The Hindu Business Line : Hello, India... Cisco calling

Internet telephony (IP)-based services are of late transforming communication networks in Indian companies. In fact, IDC predicts that India is one of the fastest growing markets for IP telephony.

Networking solutions major Cisco sees a huge opportunity here. The company, which has registered sales exceeding Rs 3,178 crore in India, is expected to cross the $1 billion revenue mark in India.

In a chat with eWorld, B. Ashok, Senior Vice President, Cisco Systems India, outlines the latest trends in IP telephony and offers insights into the evolving market. Excerpts:

For Cisco, India has emerged as a major market in the Asia Pacific region. What triggered this?

In FY 2004-05, Cisco reorganised its sales and marketing team on four key verticals of IT/ITES services, enterprise, service provider and Government. The domestic manufacturing and services industry was maturing because of de-regulation and privatisation. Faced with intense global competition, the domestic industry realised the importance of investing in IT infrastructure to adapt quickly to rapidly shifting market and consumer dynamics.

Verticalisation helped us go to market with industry specific solutions that enable customers to deliver quality products and services and reduce their time to market. This change of strategy helped Cisco consolidate leadership position in the networking industry. This happened through delivery of vertical specific solutions, expanding product portfolio from just core technologies like routers and switches to advanced technologies such as IP telephony, wireless, network security, storage, and optical and home networking to cater to both large enterprises and small and medium businesses (SMB).

Cisco retained leadership and increased its market share in routing, switching, network security and wireless LAN segment. Overall, the enterprise equipment industry was valued at Rs 7,901 crore during FY 2005-06, and this includes modems, conferencing and services.

Cisco saw a faster growth than the market with India sales revenue touching Rs 3,178 crore in 2005-06 as per V&D top 100-June 2006.

Across segments of routers, switches, security, IP PBX and wireless market, it has a big share. Despite regulatory issues, IP telephony grew and Cisco shipped one-lakh IP phones in India as of December 2005. Globally, Cisco shipped over 8 million phones and around 1.6 lakh phones in India.

India and Australia appear to have emerged as two of the fastest growing markets in IP telephony. What are some key trends in this market?

According to a Gartner survey on the five hottest trends for 2006, voice and data convergence based on IP telephony and VoIP will be under way in more than 95 per cent of major companies by 2010. Convergence will drive additional classes of communications-enabled business applications and cause an upheaval in the telecommunications industry since its inception. The report states that by 2010, 40 per cent of companies will have completed the convergence of all their voice and data networks to a single network, and more than 95 per cent of large and midsize companies will have started the process. IP telephony will be the foundation to unify communication applications and assess how business and communication processes can be changed or integrated with IP telephony and collaborative applications. Moreover, the success of the SMB market and specific vertical markets (such as manufacturing, retail, healthcare etc) will see a stronger success rate of IP adoption with vendors getting aggressive in these areas.

If you continue growing at 50 per cent this year, are you on course to become a billion-dollar outfit in India?

We are very bullish about the Indian market and will continue to work towards long-term sustainability and growth. One of our key objectives is to ensure we grow faster than the market, and we have been doing that consistently in the past.

How big is the Indian IP telephony market? What are your plans for it?

According to a Frost & Sullivan report, the Indian enterprise telephony market saw a growth of 21.1 per cent in 2005, with market revenues growing to $203.1 million from $167.7 million in 2004. This report also states that in 2005, the Indian IP PBX market registered a growth of 47.8 per cent over 2004 and generated revenues of $79.6 million. This market is expected to grow from 2005 to 2012 at a CAGR of 21.5 per cent.

As IP telephony gathers momentum, how is Cisco addressing this scenario?

Cisco's strategy is simple. To create solutions that enable more effective communications, which in turn directly impact top and bottom lines. Cisco has been an evangelist in driving IP Communication adoption in India and has worked with industry bodies to articulate the business benefits that companies can derive from a converged network of voice, video and data.

IP telephony is a strategic growth area for the company and we've taken the initiative to educate the market on the various products and solutions available, as well as their benefits through trade shows and industry events.

To strengthen the product portfolio in India, Cisco recently introduced its Unified Communication suite of products. The new suite of voice, data and video products and applications is specifically designed to help organisations of all sizes to communicate more effectively. The system will allow customers to integrate their communications system with their IT infrastructure, streamlining business processes.

What are the benefits of single infrastructure?

Last year, in addition to the then existing regulations that allowed IP telephony calls within a Closed User Group (CUG), the Department of Telecommunications (DoT) issued a circular that disallows single infrastructure. Single infrastructure was a boon to organisations, particularly the BPO industry, as it allows them to reduce cabling and equipment costs. As a result, logical partitioning of a network to separate IP and PSTN calls on the same device was not allowed, affecting the industry's cost competitiveness to a large extent. However, in a recent circular, DoT has allowed logical partitioning and the industry views this as a positive step in reducing voice-related costs that will drive the growth and adoption of IP-based networks. The reversal of the government policy to restrain IP PBX over CUG (Close User Group) will likely act as a catalyst for the growth of the Indian IP PBX market and create new opportunities for vendors.

The competition seems to be hotting up?

The increased adoption rate for IP telephony is the bright spot in the enterprise communications market. With the ability to provide end-to-end solutions in a standards-based triple-play (voice/video/data) converged infrastructure, Cisco is best placed to fulfil the requirements of the industry. The Enterprise IP Telephony market has been growing at a very strong pace. The company saw a year-over-year order growth above 35 per cent, making IP telephony a billion-dollar market for Cisco globally. IDC believes India is the second largest market for VoIP services in Asia after China. The Indian IP telephony is expected to register an average of 60 per cent (CAGR) over the next 3-5 years.

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