Cisco's Irish success down to ability to branch out

Cisco's Dublin office started out with one employee. Ten years on, the global technology giant employs 50 people in the State, split equally between sales and back-office functions, writes Karlin Lillington

Cisco, which marks its 10th anniversary in the Republic this month, has remained one of the more enigmatic of the major technology multinationals based here.

With an operation in Dublin that numbers about 50 employees split equally between sales and back-office functions for Cisco's financial and investment arm, the technology giant has grown its operations substantially from the sole employee who set up a Dublin office in the mid-90s.

But many had expectations - or at least, high hopes - that Cisco would do more. And it almost did, at one point reaching the final stages of establishing a huge manufacturing facility here that would likely have employed several thousand, only to withdraw when the economic downturn hit hard, according to retrospective comments by Cisco chief executive John Chambers a year later - and probably also as it became clear that the Republic was clearly no longer a low-cost manufacturing destination.

Nonetheless, the company's history in the Republic is a familiar tale of a small outpost that expanded rapidly as the technology and economic boom took off nationally in the mid 1990s.

Despite the severe blow dealt to Cisco worldwide as its prime customers slashed spending after 2000, the company - which has since expanded into new areas well beyond its original hardware business of routers and switches - is seeing a new range of opportunities open up.

Ask Cisco country manager Michael Galvin how the business has changed in the past decade, and he laughs. "Boy, has it changed!"

Galvin, who started out as employee number four in the Irish office, notes that Cisco Ireland was set up in 1995 when Englishman Maren Bennette - who had previously been with Motorola in Ireland for many years - joined Cisco and told the UK office that something new was happening in the Republic that merited an Irish Cisco office.

"The UK said that the market was too small," according to Galvin. "But he discussed the potential opportunities and told them about the technology multinationals then coming into Ireland - that there would be an uptake of networking technologies in that multinational base because they would set up the same networks they had in the US offices."

The UK was won over, and Bennette established a tiny operation in Dublin.

"Initially the market for Cisco was almost exclusively academic because they were pioneering the use of TCP/IP [ the communication protocol used for transferring data over the internet]," he recalls.

The universities and colleges were then just setting up both internal internet networks for e-mail but also connecting in to the educational network HEAnet - and almost no one else, but some large multinationals were on the net at the time.

As large Irish enterprises began to set up their own internal networks for e-mail, Cisco started selling equipment for creating LANs (local area networks) as well as WANs (wide area networks) - and the market shot off.

"Growth was very, very, very significant in the early days," says Galvin, who joined Cisco Ireland in late 1996. "It was almost all in Dublin at that stage. We had what we called 'infinite opportunity' in the early days. Literally, if we added [ sales] people, we added business."

In general, the Irish office would do about 8 per cent of the total value of UK sales, he says.

The rapid uptake of LANs by the US multinationals, especially the technology multinationals, in Ireland, meant business was explosive.

So Cisco doubled its salesforce from five to 10 and kept hiring. Also, the company was beginning to move into new areas - an "evolution of the company rather than a revolution", says Galvin - which has been a key reason why chief executive John Chambers has been seen as a particularly canny businessman in the industry.

His ability to push the company into evolving areas - such as voice over internet protocol and, now, broad areas of security, large-scale networking, /storage, IP devices such as phones and the associated management services around them - has proved to be a saving grace for what was a hardware company focused on the volatile telecommunications market.

Cisco is as likely these days to be talking to hotels about setting up in-house high-speed internet networks to provide streaming movies, WiFi connections and instant room service as talking routers.

Right now, Cisco's overall theme is getting intelligence into the network.

It's a transition the company needed to make, not just because its original market went sour after 2000 and is only now recovering - which hammered Cisco's bottom line as well for a couple of years - but because it faces tough competition in the router and switch business from companies such as Dell and China's Huawei.

Meanwhile, Cisco continues to add capability to broaden its traditional markets through acquisitions, most recently the purchase of California companies FineGround, which makes data centre networking hardware, and TopSpin, which makes server switching hardware.

In addition to acquisitions, Cisco makes investments into start-ups that are developing technology which it thinks may be of use to it.

Galvin argues that this type of investment is valuable to start-ups that don't wish to take traditional venture capital cash, as VCs are willing to scrap development in some areas in order to make the company profitable as quickly as possible.

By contrast, "we generally want a product at the end, not a profitable company", says Galvin. This, he says, gives small companies the chance to grow and develop their own technology.

Cisco Capital - whose Europe, Middle East and Africa portfolio is part-managed from Dublin - has investments in some Irish start-ups, most prominently in Dublin bandwidth management software company Corvil.

With the company seeing what he terms "exciting growth" again in the worldwide market, Galvin says Cisco is continuing to look at various countries, including the Republic, for expansion possibilities.

However, he also says that Cisco is probably more likely to make the indirect investment of backing select companies such as Corvil, rather than considering a manufacturing facility as before, since the Republic is now an expensive manufacturing location.

"Cisco will stay in discussions with Ireland - but also with other countries, as before," Galvin says.

For now, he points to significant growth again in the Irish market - 27 per cent year-on-year overall growth at the moment, and just over 100 per cent year-on-year growth in what it terms "advanced technology"(the newer, intelligence in the network areas).

"The thing that makes this business most interesting is also the thing that makes it most challenging - the continuous evolution of technology," according to Galvin.