China to become IT center of the world, says Cisco head

BEIJING, China – John Chambers, president and CEO of Cisco Systems Inc., said in no uncertain terms that China will be the IT center of the world.

Speaking at a press conference here, Chambers backed up his fearless forecast with an announcement of Cisco’s plans to invest $32 million over the next five years in a research and development center that will rise in Shanghai.

It has been Chambers’ fifth visit to China since he became Cisco’s CEO in 1995. He admitted that his Chinese was still bad, but not so with Cisco’s business partnerships and commitments in China.

The increased and sustained growth among China’s service providers convinced Cisco to allocate resources in this part of the world. The Shanghai facility, which will be operational by the third quarter of next year, expects to hire 100 people to work on advanced voice and Internet Protocol (IP) telephony technologies. Currently, Cisco has some 850 employees in China.

"There’s been a slowing of (business) confidence but it’s picking up again in many regions as government leaders of the world understand the 1:1 correlation of national growth and increase in productivity," said Chambers, adding that this promotes IT investments.

To position Cisco’s future in China, Chambers used his visits here to meet with key clients and top government officials, resulting in some $38 million in investments since 1998 when it established Cisco Systems (China) Networking Technology Co. Ltd. and the largest networking technology lab in Asia.

"If we’re successful, we will expand the (Shanghai) R&D facility in other areas, too," added Chambers.

Aside from its penchant for acquisitions, Cisco, the San Jose, California-based networking giant, also works with start-ups, and Chambers counts at least six of them in China, a strategy, he believes, helps "invigorate the market."

But one that perhaps carries the biggest impact for this country of 1.36 billion people is Cisco’s decision to transfer here the contract manufacturing for most of its products at the request of the Chinese government.

Chambers disclosed that Cisco manufactures every year about $5 billion worth of products in China, an operation that gives employment to some 10,000 workers.

But it’s not just China that Chambers is bullish about, it’s the whole Asia-Pacific which, he says, is now the fastest growing sector for the 20-year-old Cisco.

"Korea is exciting, India is going the way of China as well as the rest of Asia and Australia, too. In the Southeast, we have the Philippines as the location for our support center for Linksys," Chambers said.

IT job opportunities, he said, will go where the best manpower is and where there are good infrastructure and supportive governments. He believes all these factors are present in China, particularly in Shanghai, thus their decision to locate the $32-million R&D facility here.

In terms of global targets, Chambers said his challenge is to make Cisco the number one particularly in the home, hot spots, wireless and Internet markets. So far, he has done well since he took over as Cisco’s CEO in 1995, growing it from $1.2 billion in annual revenues to its current run-rate of approximately $18.9 billion. He joined Cisco in 1991 as senior vice president for worldwide sales and operations.

"Of the top 10 rivals we had a decade ago, maybe only three are left as major players today. We are committed for life. The decisions we make today will play out in the next five or seven years," he said.

Chambers was recently named "The Most Influential CEO" in telecommunications by Institutional Investor magazine and "The Most Influential Person in Communications" by Telecom Magazine.