Creating a global network

Emerging markets are the cornerstone of innovation and the potential for growth for multinationals, but challenges remain.

Last week, Cisco, the US leading supplier of networking equipment & network management for the internet, opened its Globalisation Centre East campus in Bangalore, India. The opening of the $50 million project attracted senior figures, including former Indian president Dr APJ Abdul Kalam, who is known for supporting technology initiatives in India.

The Silicon Valley-based company introduces the campus as another step in "developing the human network," which is what the company calls the process of connecting everyone — from CEOs of multinationals to rural farmers — to the internet.

Globalisation has opened up the emerging markets, which in recent years have caught the attention of companies from the developed world which are looking to expand. The 130 countries that make up emerging markets have a combined GDP of more $6.6 trillion.

Cisco believes that the majority of its growth, almost 60 per cent, will come from emerging markets. "What characterises 90 per cent of the nations we work with is that they are very focused and very much up for the challenge," says Julian Lighton, Cisco's vice-president of strategy and business development in emerging markets.

Connectivity

In theory, globalisation has the potential to reform the world's economy. Cisco envisions a world where companies can manage international offices without having to spend millions on travel, farmers can check commodity prices before hauling their crops to the market, and even fishermen will be able to use the connectivity to figure out where to dock and get the highest prices for their fish.

But that's the end result. Before Cisco's dream of the "human network" can materialise, billions of dollars will need to be spent on infrastructure and education in emerging markets. Nowhere is ICT (Information and Communications Technology) infrastructure being installed faster than in the booming economies of the Middle East, particularly around the Arabian Gulf in countries like the UAE, Qatar and Bahrain.

"Many areas — Dubai is among the leading ones in the Middle East — are actually leading in technology implementation," says Cisco's chairman and CEO John Chambers.

"A lot of the innovation will come out of the emerging countries. It won't be where emerging companies follow what Western Europe, the United States or Japan did two or three years later. Actually, the leadership will come out of the emerging countries."

The technology being installed is not just allowing these countries to become more developed, according to Chambers. It is actually allowing them to "leapfrog" developed nations. "If you watch what is going on in Dubai, Saudi Arabia or Azerbaijan, just as an example, you see countries skipping a generation," says Chambers.

"But not in just how to use technology, but how to you use technology in real estate, in education, in job creation, in competitive advantage on a global basis."

While globalisation has helped jumpstart innovation in the emerging markets and transformed economies, it is not without critics. Globalisation could make outsourcing easier for some companies, which could cost jobs in the developed world, critics say. Small companies, which don't have access to major networks, fear they wouldn't be able to compete against global giants, which can afford higher bandwidth and ICT infrastructures.

According to Saikiran, an employee on Rajesh Global Solutions, an IT-company in Bangalore, globalisation hurts the development of small companies in India because they will not be able to compete with global giants like Cisco.

"Their standards are very high," he said. "Their execution levels are very good, while some companies here are not up to those standards."

Therefore, a lot of Indians are turning to larger companies because of the perceived stability and opportunities. Even that can be deceiving though, he says, because large companies in India have a history of cutting jobs when money is tight. The growing strength of the rupee hasn't made things easier, he adds, since companies have been awarding smaller salary increases.

Scale of benefit

Saikiran also takes objections to John Chamber's analysis that increased infrastructure is benefiting small farmers. "Only one or two people in a village [are benefiting of] these things," he says.

"Most Indians still don't know what to do. It is slowly developing. Maybe in the next five years or 10 years, it will show some results, but right now I can't imagine that all the people are doing what they [Cisco's executives] say."

Saikiran thinks companies such as Cisco should be doing more to help agriculture, which accounts for almost 70 per cent of India's economy.

"Major companies are not taking any concern towards agriculture," he says. "And if you see the analysis of India, 80 per cent of the villages have no manpower at all because people are coming to the cities [looking] for jobs. They perceive that going to cities is good."

But even Saikiran acknowledges that most Indians want the economy to continue to boom. "They look at the big picture," he says. "They want the quality. They want good things — they see that." The question is how soon will that happen and is it sustainable?

The situation may be better though in the region, which isn't so burdened with such problems. In the Middle East, Lighton estimates that if Dubai were to focus its wealth on social and economic issues, it could become a developed nation in as little as 10 to 15 years. Once Dubai becomes developed, it will be faced with sustaining that development.

"What I see in particular in the North African and Gulf nations is pockets of brilliance, of absolute world beating brilliance, but how replicable is it? Are they willing to share amongst one other, can you make it sustainable? Can you make it more than a generation?"