Globally, it is the Indian and Chinese governments that have got it right on how big will the scope of the broadband-based business models be, says Cisco CEO John Chambers. So India is high on his agenda as he confirms ?20% of Cisco?s top global talent? will be based here. Clearly bullish on the prospect of a fast recovery from the global downturn, he avers every government in the world (must) clearly understand that the best form of governance is to grow economy and create jobs. Practising that mantra, Chambers is steering the world?s largest maker of networking gear with an acquisition drive. The $36-billion company has signed two acquisition deals in two weeks?wireless equipment maker Starent Networks for $2.9 billion and Norwegian video conferencing maker Tandberg for $3 billion. Cisco has spent about $56 billion in 174 deals in its 25 years of existence and enjoys $30-billion cash balance. In an exclusive interview with Pragati Verma at ITU Telecom World 2009 in Geneva, Chambers summarises his experience of managing through five downturns and narrates his plans of moving into new markets like healthcare and security. Excerpts:
Cisco seems to be aggressive on acquisitions and getting into new markets. What makes you so bullish?
I am optimistic about the economy. It might be early to call it a full-blown bounce-back, but the trends are towards an upturn. You are going to see acquisitions heat up. In the four earlier downturns too, we came out stronger in terms of marketcap and market share and used it to move into new markets.
It is important to be realistic and take a look at how much of the downturn is due to economic environment and how much of it is self-inflicted. The second thing is to determine how deep is it going to be and how long will it last. Thirdly, you need to get ready for the upturn and communicate your strategy with your employees, shareholders and customers.
Companies that paint the picture of what their press releases will look like five years from now will do well. And companies that get into a self-pity mode and not strategise on what they will look like when they come out of the downturn will get into trouble.
Tandberg was your first public company acquisition outside the US. Are cross-border integrations more challenging? Will we see more?
Yes, it?s the first non-US public company we bought. But the product and the corporate culture fit in well with Flip and Scientific Atlanta. Our customers told me to buy it. It is not a mere video conferencing company but a communications company with open standards focused on video.
We have a good success with acquisitions so far. About 90% of acquisitions in this market fail, for one reason or another, but more than 70% of our acquisitions have exceeded expectations we presented to the board.
So, this will not be our last major international acquisition. Innovation knows no boundaries though it does add to the degree of difficulty when you acquire a company outside the US.
You talked of relocating top 20% of your global talent to India in about five years while setting up a globalistion centre in Bangalore almost three years back? Are you confident of meeting those targets?
Our top talent is already growing in India. Having 20% of the top talent in a couple of years is a bold statement but quite doable. India is a small part of our business but a big number of our top-level talent is already there. Already we have Wim Elfrink, chief globalisation officer, Sameer Padhye, senior vice-president, worldwide service provider line of business, and Anil Menon, president, globalisation and smart and connected communities in India.
As emerging markets like India and China start gaining importance, do you see new business models emerging?
When I talk to governments in India and China, I believe they have got it right and understand the importance of broadband and ICT technologies. ICTs can improve the global standard of living through healthcare, education and sustainability and connect people who make less than $3 a day.
We need public-private partnerships. One of the reasons that I am optimistic about economy is that groups that were traditionally not working together are now doing so. All successful public partnerships need to have a common underlining clear statement of vision over long term.
Secondly, it is a multi-phase, multi-year approach as it takes a minimum of three to five years to implement. We need a clear-cut definition of responsibilities and roles. How you enter and exit should also be well defined. We find that governments around the world have clarity on their goals. If we can grow GDP faster than productivity, more jobs can be created. Every government in the world clearly understands that the best form of governance is to grow economy and create jobs.
You are moving into several new markets? Which excite you the most?
I believe video will be a killer across areas. The most exciting area of technology today for me is all-around collaboration and video architecture. I think it will change a decade of productivity. Security, surveillance and healthcare are exciting too.