May 5, 2005 1:00 PM PDT
India enters the networking market
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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 128-kilobit-per-second 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 cell service averages run about $4 to $7. Home broadband costs $10 a month.
To meet this demand, telecommunications carriers will have to install a lot of switches and routers. But because it's India, the equipment will have to be cheap. Even though North American companies have moved research and development operations to India and China, Nayak says Tejas can still undercut them. The company also has a comparatively small sales and marketing staff. Flextronics, which opened a contract manufacturing center in 2000, assembles the systems.
China's Huawei has already shown that upstarts can break into the market. Three years ago, it was relatively unknown. Now the company competes with Cisco Systems in almost every geographic market. (Cisco settled a patent and copyright infringement suit against Huawei last year.)
Being local, of course, helps. A watershed moment for Tejas (which means "shine" in Hindi and has nothing to do with the Lone Star state) came when it won a large contract with Indian Railways. The railway, the largest in the world, is scrapping its diesel trains for electric ones. Inside the power lines, it's installing fiber-optic cable, which it plans to lease to regional carriers.
Tejas worked with officials at the Telecom Engineering Center, which sets the technical specifications for government projects, to expand their regulations so the company could bid on the project against established competitors.
"We really got under their skin," Nayak recalled.
Still, one of the biggest challenges is getting over the credibility hump. Product companies in India remain somewhat rare. When Tejas started, most potential customers assumed it was repackaging technology from a Western vendor.
Vinod Dham, founder of NewPath Ventures, a venture capital firm specializing in India that has invested in Telsima, recalls going to a sales presentation with the company.
"They said, 'We are very interested.' I told them, 'Thank you very much. Now let's tell the truth. You aren't going to buy from an Indian company. You know you won't,'" Dham said. "But they said, 'Yes we are, because if something goes wrong, we know who to call."
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