Emerging Times

Broadband Connections Soar in Argentina

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Argentina’s economy is again making headlines. In April, the nation named a new economic minister, Carlos Fernandez. His primary challenge: reign in inflation without derailing the South American country’s fast-growing economy.

Argentina, of course, is accustomed to economic tumult. In the 1990s, it endured hyper-inflation and then a full-blown economic crisis in 2001-2002. But prosperity returned to the country after former President Nestor Kirchner took office after the 2003 election. Since December 2007, his wife, Cristina, has served as President.

Some say it’s been a bumpy ride, however. Farmer’s for example, have taken to the street to demand better conditions and lower taxes. And inflation, once tamed, is now creeping upwards of 10 percent. These and other factors threaten to slow or even reverse gains achieved by Argentina’s working poor and middle class.

Amid this background, we turn to Horatio Werner, Cisco Country GM for Argentina, Uruguay and Paraguay, for insights. One metric he keeps an eye on? Broadband connections, which have increased sharply in Argentina of late. In fact, a recent survey of South American nations reveals that broadband adoption is growing in Argentina at a rate faster than anywhere else in South America. Today, one in four Argentine homes has broadband access. Overall, the rate of penetration per 100 residents is 6.6 percent. That’s more than in Brazil, Columbia and all other South American economies save Chile (8.8 percent.)

Werner believes several factors are driving growth, which Cisco is now monitoring via its Broadband Barometer. In this video, Werner explains why.

Werner, who joined Cisco eight months ago after serving in the nation’s trade ministry, managing his own business and working at Motorola, believes his country’s growth prospects remain very good despite recent tumult.

“Argentina has always been an early adopter when it comes to technology,” explains Werner. “We aren’t exactly a Greenfield opportunity like some Middle Eastern nations, but a country where there’s plenty of opportunity to revamp and renew [customers.]”

The Great Talent Hunt

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Everywhere you turn, seems someone could use a hand. No, I am not referring to the state of humanity, just the state of employment in the high-tech sector in key developing economies in Latin America, the Middle East and beyond.

Consider: A recent study completed for my employer, Cisco, concluded that "the demand for Latin American professionals with Internetworking skills will outpace supply by nearly 27 percent by the year 2010." The study went on to say that the shortage "€œequates to nearly 90,000 qualified professionals who would need to be trained before then to meet the expected demand."

Not surprisingly, the top issue front and center at next week'€™s Cisco annual Partner Summit in Honolulu is likely to be "€œtalent,"€ according to Cisco'€™s senior vice president of worldwide channels, Keith Goodwin. In this video for Everything Channel'€™s CRN magazine, Goodwin describes for editor Jennifer Hagendorf Follett what Cisco is doing to help ease the talent crunch.

The talent crunch is a true worldwide phenomenon. For example, in his March 23, 2008 column for Channel Middle East, a leading industry trade magazine in the Middle East, editor Andrew Seymour wrote: "Not a week goes by without concerns over skills shortages—€”current or imminent depending on who you listen to—€”being raised in the Middle East channel. Distributors and resellers are desperate to get hold of good talent, but at the same time the avenues to do this are becoming more restricted every day, leaving the channel woefully exposed on the resources front."

A quick Google search will bring up tons of hits for stories, studies and other data on the pressing "€œIT Talent Shortage."€ In this article posted by Tekrati, for example, Gartner analysts explain why this shortage is different from past shortfalls.

Of course, there are plenty of voices who say talent shortages are artifical and that the IT industry is guilty of promulgating stories of shortages to get around various laws, rules and regulations. Case in point: the U.S. limit on H-1B visas. Each spring, those are given out to skilled workers on a random basis. Not exactly an elegant solution. To get around the limit, some IT firms including Microsoft are hiring workers in places such as Canada. On his blog, Kim Berry, president of the Programmers Guild, makes some interesting and insightful comments about U.S. policy. (One has some unfavorable things to say about Cisco.)

Regardless of what'€™s happening in the U.S. though, it'€™s clear there remains a shortage of qualified workers in developing nations with fast growing economies. That could hurt these economies just as they are hitting their stride.

Education is one answer to the problem. And private enterprises can help. Cisco Romania and Cisco Networking Academies, for example, recently teamed up on a "€œNetReady"€ program that helped increase new Cisco Certified Networking Academy certifications by 45% in that country. Those graduates went on to gain employment at local partner companies, which, in turn, enabled these third-party companies to grow their businesses.

It'€™s not just employers or customers that benefit, but individuals, too. For example, I wrote an article for Cisco a few months back that showcased a woman in Ethiopia who once troubleshot electric motors at a cement factory. It wasn't her calling, she decided, so she signed up for classes at one of the more than 2,100 Cisco Networking Academies located in emerging market economies. Upon graduation, Eyerusalem Getu Tadesse took a job helping to manage networks for the Ethiopian Telecommunication Corporation.

"Taking Cisco training helped me to be satisfied in my job and changed my life," she said.

That's about as meaningful as it gets.

Making Green from Green: Dimension Data Steps Up

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No matter where you trod in cyberspace, you're bound to step into something green. Corporate green initiatives are all the rage. IBM announced a green initiative nearly a year ago. Microsoft, too. My employer, Cisco, also has a significant green push. Recently, company CEO John Chambers joined Nobel laureate and former U.S. vice president Al Gore in a telepresence discussion on technology and global climate change at the recent VoiceCon Spring 2008 show.

A lot of companies have targeted their efforts on helping institutions in the developed world. A few, however, are looking at the developing world, too. That includes Dimension Data. It has launched a series of green initiatives targeted at the data center and beyond. In this video, filmed at a recent Cisco event for Latin American partners, Dimension Data Americas CEO, Jere Brown, describes what his company is doing to help customers become more socially responsible, reduce energy costs and make better use of physical and virtual resources. Along the way, Dimension Data has found a way to make some green from going green. Maybe not Nobel, but novel, no?

Morgan Stanley Report Has Startling Insights and Pedestrian Observations, But Is Worth Reading Just the Same

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A new Internet Trends Study from Morgan Stanley has people talking. In it are both startling and not-so-surprising revelations. Among them:

• The volume of consumer IP traffic will surpass that of business IP traffic this year.
• The U.S. economy accounts for less of the world’s GDP than it did a few years ago. (That's one of the "Duh" revelations.)
• YouTube now accounts for a greater percent of daily page views on the Web than either Yahoo or Google.

There are some interesting facts from the study that have implications on Emerging Market economies worth noting. Consider:

• Among the 15 countries with the greatest number of Internet users, only Indonesia and India are adding new users faster than Russia, which now has more Internet users that France, Canada, Mexico or Spain.
• Brazil and Russia have displaced Canada and North Korea from the list of the world’s top 10 technology, media and telecommunications (TMT) countries, according to Morgan Stanley Research. (It’s a complicated measure best explained in the report.)
• Traffic to some of the world’s most popular sites including Google, Yahoo and YouTube is overwhelmingly coming from outside the U.S.
• Facebook is disproportionately huge in Turkey, Columbia and South Africa.

Another claim made in the study: consumer technology has surpassed that of enterprise technology when it comes to robustness and innovation. To bolster that claim, the study includes a quote from Google’s CIO Douglas Merrill: “Fifteen years ago, enterprise technology was higher-quality than consumer technology. That's not true anymore...”

Overall, the study is honestly a fascinating read. It may not have earth shattering news at every turn. But it sets the stage as to where we are now. (Plus, it has great insights on social networking sites.)

One final message driven home by the study: the U.S. economy is really in lousy shape.

That's the latest from one of Wall Street's best.

New Thoughts on Closing the Digital Divide

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A recent article in The Economist suggests the Digital Divide that many thought to be closing may be a more difficult problem to remedy than previously thought. The theory: some technologies take longer to reach widespread adoption than others, and connecting the next billion users to the Internet will be tougher than it was to get a 2nd billion people to embrace mobile phones.

Challenges aside, however, there is clear evidence that some prognosticators are simply wrong. Millions more are connecting to the Web every year, and the road to the next billion may not be as long as dire predictions suggest. Just today, for example, the New York Times reports that “the level of broadband subscriptions in eight European countries [has risen] above the levels in the United States and Japan.” Even in developing economies, there’s great progress to report. Consider: since 2005, the number of broadband connections in Brazil alone has doubled to 8.1 million, according to IDC in a press release put out by my employer, Cisco.

The Organization for Economic Cooperation and Development has released a new report that is both upbeat about the prospects of connecting the next billion users to the Internet and critical, too. The report, “Global Opportunities for Internet Access Developments” is a must read. Its presenter, Dr. Sam Paltridge of the OECD’s Directorate for Science, Technology and Industry, showcases a number of interesting findings. Among them: “All indications are that the majority of the next several billion users, mainly from developing countries, will connect to the Internet principally via wireless networks.”

That finding is key because it addresses a central point of those who believe that it will take years if not decades before the level of Internet penetration in the developing world reaches that of the developed word. One reason: the geographies and topographies found in the developing world make it almost impossible to extend fixed broadband communications services to hundreds of millions of potential Internet users. This is largely true, of course, but misses the point. Wireless, for millions, is the answer in the developing world. Furthermore, most of the next billion people who connect to the Internet are likely to do so via a device other than a traditional PC, the method most of the first billion users of the Internet relied upon.

Paltridge makes the case that competition, not technology or geography, may play the greatest role in determining how quickly citizens in developing countries get connected. (To wit, the headline of the aforementioned NYT story is “Competition Fuels Broadband Use in Europe.” In this fascinating Q&A for the OECD, Paltridge answers tough questions on the benefits Digital Inclusion, the role of the private sector and competition, what devices people in emerging economies will use to connect to the Internet, and other items.

“For Internet access to be extended to the next several billion users it has to be made increasingly accessible, affordable and applicable,” says Paltridge. “Each of these challenges service providers to extend the reach of networks, lower costs and tailor services to meet the demands of new users (in the case of the latter both in relevance of content and suitability for the devices they will use).”

More Positive News from Kenya

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After months of turmoil and recent weeks of promise, the news from Kenya is much improved. Reuters reports that “Kenya’s parliament on Tuesday unanimously approved a power-sharing deal designed to end the post-election crisis that killed at least 1,000 people in the east African country.” Looking for more personal insights on what has happened in Kenya of late, I turned to my Cisco colleague Michele Castegnaro, Cisco’s business development director in Kenya. In this passage, Castegnaro speaks for himself and not the company. Here’s what he observes:

“Kenya is formally back into harmony. The Government is formed, the PM mandated, and two vice PMs have been nominated as well. Upon the last day of the Kenya Golf Open, President Mwai Kibaki and rival Raila Odinga Kibaki were walking side-by-side displaying PDAs and mutual esteem. [Editor’s note: not sure if Castegnaro means Personal Displays of Affection or Personal Digital Assistant. Regardless, I think you’d agree the news is good.]

The tensions have left some sequels, of course, primarily in the Northern Regions, the Rift Valley, in particular… [But] since a compromise was reached, there is a massive advertisement of the agreement reached, published in the local dailies several times, and echoes towards unity from all sources including entrepreneurs, communities and religious organizations. The business community has been instrumental in advocating the restoration of peace by organizing sessions stating the dangers of instability, namely employment and growth. It is estimated that in excess of 300,000 jobs have been cut during the troubles. And that’s at the low-end of the scale.

My assumption is that normality—total normality—will be reached towards second half of the year by restoring security in the troubled areas, by repatriating the people who fled to Uganda and by restoring economic growth conditions. That’s important because at this stage, the Minister of Finances has inaugurated an austerity campaign cutting Ministries' expenses.

As per the message from the ones having watched this conflict from outside, there is a great deal of relief coming from international organizations including the African Union but also the UN, EU and the major world diplomacies. There is the satisfaction among the orchestrators of the agreement that Kenyans and the Africans, including President Kikwete and former UN General Secretary Kofi Annan, have been behind this deal, which was seconded behind the scenes by a strong U.S. Secretary of State, Condoleeza Rice, and a strong European Commissioner for development and humanitarian aid, Louis Michel.

Encouragement to come back to normality in the fastest way possible arises from all parts, and funds will also make their way back to Kenya since this country is strategic corridor to other countries in Eastern Africa, plus Uganda, Rwanda, Burundi and Sudan. The central role of Kenya is clear to everyone and even more so, after what happened.”

One Expert's Take on MWC and the Emerging World's Most Promising Service Provider

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Mobile World Congress (MWC) has come and gone but it’s worth reflecting upon its impact. For insights, I recently reached out to Alec Barton, On-line Publisher at Developing Telecoms, a U.K.-based media outlet that follows emerging markets and telecommunications.

He’s written a comprehensive recap of MWC, which recently wrapped in Barcelona, Spain. In an email exchange below, I asked him several questions about the show and recent trends. What’s particularly interesting is his take on the split between those who are pursuing emerging markets and those who are not. (see below)

The best line from his report? “Emerging markets languished in the minor leagues of communications for over 50 years when fixed networking was seen as the only solution to digital inclusion. Monopoly operators and expensive proprietary technology solutions resulted in a business model based mainly on aid, not trade.”

No wonder he’s so upbeat on the prospects of service providers such as Zain, which offers extensive wireless service through the Middle East and Africa. Recently, the company reported results for 2007 that were “the highest ever net profits in the history of Kuwait's private sector.”

(When looking at the company’s year-end financials, one thing jumped out at me: customer acquisition growth. Zain’s customer base grew to 42.4 million from 27.03 million. The increase includes of 3 million customers acquired when Zain bought Iraqna, but the growth is noteworthy, nonetheless, because it shows just how widespread ICT adoption is throughout the Middle East and Africa, despite what some critics say. More on that next week.)

Meantime, here’re some valuable insights from Barton.

News@Cisco: Thoughts, impressions from MWC: What brand new trend wasn't discussed last year and are there any new products or technologies that are really shaking things up?
Barton: As is clear, I felt that there was a degree of polarization on show this year between the people who are getting serious about emerging markets and those who are not interested, which has not been seen in the past. The other big buzz area, which I didn't really cover for obvious reasons, was mobile content. But although a lot of people are into this, I think Robert Redford's keynote (which I didn't attend) said it all: it is still very early stage.

News@Cisco: About those upstarts: Cisco talks a lot about investing in alternative service providers with innovative business models. How do you see these companies (the Max Telecoms, Netias and others) evolving? Are they hitting their strides? Are they causing incumbent operators to dramatically change their strategies? Any hits among the upstarts?
Barton: The hottest upstart is Zain, in my opinion—loads of deals. And, yes, the upstarts are definitely starting to impact on the incumbents… people like Vodafone and Sprint… Some really exciting Chinese and Russian operators, too, [are coming to fore.] Cisco, meantime, is well placed being standards-based. I think the whole industry will go that way and you can start to see the big proprietary guys losing out.

News@Cisco: WiMAX: has its time come? Is Cisco making the most of Navini? What is the next milestone for the WiMAX industry?
Barton: See comments about WiMAX in my article. I have to say Navini was low key, unlike Cisco, which had a great location and looked well organized. Cisco was probably the most together U.S. company there, particularly given the poor showing from Motorola and Alcatel-Lucent.

Worried Trade Deals Will Eliminate Your Job? So Is the Rest of the World

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In the U.S., trade has become a battleground over which the upcoming U.S. Presidential election is being fought. Disenfranchised Ohioans, distraught over their local economy, blame the North American Free Trade ACt (NAFTA) and other trade pacts for their woes. The benefits of free trade, some argue, flow mostly to less developed, emerging economies.

But some Ohioans might be surprised to find that many in developing economies believe the opposite is true. This week, labor leaders from South Africa, Brazil and elsewhere expressed frustrations at the Doha round of trade talks. Their main gripe: mature countries seek to unload industrial goods in emerging economies, thus depriving developing nations a chance to build out their own competitive, domestic industries.

According to an AFP report, labor leaders from emerging economies "contend that they must protect nascent industrial sectors that were already hurt by trade-opening measures thay had to adopt before joining the WTO." The article goes on to say that many of the positions in emerging economies lost to liberal trade pacts were jobs held by women.

That claim made me think of my company, Cisco.

Cisco has invested a great deal in Networking Academies over the past 10 years. These are institutions where young men and women can learn skills necessary for selling, integrating and supporting sophisticated computer and telecommunications networking systems. Graduates of these academies have found their certifications to be the key to higher paying jobs and better lives.

Today, Cisco has Networking Academies in more than 160 countries. They are currently teaching nearly 1 million students the ins and outs of networking. There are Networking Academies in some of the world's most prestigious universities and even one in one of the world's largest slums in Nairobi, Kenya.

What's particularly interesting about Cisco Networking Academies is the number of women these facilities are teaching. That includes females in places thought to be hostile to women entering the professional workforce. Once again, reality is quite different than perception and stereotype.

Take the Middle East, for example. There, nearly one in four students in a Cisco Networking Academy is female. In Africa, it's almost 30 percent. That's twice the rate of the U.S. and Canada.

For more on the origins of Cisco Networking Academies, please check out the following:

Bulgaria Sets the Pace

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“Fossilized.”

That’s how one entrepreneur likes to describe the state of development in Bulgaria’s telecommunications market. It's a mischaracterization, of course, but Krassi Stoitcheff, founder and CEO of Sofia-based Max Telecom, is out to make a point, not to mention a profit, too. His plan: revolutionize the market for Internet, voice, access and TV solutions for as much as 90 percent of Bulgaria’s population of 7.7 million residents.

In this video, he outlines his goals. “Our ambition is to disrupt [the market,] to offer brand-new services and to upgrade the customers,” Stoitcheff says. (For additional news on developments in Bulgaria's telecommunications market, click here.)

The key to Max Telecom’s plan is new access and aggregation solutions from Cisco and WiMAX technology from Navini, a company that Cisco acquired in 2007. With WiMAX, a radio-based technology that supports broadband wireless solutions, Max Telecom could very well be the first to introduce new services and value propositions to millions of customers in Bulgaria.

In February 2008, Max Telecom announced the completion of the first phase of its WiMAX service rollout. Now, nine major cities and even two ski resorts have broadband mobile communications services. For Stoitcheff, the fun has just begun.

“We think we have a great opportunity, especially against the competition, which is big, but really complacent,” he says. He says the recent market moves of some operators to focus more on price competition than service innovation and enhancement has opened a door for his company. He envisions a day when the price bundles that some operators create with hidden tariffs will go away. In their place will be more robust, cheaper, wireless, broadband options that relay on WiMAX and thus carry little or no data roaming charges.

Emerging Market Economies: Why Investors Differ from Suppliers

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Since the beginning of the year, many have worried that returns from investments in emerging market economies may have peaked. But peaked for whom?

In this analysis from July, Investor's Business Daily poses the question: "Emerging Markets: Long In The Tooth?" What makes the article compelling is that it distinguishes between growth in these countries—and, by way of extension, those who trade in them—and returns individual or institutional investors can expect from them. The two are very different things, obviously.

Many experts expect sustained if not accelerated growth in Russia, Brazil, South Africa and other developing economies. That's not to say, however, that private equity funds and mutual funds and other investment instruments will enjoy similar gains from this point forward. Why? Many investors may have already made their big gains. Even though experts agree there's plenty of upside left in emerging market economies, big funds built around these opportunities have grown to the point where those who investment in them may wonder if they may be over-heated. A quick scan of leading funds that invest in emerging economies suggests considering this point of view carefully.

Consider, for example, the eight funds mentioned in the Investor's Business Daily article: DEMSX, DFEVX, EITEX, GBFAX, GTDDX, QFFOX, SNEMX and TREMX. All are up substantially in the past two years and, with the exception of TREMX, all are up better than 20% this year. Two, DEMSX and DFEVX, are up nearly 35%. (TREMX is up 11% for the year.) No wonder experts are speculating that these funds might be too hot for new investors.

But for the companies who sell goods and services in these economies, the good times may just beginning. In just two years, the percent of business that France Télécom derives from sales in Emerging economies has risen to 13% from just 10%. Telefonica, meanwhile, one of the largest telecom operators in the Spanish-speaking world, saw sales in Latin America grow 8.5% year-over-year in the most recently completed quarter—faster than the company's main European business. If trends continue, revenue from operations in Latin America could one day overtake those achieved by Telefónica España, which does business in the company's home market.

My employer, Cisco, is also enjoying gains from investments in Emerging Markets, according to market watchers. In a recent report, Bears Stearns concluded that, "Cisco is early in reaping the benefits from the growth cycle in Emerging Markets." Will it end there? Hopefully not. Cisco, for example, is still barely covering the strategic accounts in the area, let alone small and medium-sized businesses in the Theater, according to Cisco senior vice president Paul Mountford. That's despite increasing headcount in the past few years in emerging markets.

Plenty of others are making steep investments into Emerging Markets and hoping for key returns, too. In Africa, Huawei, for example, has established training centers in Nigeria, Kenya, Egypt, Tunisia, Angola, and Guinea, according to its 2006 Annual Report. "In addition, we have trained more than 3,000 communication professionals in Africa’s telecom industry," the report says. Huawei employs more than 2,000 people in Africa, 60% of whom are local employees. In all, the company says it has invested $500 million in Africa’s telecom industry—a hefty sum.

Individual investors may wonder if their gains in emerging markets may be peaking, but those who conduct business in these countries are counting on additional returns for years to come.