Cisco Tries Another Approach to China

September 24th, 2015 by · Leave a Comment

Yesterday, Cisco made a deal aimed at rejuvenating its approach to the Chinese market.  In an announcement that clearly was choreographed to fit with the visit of China’s leader Xi Jinping in Seattle, Cisco partnered up with Jinan-based Inspur as part of its $10B investment initiative in the country.

The Chinese market is potentially huge, and therefore looms large in the growth plans of virtually every international tech and technology firm.  But it’s also opaque and difficult for outsiders to crack, with both international politics and local relationships often overriding mere things like economics.  For Cisco, the biggest hit to their earlier plans came with the Snowden/NSA revelations, which led to suspicion that US networking gear might somehow be used for spying much as earlier fears suggested might be the mirror case for Huawei.

But that was just a more visible speed bump on an otherwise rocky road for all global corporations trying to enter China.  After a decade of more direct but troubled approaches, lately the favored path has been the joint venture.

Like IBM before it, Cisco will be doing business in China as the 49% owner of a joint venture with Inspur, with the two putting $100M into the project.   The JV will deliver advanced technologies and services in information technology infrastructure, the cloud, data centers, smart cities and big data.  Working with a partner reduces the overall potential reward, but leverages an organization that knows the Chinese business world and is more comfortable growing within it.

Will it work?  Will this mollify the politicians and give Cisco a leg up in its efforts to battle Huawei on its own turf?  It’ll be years before we really know.  However, one thing we can be sure of is that the underlying complexity of mixing the two business cultures is still there, JV or not.

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