Chairman and CEO, Netgear, talks about market competition and partner strategy in the India market.
CW: Over the years, what has redefined the networking market, which was more about switches and routers?
Lo: Presently, the network is the system. There is not a single computer present which will service all the demanding tasks and there is no single datacentre that can hold all the data that you need. Therefore, work is distributed over multiple servers and storage for which networking is a must. Right now, the network is the centre of gravity, and that's why we see the emergence of players like Cisco prominently, as compared to companies like HP and IBM. All the other companies have either changed themselves to service oriented companies or become completely irrelevant.
CW: Networking to a large extent is a commodity market. The SMB segment is attaining maturity in terms of connectivity, but is highly price sensitive and not really 'brand conscious'. Comment.
Well, the answer is yes and no. The economy goes through multiple phases of maturity. During the early stage, which is the survival stage, the important thing is to get things done because one starts from nothing to achieve something. India is at the early stage of maturity in the market. So, the general tendency is to just do it. But, the good thing lies in the fact that the market here is growing at a rapid pace. Even though it is a commodity, everyone seems to have a stake in it. But as the economy matures, you will get a lot more competition, and in order to survive, one would need to add value. So, as an organization, one has got to be more sophisticated and differentiated.
CW: Fighting the price war in the SMB space means lesser profitability for you and your partners. How have Netgear books been in past 12 to 18 months in this seemingly slow economy?
Profit is the measure of appreciation by customers for the value-addition that you create. If the customer appreciates your value addition, then the customer is willing to give you a lot more profit and if not, you don't profit either. For example,China is less price-sensitive than India and their economy is more mature than the India's. At this stage of fast growth, talking about profitability wouldn't make sense because no one is going to appreciate your value-addition. Netgear books have been doing very well. Our growth in 2011 over 2010 was 32 percent and our growth in 2010 compared to 2009 was 35 percent. Moreover, the growth during the first half of 2012 as compared to 2011 has been 16 percent. So, in this kind of an economy, you cannot complain much. We are certainly growing much faster than any of our competitors like D- Link, Cisco or HP.
CW: How easy or difficult is it to be an end-to-end networking vendor for SMBs, as there is a need for continuous R&D to encompass latest range of routers, NAS and other networking products?
We started operations 16 years ago purely in switches. We then went on to add routers, firewalls, wireless LAN, NAS, and recently we have added video-surveillance to our portfolio of products. When the market matures, customers demand sophistication and value-addition in terms of completeness of solution and services. And we provide better service to our customers through our full portfolio of products. We already have 60 R&D engineers in India and plan to continue expansion through next the year. The fastest growing team in our organization is R&D. In China, we have over 120 engineers, which is double of what we had the year before and we have also doubled our tally from 150 to 300 in the U.S.A. Unlike other companies who are moving their jobs away from US, we are actually recruiting back there.
CW: Netgear also competes with entry-level brand like Zyxel, TP-Link, Belkin and local Indian brands like DAX in the SOHO/SMB segment. So, why should a systems integrator work with you?
We have a robust portfolio of products as compared to the above mentioned companies. People who buy Zyxel and DAX are few in number. We are number one in every product we provide. The SI would stay with us for our full portfolio of solutions, and they would not have to look at multiple vendors or face multiple issues. Our products are more expensive than most of the competing brands, yet the reason the customer pays that price for our products is because of the value-addition we provide. Also, the partners end up with better margins. We have a robust portfolio of products as compared to the above mentioned companies. People who buy Zyxel and DAX are few in number. We are number one in every product we provide. The SI would stay with us for our full portfolio of solutions, and they would not have to look at multiple vendors or face multiple issues. Our products are more expensive than most of the competing brands, yet the reason the customer pays that price for our products is because of the value-addition we provide. Also, the partners end up with better margins.
CW: Your close rival D-Link is moving fast towards enterprise segment without losing grip on the SMB market in India? Why is Netgear staying clear of the enterprise and upper mid-market?
D-Link has been losing out in the SMB space and has nowhere to go. They are naive enough to think that they have enough market in the enterprise segment. I urge them to pit themselves against HP or Cisco. While we have been gaining 16 percent year after year, D-Link has been declining by 7 percent.
CW: Networking has a big role play in datacentres backed by virtualisation, collaboration and cloud applications. What is your innovation in these emerging technologies and how can partners leverage the same?
We are the number one NAS provider in the SMB segment that started supporting virtualization. In cloud computing, we have introduced the unified storage that would enable our channel partners to provide cloud services to our customers and will let our them build their own private cloud. With the introduction of the ReadySHARE Cloud, we are enabling our customers to access their data from any mobile platform.
CW: What is your roadmap for BYOD in terms of product and partner strategy?
When people are plugging their devices to the office network, our wireless LAN will be able to let it plug into the network with security. We are investing a lot in this wireless LAN technology and have a skilled team that is building a next generation wireless LAN controller coupled with our security appliances, which would accommodate the BYOD.
CW: How has Netgear fared in the India market in past year in terms of partner business and customer numbers?
Presently, in India, as compared to D-Link, we are still pretty small. We still have a vibrant presence in Chennai, Hyderabad, Bangalore, Mumbai and Delhi and have atleast 40 to 50 partners in each of these metro locations. We do have some direct connect with partners in tier-2 cities and some of the major city SIs' have connect with the smaller companies too.
CW: How have you been innovating so that partners benefit well?
On ground, we have a better developed programme in North America and Europe, and plan to implement the same gradually in India. The most important aspect is to protect our partners' margins. We have a true deal registration in place wherein we treat every deal on the partner portal as a secret. In case of companies like Cisco and HP, many partners are involved in the during the bid, and often these vendors bid directly. This is never the case with us.