Wednesday, June 6, 2007

Cisco Invests in Designing for Local Markets

In today’s business climate, it is common for technology companies to be bullish on India, but Cisco is taking action by hunting for acquisition targets among Indian companies that design new technologies specifically for developing countries. Vital Wave Consulting closely follows the evolution of multinational corporate activity in developing countries. After decades of outsourcing to reduce labor costs, companies are now adding the creation of learning and innovation centers to their emerging-market strategies.

Outsourcing research and development (R&D) is not new to corporations; around 300 multinationals, including the majority of leading IT and telecommunications companies, have R&D centers in China. But creating innovation centers in developing countries for the purpose of designing products explicitly for those markets is still an anomaly. HP led the way with its i-Community initiative in South Africa and India in 2000. Intel followed with its Platform Definition Centers, and now Cisco is following a similar strategy through acquisition.

Cisco and its predecessors have realized that a growing consumer base in rapidly-developing economies is evolving into a profitable market with distinct technology needs and preferences. Companies can no longer recycle developed-world technology in emerging markets and hope to win a leadership position. To be successful, products must be developed with the needs of these markets in mind. And to truly understand these needs, it benefits companies to invest in on-the-ground learning laboratories in the heart of these emerging mass markets.

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