According to a November 2007 interview with Cisco CEO John Chambers, his company has made the decision to expand dramatically in China over the next five years. Cisco is now expanding its operations in the central and western parts of the country, as well as looking for new partner opportunities. The initiative includes a memorandum of understanding with the China Development Bank to examine joint investment opportunities and the establishment of small- to medium-sized business research teams within China. And Cisco already has a stake in Chinese internet company Alibaba, which raised USD 1.5 billion in an IPO last November, and Chambers confirms that more deals are likely.

According to Chambers in another interview last month, “This last year, emerging markets passed the developed markets for the first time in hundreds of years (in total gross domestic product, or GDP). In terms of purchasing power, the emerging markets are for the first time bigger than the developed markets. GDP growth in emerging markets is dwarfing that of the developed markets. And unlike what occurred a decade or two ago, it is now the emerging countries that are actually leading in technology implementation. We haven't seen that before.”

For insights into how Cisco is actually implementing this strategy on the ground in China, Michael Anobile (LISA’s Managing Director) interviewed Dr. Jan Gronski, Managing Director of the Cisco R&D Center (CRDC) in Shanghai. In China since 1994, Cisco launched the CRDC in Shanghai in 2005. It has grown to more than 550 people in less than two years. Gronski describes in detail how he and his team are transferring Cisco’s innovation culture through building trust and building managers. As they do so, they are supporting Shanghai Municipality’s goal to increase the number of foreigners to 10% of its population.

Gronski also shares why he thinks that it’s probably easier to steal intellectual property in the U.S. than it is in China; how Cisco is empowering their new managers in China to feel comfortable speaking out and speaking up; why the lack of English in China is only a transient problem; the hiring process that Cisco employs in China; and why he believes that China will eventually become a center for global product development.

Rebecca Ray (LISA’s Managing Editor) interviewed Amy Zhang (Director, Engineering). Zhang explains how her 25-person development team, based in San Jose and Shanghai, is building the underlying infrastructure to support Cisco’s product globalization model vis-à-vis emerging markets, and how this may lead to China becoming Cisco’s product localization center.

Below, you will find excerpts from both interviews.

For full versions, along with an analysis of how the Chinese software development and services sector is transforming itself into a global product development center before our very eyes, stay tuned for LISA’s new Industry Insights Report: The New Breed of Chinese Localizers – Building Quality Localization Hubs with Full Outsourcing Capabilities.

For more details on Cisco’s strategy in China, including its channel strategy, you can log into the LISA web site (if you are a LISA Member) and click here to download Cisco: Lessons Learned in India and China).

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What is Cisco’s current product globalization model?

Zhang: About two years ago, the #1 issue identified by Cisco’s global sales force was globalization. Over half of Cisco’s revenues are now generated from outside of the U.S., and emerging markets are growing the fastest. The company had to come up with a better way to address the needs of its (potential) customers outside of the U.S.

In a nutshell: hassle-free translation!

The top priority within our charter, and the first thing to address, was to develop a management system to enable efficient, cost-effective, easy-to-use translation enterprise-wide, and at the same time, incorporate corporate-wide linguistic assets like translation memories (TMs). In a nutshell: hassle-free translation!

Gronski: About 25 of our 550+ staff in China, or 5%, directly support globalization. This group has worldwide responsibility for translation memories and related tasks – this work is done almost exclusively here in China. These guys essentially set up a system, build the software, and manage the process for globalizing our documentation and other materials, and having them translated.

With so many strongly independent groups spread across Cisco, where did you start?

Zhang: After researching the company’s globalization needs, we confirmed that localization is all process and that my team would be part of a much larger service chain. The next step for us was to set up a central library for Cisco’s linguistic assets so that we could leverage reuse during the pre-translation phase. We launched the first version of the library last March.

Our real challenge has been the workflow model, not the tools to be applied.

Originally, management wanted us to focus on the central library more from a tools perspective. However, by spending time with several teams, we confirmed that our real challenge would be the workflow model, since there were so many variants on the process already in place within Cisco. This required different UI for different types of users at different points within the process. At the same time that we designed for maximum flexibility, we also needed to maintain the function as a centralized one.

We are now building a system that is designed to accept any type of content, so software code is considered to be just one more type of content under this model. We have to do this since Cisco now sells more and more consumer products, e.g., Linksys, WebEx.

What standards are your workflow models based on?

Zhang: The tools we developed have to support backward compatibility, along with the latest standards, to ensure efficient content exchange within our system.

Has Cisco experienced any problems related to IP protection since you set up the Center?

Gronski: I have a hunch that if we looked at the number of incidents in the U.S., in the Western world, it would probably be much higher than in China. I might be wrong, but my gut feel is that it’s easier to steal intellectual property in the U.S. than it is in China, on a statistical basis. Why? Because the U.S. is a much more open society, and people basically trust one another. And, of course, this means that there’s more temptation for people to take it.

For more details on Cisco’s IP protection strategy in China, log into the LISA web site (if you are a LISA Member) and click here to download Intellectual Property Protection in China: Lessons Learned).

What has been your biggest challenge so far in China?

Gronski: Number one has been the difficulty in finding middle-level management in China. And number two has been the difficulty in finding Senior Engineers in China.

People really care about titles here – it’s not even money. Money is important – money is always important, OK, but it is the title and the ability to, how shall I say, be a boss – to have some people reporting to you. Of course, this is a terrible generalization since there are people who are not like this, but I’ve seen it over and over again here. People really want to have the title of manager, and they want to manage people. But of course, they really do not know how to do it. So, while there are millions of managers in China, I claim that very few of them really know how a Western-style company manages their people.

How are you building trust and building managers?

Gronski: I’m not really here to change China. China will change itself in due course, but at the same time, I do have a mission to accomplish here. And trying to get the managers to be the way you want them to be requires the investment of your personal time. What I’m doing is essentially running management seminars within the company here. We have two seminars, and they alternate every Thursday for two hours. One Thursday we have what we call the Management Kindergarten, and on the alternate Thursday, we have the Management Primary School. The objective is to get people to formulate their thoughts, to make an argument and to speak out in public.

For more insights into Cisco’s engineering and innovation culture, log onto the LISA web site as a LISA Member and then click here to download Cisco: Lessons Learned in India and China).

Would you do anything differently if you were starting over again?

Zhang:We have been very lucky with top management support, along with patience and collaboration from all groups company-wide.

Cisco has also spent time with many industry leading Fortune 500 companies to benchmark and share best practices.

My team is outstanding – I wouldn’t want to be anywhere else right now!

China was really the only place considered for this initiative. I have 25 developers on my team, with one R&D team in China and one in San Jose. My team is outstanding – it’s very young and innovative with the average age only 25. It was formed less than 18 months ago, but it has already won awards! The people come from the top graduate schools all over China and U.S. It is by far the best team I have ever worked with during my 8 years with Cisco.

Do you see China becoming a global center for product localization?

Gronski: I think so. It’s not a coincidence that several companies have R&D centers in Shanghai. it is easy to find people who speak any of the European languages to do the verification here. It is much harder outside of China to find people who speak Chinese, Korean and Japanese. By the way, you can find those languages here as well.

Zhang: If you don’t restrict me with budgets, and you allow my imagination to run wild, I would like to transform China into Cisco’s Localization Center – to streamline the processes and to serve all groups. Will we become a global center for product localization? My answer would be a “definite yes.”