adopting Wireless LAN (WLAN). One of the biggest
drivers of wireless products seems to be price. Says Ranajoy Punja, Vice-president,
Marketing, India & SAARC, Cisco, “The rapid fall in the prices
of WLAN equipment has put technology within the reach of the SOHO segment.”
Further, the flexibility to extend networks into areas that were previously
not cabled or jacked is a huge benefit. Users can access shared information
without having to hunt for a place to plug in. Pharma companies are taking
the lead in this, and others are bound to follow.
“A key driver is the
ability to use the same wireless network in the workplace environment;
this saves costs in laying wires,” says Punja.
Comments Adil Doctor, Linksys
India Country Sales Manager, “India is potentially a large wireless
market. The key application areas in entertainment, education and security
are compelling urban households to opt for diverse wireless products.
As the demand for convergence increases, Linksys aims to be at the forefront
of this revolution.”
Cost issue
WLANs are generally perceived
to be expensive. In that case, how would this new rollout help? Counters
Punja, “It’s a myth that WLANs are expensive. One of the main
reasons for the SOHO and home wireless networking segment gaining momentum
is that the per-user cost of deploying wireless has dropped by 50 percent
due to the fall in the prices of wireless equipment—not to mention
affordable broadband connections.”
His views are seconded by
research analysts who estimate that the Indian WLAN equipment market grew
to Rs 82.5 crore in fiscal 2005 as compared to Rs 51.5 crore in 2004.
Another issue that needs
to be addressed for WLAN to pick up in the country is that of broadband.
In India, broadband is yet to make a substantial impact. Consider this
statistic: broadband penetration lingers at about 0.02 percent in India
and 1.4 percent in China.
Having said that, initiatives
in the form of a broadband policy have been taken by the Indian government
in the last quarter of 2004. The government has set a target of 20 million
customers by 2010, of which 50 percent are expected to be on broadband.
It seems an attractive proposition
due to cost efficiencies, and provides scaling up for these companies.
“With a minimum investment, a wireless router that ensures connectivity
between multiple PCs and laptops can be achieved,” feels Punja.
However, SOHOs are confronted
with complex issues. One is how to deploy a network today that can be
upgraded easily in the future. The other issue relates to security. A
firewall costing thousands of rupees can be completely compromised by
a single incorrectly configured access point even when that access point
is behind a brick wall.
Two-step strategy
WLANs could also fall victim
to their own success as multiple network standards, including Bluetooth,
start to interfere with one another. There are also IP issues, and locating
access points across subnets makes it impossible to roam from one location
to another without middleware mobility.
The good news is that solutions
exist for most of these problems, and forthcoming standards will address
many of today’s limitations. WLAN is good today, and will only get
better, but to be successful in using it there’s a need to carefully
navigate through an evolving landscape.
In the final analysis, a
SOHO can start with Linksys products, and as its needs increase (like
the need for more PCs when physical networking comes into the picture),
Cisco products can start playing a role.
The strategy looks interesting.
One has to wait and see whether Indian SOHOs think along similar lines.
—Venkatesh Ganesh
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Partner initiatives
Cisco has a 100 percent channel model in India; however, the vendor operates
through major SI partners in the enterprise space. At the low-end, or what the
vendor calls the SOHO, home and low-end SMB, it has Ingram-TechPac and Redington
as distributors selling Linksys products. The company has over 1,500 resellers
reaching out to more than 1,000 cities and towns across the country.
“Our partners have responded well to the SMB portfolio as it allows them
to focus on a profitable market with a complete end-to-end solution. We see
it as recurring business for partners because SMBs are fast moving up the value
chain,” says Punja. The company has identified the top 50 cities and is
giving hands-on training to partners and resellers in these places.
Cisco sees it as an opportunity to build a foundation to sell wireless and IP
telephony to the same customers. However, IDC feels that the road may not be
quite as smooth for the vendor. “The SMB space is a different market altogether,
with severe competition. It is extremely price-sensitive and value-for-money-conscious,”
comments Singh.
With newer players such as HP ProCurve entering the market, Cisco needs to pull
up its socks. Cisco’s products are costlier than those offered by competitors
like D-Link and Dax, which are strong regional players. “A major challenge
for the company now is to have a strong and robust channel, and a clear strategy
about which products to sell from Linksys, through what kind of partners, and
which ones under the Cisco brand,” comments Singh.
Another bottleneck that the company may face while trying to firm its ground
in the SMB market is service and support. Though the vendor is known for its
good support infrastructure in the enterprise space, it remains to be seen whether
it can extend the same to the SMB market. In the latter case, it has to serve
a far greater number of customers at more locations, and hence it will need
nation-wide reach in terms of logistics and supply.
SMBs are not brand-conscious but value-oriented. The tier-2 and tier-3 partners
which the company is looking to leverage to ramp up sales may not be able to
match up to the demands of a value-conscious customer environment. “That’s
exactly what competitors in the SMB space are hyping against Cisco—that
it may be a brand in the enterprise space, but that they (the competitors) can
provide better value-for-money to SMBs,” adds Singh. To complicate things,
the domestic market is also being inundated with Taiwanese and Chinese brands.
There is an evolution happening in the SMB market wherein companies that have
reached some level of deployment are now looking at increasing their technology
use for innovative business processes; it is this chunk of companies that Cisco
can latch on to.
Where the growth lies
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Our growth is directly proportional
to the growth in the installed base of PCs and laptops; strong growth
there is strong growth for us
Ranajoy Punja
Vice-president
Marketing
Cisco
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Cisco works on a verticalised approach and has identified
three major segments—enterprise, BPO and manufacturing. The enterprise-wide
growth that the vendor has seen in these three verticals seems to be trickling
down to the SMB as well. Punja says, “The mid-market is expanding with
many BPOs and tech-savvy organisations gearing up to spend on IT. The same goes
for manufacturing, particularly auto ancillaries.” BFSI and organised retail
are the two other segments where the company sees traction within the SMB market.
Increased awareness among government and education institutions is another growth-fuelling
proposition. According to Cisco, any organisation that has deployed laptops
and PCs needs to have a network and is thus a potential customer.
Reasons Punja, “Our growth is directly proportional to the growth in the
installed base of PCs and laptops; strong growth there is strong growth for
us.” The company began to focus on SMBs as a separate market segment only
a couple of years ago, but has since then experienced strong customer adoption,
growing by more than 50 percent.
New products
Cisco has new products coming out this year for the SMB segment. They include
an extension of its ISR range. Phase II involves more product rollouts with
innovative programmes and incentives to push the same through the channel. “Our
focus will be to concentrate on repeat business that our tier-2 and tier-3 partners
can bring, and to increase our customer base, especially in the top 50 cities
and towns,” discloses Punja. The company is pushing products with service
packages that the partners can offer.
Singh opines, “Training of partners to sell solutions
will be crucial to Cisco’s success in the SMB market as partners selling
network security products with a solutions approach need to be geared up to
provide service support capabilities demanded by SMBs.”
With Indian businesses moving up the value chain rapidly, IT is being used for
many mission-critical applications and in several innovative ways. The network
becomes critical for the success of these applications—and that’s
exactly what the vendor intends to play on.
kusum@expresscomputeronline.com
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