India: It's not just about outsourcing
Published: 06 May 2005 12:30 BST
Following in the footsteps of China's Huawei Technologies and ZTL, a couple of Indian companies are trying to get a foothold in the global market for networking gear.
Though most of its sales to date have been in its home country, Tejas Networks, which is based in Bangalore and specializes in Ethernet-over-Sonet boxes, has started to sell equipment in North America. Rather than sell the gear under its own name, Tejas serves as an original equipment manufacturer, or OEM, for multinationals, which put their own brand name on the products.
"OEM is going to become a way of life for them. It is the only solution," said Sanjay Nayak, CEO of Tejas. "They have less money to spend on R&D."
Tejas, which has received $29m (£15m) in venture capital funding from Intel Capital and Battery Ventures, among others, will hit a run rate of $100m in revenue within 18 months, Nayak predicted. So far, Tejas' equipment has been installed in the networks of 20 Indian carriers and five overseas carriers.
"If you use a cell phone in Mumbai, there's an 80 percent chance it went through us," Nayak said. "We have the opportunity to become a half-billion dollar company in the next five years."
Meanwhile, Telsima is coming out with a broadband switch for wired and/or WiMax traffic. The company expects to hit a price point that will come to roughly $150-per-user, less than the $350 per user cost a similar product from a North American manufacturer might run, even if the North Americans used some overseas labour, said MT Karunakaran, chief executive of Telsima.
"If we can hit $150, it will trigger WiMax. Carriers will look at it to connect towns and villages," Karunakaran said. "The primary focus is India, but we would like to build a global company. We are talking to a reseller in Japan."
Besides the usual factor — lower development costs — the push into networking comes because of the conditions of the Indian telecommunications market. On one hand, it's incredibly small. There are only 100 million phones, cellular and wired, in the entire country. That works out to about nine phones per 100 residents, said M.K. Shankaralinge Gowda, secretary of the Department of Information Technology for the State of Kanartaka. Residential broadband means a 128Kbps line.
At the same time, India, like China, is one of the fastest-growing markets in the world, with about 2 million cell phones jumping onto networks every month. "We want to have 250 million in two years," Gowda said.
Manufacturers are also tweaking their products for broader acceptance. Motorola, for instance, recently released a $40 phone, according to Gowda. Monthly mobile phone bills average about $4 to $7. Home broadband costs $10 a month.
"Make your prices competitive and get the profit through volume," Gowda said.
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