Executive Interview, Strategy, Service Providers, Emerging Markets, Global: Emerging markets are one of Cisco Systems top priorities. The recent acquisition of WiMAX specialist Navini has been widely interpreted as confirmation of Cisco's intention to place greater emphasis on technologies which will be used to fuel its emerging markets growth. Last month Alec Barton met Massimo Migliuolo, Cisco's Vice President for service provider business in emerging markets in an exclusive interview, to ask him where Cisco is heading.

The service provider area now accounts for more than 35% of Cisco's emerging markets business and covers four key regions: Central and Eastern Europe, Russia and the Commonwealth of Independent States, Latin America and the Middle East and Africa.

Key engagements for Cisco include advising country and service provider leaders about their Information and Communication technology (ICT) and broadband strategy, enabling the built-out of Digital Cities across the Middle East and the creation of a Public and Safety Virtual Service Provider (VSP) in Latin America.

DT: How important are emerging markets to Cisco?

The importance of emerging markets to Cisco is very high. The focus first started three years ago when CEO John Chambers identified the emerging markets opportunity as one of the company's biggest enablers for growth. Cisco's initial interest was like that of any company, in that it identified a potential growth opportunity. But since then our interest has increased substantially, as we have become aware of the potential for emerging markets to leapfrog over mature markets in terms of business scope and become the largest communications markets in the world.

Cisco also became aware early on that it would need to approach emerging markets in different ways, using innovative business models to address the specific challenges. The difficulty in emerging markets is always about the level of GDP. When examining the possibilities of applying traditional networking business models in emerging markets it is difficult to see ways of achieving sustainable growth. So Cisco's approach has been much broader. We have started by talking with governments which are often very keen to develop their countries both internally and at the regional level to become hubs in order to boost national competitiveness. Through this approach Cisco has developed a more tailored business strategy which can deliver sustainable networking solutions.

This strategy works particularly in markets where there are no legacy systems. Instead of going for a traditional networking model we have developed networks which are completely open, far more accessible and with a different, lower cost of ownership. In this way you can satisfy the issues around low GDP because you are able to transfer the benefits down to the citizen. Open networks enable governments to deliver a much wider range of services, for example in productivity improvements and education. This model extends the networking benefits to a much wider audience and brings down the cost of ownership.

DT: Is Cisco only interested in working in so called ‘Greenfield' markets and with new wireless operators?

We want to work with everyone! Our experience is that the penetration of legacy systems in emerging markets is often very low. Systems are often limited to major cities, quite old and in need of replacement. So the opportunity to refresh the network in the major city and jump to the next level of technology is often one of the first opportunities in a developing country.

But working with central governments to deliver this often opens up opportunities for development outside the major cities. For example, Cisco have been working with the government in Russia to set up a system to improve education services outside the major cities. When we talk to regional incumbent operators about implementing projects of this type, we find they are very open to deploying new technologies because they see the government pushing hard. We believe that this situation has changed a lot in the last two years as increased competition has encouraged legacy operators to examine new ways of renewing their networks.

As a company with its background in enterprise networking, does Cisco have the skills necessary to compete in the service provider market?

Yes. Cisco has the capability and technologies to satisfy needs not only in the enterprise area but also in the field of national networks. Our main focus is IP infrastructure and in this area we are bringing innovation such as voice over broadband, which is a step beyond soft switches in terms of cost structures. We are already looking to deploy this technology in emerging markets where we are discussing with governments the opportunities to leapfrog and use the latest technologies such as voice over broadband to drive down costs and deliver new innovative services. Is our technology carrier grade? Absolutely.

DT: Technology developments, falling order volumes and the emergence of strong competition from China have resulted in consolidation of equipment vendors. How can Cisco remain competitive?

You have to look at the problem of how to keep your level of competitiveness in two ways. Firstly you have to develop your technology platform so your cost reduction program is aggressive. This is not just on unit price - the cost per box - but also on the architecture itself, which must at the same time be more capable. Cisco believes you achieve this by reducing the level of network complexity. For example, why keep to an IPM-PLS or SDH deployment model when you have a Greenfield operation? Our view is that you can go straight to IP over DWDM. The fact that you can have an optical board in our flagship CRS-1 switch reduces the complexity of the network design substantially. Hence we can be more competitive, not because the unit price will be lower but because we can deliver a better solution to the customer.

Secondly, our view is that networks should always be characterised by intelligence. Intelligent network infrastructures enable operators to offer more services like middleware and hosted web applications. This means operators can extract greater value from the network as well as offering better managed security and QoS. In a period in which service providers are becoming more vertical in their thinking, and considering how to go after specific industry sectors - SMB, enterprise, education, public sector, public safety, etc. - I think this offers a lot of value to them.

DT: How important is broadband wireless and WiMAX to Cisco in view of the recent acquisition of Navini?

Cisco didn't do the acquisition for the technology in itself. As a company we are access agnostic and deal with a multiplicity of access channels. Our goal to create an IP infrastructure onto which you can plug any type of architecture. In addition we want to be device independent. I believe that devices of the future will be seamless to the user's experience. This means, for example that with devices such TVs and laptops, people will want them to have the same look and feel.

WiMAX is very important for emerging markets. In order to deliver a picture you have to take account that there is often very little broadband connectivity and that this will often be on very old copper. So reaching the speed necessary to deliver broadband services is difficult. For the governments Cisco are dealing with, broadband is their first priority so we have to find ways to deliver the services they are requesting like digital inclusion and SMB services and take account of the need to do this more quickly than has happened in the past.

We believe WiMAX offers the possibility of meeting this challenge for a number of reasons. Firstly, the technology works. Second, it is IP end to end and, thirdly, you can guarantee the quality of the voice and, more importantly the data services and also the security. In the future the possibilities with WiMAX may be greater but right now Cisco's primary focus is on using it for broadband replacement together with managed services.

For example, with many of the governments we are working with, digital inclusion is a key issue. A WiFi phone, associated with WiMAX through a wireless LAN access point is a very good solution which can start to drive the cost down for specific regional deployments outside the big cities. It allows governments to offer a different paradigm for their citizens. In the future, when emerging markets develop further and the GDP grows, you can go for FTTH and FTTX in metro redeployments. In fact Cisco are working in some FTTX projects in the municipalities in South Africa now. As a technology WiMAX encourages the public sector and service providers to cooperate better on different business models.

DT: Where will Cisco be in emerging markets in 10 years?

Last year, for the first time, the total GDP of emerging markets was higher than that of developed countries.  As that trend continues it will create further opportunities to increase services. We are starting to see this trend already in some areas, for example Dubai, where they are looking at ways of using our technology to attract more shipping business.  Cisco hopes to play a substantial role in emerging markets, delivering innovations and new services.

The possibilities for innovation are the most interesting aspect of emerging markets for Cisco. John Chambers recently demonstrated some new possibilities for Telepresence at the opening of Cisco's globalisation centre in Bangalore. Given the increasing awareness of the need to reduce the carbon footprint of emerging markets it is possible to see how governments and enterprises in emerging markets could use Telepresence to reduce travel in places where travel infrastructure is not fully developed.

Massimo Migliuolo, Vice President, Service Provider, Emerging Markets, Cisco Systems: Recognised as an innovator and thought leader in Cisco, Massimo Migliuolo is focused on creating new business models and developing new solutions to help Service Providers and Governments continue their transformational broadband build-out. Previously, he was responsible for developing Cisco's global mobile strategy and implementing the company's vision for mobile Service Providers.

Migliuolo joined Cisco eight years ago from Lucent Technologies and previously worked at AT&T, where he was engaged in the development of their mobile market. He graduated from the Bocconi University in Milan, with a degree in Business Economics, and spent three years in the Oil Industry, before joining the telecommunications industry.