Mr. Carpenter, when we talk about Cisco Systems on a global scale, we are talking about the world's largest manufacturer of network equipment which is based in the Silicon Valley. Would you say the company's philosophy has been well accepted in Mexico or does Cisco Systems have to adapt to the specific Mexican market?
I think Mexico is part of the global trend. In Mexico, the different users interested in the market have very well accepted Cisco Systems' philosophy and visions.
So you are saying there is absolutely no difference between the operations Cisco Systems is doing here in Mexico compared to other countries, whether in Europe or in Asia? Isn't there any difference in the country's mentality?
I believe countries ' cultures & mentalities are different throughout the world. I believe that what makes sense is the global model under which we operate and the impact the Internet is having in the way the country and its markets evolve, so I think it could be a common denominator. Also, there are different levels and speed of acceptance in the markets worldwide. Every country has its own speed of change and adoption level of Internet but the operating model is basically the same.
Did Cisco Systems when it established its office here in Mexico, followed its clients or did it foresee the importance that Mexico would have one day as a platform for globally operating companies?
When the company established in Mexico, in 1993, Cisco was initiating its worldwide presence. Mexico was one of the first countries we moved into and it has to do with many reasons. First, being close to the USA. At that time the opening of our economy was happening. Second, being one of the largest trade partners to the USA. In terms of development potential, Cisco saw Mexico as a country with a strong potential for the future and a country willing to adapt fast and as a pioneer in Internet adoption in businesses.
How many employees does Cisco Systems have today in Mexico and what would be the company's total revenues in the country?
We have about 120 employees in different areas of specialty. In terms of revenue, we don't disclose revenue individually by country. However, we have been growing at an average of 100%+ in the last 5 years. That reflects the level of penetration of Internet in the way businesses are evolving. We believe the rate of adoption has been growing substantially as well as the competitiveness of the market. So, that together with the fact of the economic changes such as the deregulation and globalization makes a very attractive market for the implementation of Internet in the way that people do business. People learn. We foresee an accelerated growth into the future. Market conditions are present and are facilitating the adoption of Internet, which is the business we are in.
If you see this kind of possibilities in the future, I assume that Cisco Systems is also running some research and development facilities in Mexico. If so, what percentage of the total revenues would be invested in research and development in Mexico?
Not necessarily, because Mexico is usually driven on European standards in terms of telecommunications, so we leverage of the work done in Europe as well as worldwide. Localization for specific requirements done either in Mexico or in San Jose, California, we don't need to do much of a change. We leverage what is done elsewhere, We focus more on implementing and helping customers implement the solutions. I believe this allow us to speed up our time to market.
Are you referring at the same customers Cisco Systems finds on a global scale or do you encounter any specific differences in Mexico?
There is a mix of customers; global & local. The way the market is structured is unique to the country. Business processes, however, tend to be common.
Cisco Systems has a system called "Gold Certified Partners". Could you explain the background of the system and how you determine the specific conditions of companies that are part of this program?
We have a comprehensive certification program. We listen customers and understand the needs they have to implement solutions from our partners: integrators, a consultants, a distributors,.. . We translate those needs into certification levels, that's how we create our certification levels. We add up the knowledge, support capabilities and areas of specialization required. We end up with different levels of certification/specialization that translate customer's needs into different levels of certification and specialization. For example, in the certification level we have premier certified partners, silver certified partners and gold certified partners. They grow up from premier to gold depending on their support capabilities, number of specialized people, number of markets they serve, and areas of product expertise. There are several specialization areas such as security, local area networks, voice,.., we translate the customer needs into qualifications of specialization. Usually these partners either specialized or certified collaborate amongst each other to deliver the solutions to the customers, they create an ecosystem. That's how we help our partners develop and serve their customers. That's how, the customer can locate the right partner to work with.
Do you have in Mexico any partners who accomplish those conditions in order to be part of the Gold Certified Partner's program?
We have four gold, five silver and 60+ premier partners in Mexico.. We have about 800 registered distributors. And then, by specialization, we have partners specialized in SNA, IP telephony, security and local networks. You can see that we have a full set of distributors that add value at different levels according to customer needs. And lately, due to the fact that customers are integrating the Internet into their business processes, we have initiated work with consultants that help them speed their time to market.
As KPMG for instance?
Yes, KPMG, Cap Gemini-Ernst & Young, Arthur Andersen, Price,,.. We are also talking about partners that do outsourcing. The ecosystem helps our customers implement business solutions. Customers use the Internet to change the way business is done. They need technology and integration expertise, that's the collaboration of many companies. We call that an ecosystem. We don't believe there's one company that can do it all for a customer so we developed alliances with many companies with the objective of helping out and shortening the cycle of implementation for the customer, bringing the appropriate knowledge for the different processes they want to do. Within this ecosystems we work with consultants, with integrators, resellers,., that's what our customer needs. So the ecosystem is a collection of companies that contribute in different areas with different expertise but at the end of the day what you look for is the most effective way to help the customer implement the change in the business processes he needs. Usually this change in business processes is related to the Internet.
So the customer can concentrate on its business and you cover the technological matters of the company?
Yes, the ecosystem helps out in the technology integration so he can focus on his business.
Mr. Carpenter, in the last years it was very interesting to follow the development of acquisitions by Cisco Systems. Since 1993, more than 70 acquisitions took place. I would like to find out about a few of them because I think they clearly represent the direction that Cisco Systems is heading towards. What are the particular impacts those acquisitions had on your operations in Mexico? First of all, I'm going back to June '99, the acquisition of Share Wave Inc. In June this year the acquisition of Pirellis fiber optic systems and the first move into DWDM and last July, Netiverse Inc., as part of Cisco Systems' "El Nuevo Mundo" strategy?
Our focus is to facilitate the way customers
can integrate the Internet into business solutions.
So I think the company will continue to focus on
that. We have acquired about 69 companies since
'92 and we acquire not only technology, the talented
people. We bring those people on board, we retain
them and we give them a place where they can develop
their creativity to its fullest potential. So, we
can leverage that knowledge and integrate it into
our platforms, this way we offer customers robust
solutions. We can integrate technology faster than
if developed internally. Acquisitions are a very
important part of our strategy. Now, the ones you
mentioned are not an exception. Just to pick one
of them, for example, DWDM, particularly in Mexico,
we see a huge potential for fiber optic systems
in terms of "unlimited" bandwidth offering
in two areas. One, in the long distance, going up
to 800km without repeaters. The other, optical transmission
within metropolitan area, which is a different spin
to this technology. |
Complemented with other acquisitions. We expect the country starts to move into high bandwidth services for customers as we move into the data world. We see the emergence of a great variety of services (Data, voice and video. In Mexico we have the advantage that the actual investment is not that high in certain types of "old" technologies. We can leapfrog cycles and move on. We are talking about transitioning markets, agility, open standards, increased services offering,.. We focus on making change happen. We work with customers and partners to implement solutions/services that facilitate and speed market growth. We can shorten times from 2 years to 1 or 2 months. Helping customers change the way they operate.
Cisco Systems worldwide is facing very strong competitors as for example: 3Com, Lucent Technologies, Nortel, etc., which are as well the same competitors you find here in Mexico. What defines the difference between Cisco Systems and those competitors of yours, especially in Mexico? What in your opinion made this company the number one on a global scale?
The market is global. It's very common to find many global competitors in the local market. There are some exceptions, sometimes they don't have the footprint to operate in all markets. You could say that global competition is present in all markets.
For us, the challenge is to work very close with customers, add value helping them to be successful integrating these new world solutions, being successful offering new services to their customers, internal and external. The challenge is to listen to the customer to develop the ecosystem around it so everything is in place for them to move on. We do believe that the success in this market has to do with the agility of the company. We do believe that the agile will beat the big, it's not a matter of being big or small. In that way we help the customers become agile in the market, to develop the partnerships in the market in order to facilitate processes understanding that no one is so big to do it all. We measure penetration, we compare, for example, the GDP number of the country by the penetration rate we have in the country. Mexico shows up very high in the worldwide chart, amongst the highest. Companies in Mexico are increasing their Internet rate of adoption. There is still a long way to go, the elements to make a very competitive market are present. In terms of success, that's one of the measures and I think ultimately the customers are the ones that measure how effective we are, considering us as their trusted advisor. That's what we look for, customer success. We know about technology, our customers know about their businesses and the ecosystem helps connecting the links. Our goal is to grow faster than the market.
Mexico is the country with the most FTA in the world, as for instance the NAFTA or the recently signed FTA with the EU. How do you foresee the future bilateral trade relations with Asia considering the upcoming free trade agreements? What are going to be the repercussions on Mexico's economy and on Cisco Systems Mexico?
I do believe that, as you mentioned, the NAFTA, the EU agreement, and others, have helped our economic growth. So I do believe that if the treaty with Asia happens, will be very positive for our economy. In terms of the market we participate on, to operate in a country that is very open means a lot of opportunity for growth in terms of the local market, a lot of activity, a lot of need for interaction and for electronic transactions & trade. And also a lot of opportunity for the country to participate in global processes. So, we expect foreign investment to grow. Usually, these treaties come together with companies willing to install local manufacturing facilities and service companies. So, we see a big advantage for Mexico being open and participating in the big trade blocks. Being open allows the sharing of information. So, the big challenge that Mexico faces along with the commercial side is the cultural and human side which is the training and evolution of the workforce, the skilled and non-skilled workforce, how you train them, what options they have for the future in terms of a job and also the ability and openness to learn from other cultures. We are collaborating to support de development of internet skilled workforce, via our Cisco Networking Academies program, in which we develop distance learning and instructor led courses for the Universities and Technical Institutes, contribute to develop practice laboratories, .., we expect more than 2,000 students in the program this coming year.
Would you say you are currently experiencing a lack of skilled personnel in Mexico and if so do you offer any programs to train your own employees?
A large percentage of our population is under 20 years old. It's a challenge to integrate these newcomers every year into the workforce and the opportunities they face. The flourishing of investment helps offer new work opportunities for them. On the other hand, there's also the challenge to train them, and to position the country on the worldwide competitive landscape not only on labor, but on skilled force.
Taking into account the rapidly changing way of doing business in Mexico, with the implementation of Internet, what is going to be the role of the new administration to support the "New economy" and to support medium and small size companies to in order to be capable to use this technology? What is going to be Cisco's role to support this sector and the development of Mexico?
We do believe that the government's role as a facilitator is very important. That has to do with telecommunications regulation, to keep the market open and to incentive fair competition. That has to do with Mexico's positioning in the worldwide picture and as a competitive country. The government's role is crucial. It's very important to support the economic growth and the open market. Also, the specific challenges for the Mexican government is what you mentioned: 50% of the population is under 18, so we need to make sure to young people that integrate into the economy are well educated, with the right skills and motivated to participate in the creation of a new Mexico for the next 20 years. And that has to be done countrywide, not only in a few cities.
We, as Cisco Systems, in this new economic processes Mexico is entering in the years to come, which is always evolving, see ourselves as contributing by working closer with customers helping them in their business processes and developing the ecosystems required to help them move faster into this market with new services, ways of doing business, taking care of customers, ways of communications, ways of doing electronic transactions ways of learning, ways of innovation,.. We see ourselves very close with the customers understanding their needs, understanding their clients needs, and helping out to change the speed of change within the market, shortening the cycles, changing the times, and helping make a reality their business ideas. And those customers can be global, local, small or large, working with the phone companies that are a very important catalyst in facilitating many of the processes. The phone companies and the Internet service providers become a very important engine, as they facilitate the integration of small and medium business to the Internet economy. Without their services, the small and medium businesses would not be able to build independent and privately owned networks, so they have can take advantage of the new world opportunities. |
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