With a war chest of $2 billion to invest in India, VMware is certain that India is an important part of its global expansion plans. It is looking to invest in the country across research and development, people and infrastructure in a multiyear investment plan.
In an exclusive interview with CNBC TV18, its global COO Sanjay Poonen said India is a critical market for the global tech giant, not just owing to its importance in the company’s research and development footprint but also because of the talent pool, technological IP and the client capability that it offers.
“We feel a lot of the go-to market relationships and some of the key verticals that are important to us as a company are represented at scale here, whether it’s banking and financial services, telecom and media or the public sector. Those are the long-term relationships and you have to be committed to this,” says Poonen.
Listed on the New York Stock Exchange, VMware provides cloud computing, networking, visualisation and network software solutions and services for clients across the world. It has grown rapidly over the years through critical acquisitions that have helped it grow in scale and capability. Going forward, Sanjay says VMware wants to continue to grow via acquisitions that have strategic fit for the company and India is definitely one of the countries that have attractive opportunities.
“If you look at the four biggest acquisitions (we have done), they all have very important footprint for us in India. I think of all the areas we have acquired we either have investment of R&D that is very much centred around India but even as important is the interest of customers from the stand point of sales;” he pointed out.
When asked how he sees the India market in the context of the new government, Poonen says that he was reasonably bullish. “We keep a good dialogue with the government. I'm very encouraged by their positive attitude towards foreign direct investment and I hope that continues. The more that India could have the view that the world economy helps them and they are favourable to direct investment here. That is what really has gotten the tech industry going strong. I'm reasonably way positive on that direction and we would love to see that continuing. The most important thing that I'd advise the government officials is to invest in the people but more in infrastructure. The airports, the roads, the telecom infrastructure will become world class. The one piece of input that I would have is continue investing in infrastructure;” he added.
Edited excerpts for the interview:
India is the second or third-largest market as far as the R&D presence is concerned, help us understand how critical is India strategically on your global expansion plan
Yeah, you know I say this first as a representative of VMware and also as an Indian. I happened to live in America but my roots are all here. My parents live in Bengaluru and it's always good to come back and we have a big conference this week in Mumbai.
It is important because it is one of the top economies in the world, for one. It has a significant talent base of engineers who speak English. So, we invest in this country based on two fronts. One is because of R&D resources. It is one of our biggest teams now. So, a lot of R&D innovation happens here (India). We have got a lot of teams in Bengaluru, Pune and Chennai.
Secondly, we feel a lot of the go-to-market relationships and some of the key verticals that are important to us as a company are represented at scale here. Whether it’s the banking and financial services, telecom and media or whether it’s the public sector. Those relationships are the long-term relationships and you have to be committed to this. I have seen this move before my days in SAP. SAP was very successful in India, they focused and when you focused here, where the company and country understand you are dedicated here, you can see results and that's what we are seeing here.
So, you had announced a $2 billion investment last year into India. Across how many years is that going to span and help us understand what are the key areas you are going to be investing in, which are going to be relevant to the global plans?
It is a multi-year time investment plan as we think about every year we look at ways about how we are going to spend at R&D and in facility and locations here. We have 5,000-6,000 people in the R&D department and other functions here. We expect that number to grow because this is an attractive place in which we can invest and has grown in the past several years. That’s part of the investment plan. We also see tremendous opportunities for many of the multi-nationals who are doing business. Coming with system integrators like Cognizant, Infosys, Wipro.
There are many banking and financial companies that are making big investments here. I think we look at the grand economy of the world from the standpoint of multi-nationals based in the US. The US is an important economy for us, the UK, Germany, China, India, and Australia. India is a very important place and especially I think the other thing that is going on in the countries in the US are thinking through is should we invest in one location versus the other. India vs China. I think India stands to gain some of that investment.
Are you saying India vs China, India may win? We never look at them as winners or losers. We wanted the entire world to do well. But we do think there are some attractive aspects of the Indian market. That's part of the reason we have a bigger team here. (India) in terms of our R&D investments. But our China business is also doing well in the midst of uncertainty. We have actually done pretty well in the past in our China business and we are hopeful in the grand scheme of long term peace may prevail in all the trade disputes that exist in the world. I want to ask you more about the recent development of R&D processes in India. You have been expanding in the last four to five years. What is the kind of expansion you want to look at? Considering this is the second or third largest in the world. Perhaps increasing the footprint in India to make it the largest.
Absolutely, all under consideration, we start off with the biggest teams we have here which are R&D and support. We like the innovation those teams are producing and the number of patents they are filing. All of those are metrics of innovation. Our retention rates are very high. We are rated one of the best places to work.
We have been investing in some incredible programs for inclusion in diversity like TAARA which is investing not just in our own people but investing it back in the community. It is a fantastic program. We have made it free for women to get trained and enabled on VMware related infrastructure and technology for free. That is getting a lot of attention here and one of the creative ways in which we can invest back in the Indian community among woman. Those all are things that make us very excited about the potential of this place as in R&D, support, location.
Then you go to the market side of it, we are excited about the team. We have instituted a new country MD (Managing Director), Pradeep Nair, excited about his potential. And growth in this market has left us with lots of opportunities. Part of my interest this week is been to meet with some of our top customers and some of these key verticals such as banking, financial services, telecom and public sector. And continue to reinforce to those customers, we are committed. When they see not just the fact that the Indian market and the leaders here, the APJ leaders, the co-operative executives, some of the Indians like myself are coming here to assure them, that means a lot to them
The sectors that you mentioned, banking, finance and telecom, are facing growth woes in India. Have your customers been impacted by the slowdown that the Indian market is facing these markets? We keep hearing that at such times people invest more in cloud, mobility, security solutions. But is that really happening on the ground?
One of the amazing things of VMware software is that you need us in good times as well as in tough times. It is because the ROI (Return of Investment) is one of the phenomenal of any technology in the world. I saw one of the certain SAP with the VRP accounting system. But in the early days of VMware, we had customers who had to send us their electricity bills before and after VMware, because the dramatic savings you could have, would have been of the order of 80 percent bottom line!
We have just amplified that today. A dollar invested in VMware has returned $10 of economic value on an average to the customers. So when you have that dramatic ROI, you could showcase to customers and that by the way is any country. If it is a tough time, you have to probably reduce your infrastructure, maybe reduce the cost you are spending on hardware with software. VMware can help with that. May you are thinking about you are moving away from a data centre or cloud, VMware can help you with that.
Maybe you are looking to move faster in developments, with the whole new world of containments, VMware can help you there. You are looking to get more work done on your phone, which is a digital workspace, VMware can help you there. Security, because the bad guys are constantly on the rise. These four or five areas are areas that are strategic to us and things we find are helpful in good and tough times.
As far as acquisitions are concerned, are there attractive opportunities in India, because VMware hasn't shied away from acquisitions if I look at your last 10-year-old strategy. Firstly are there attractive targets, acquisitions? Secondly, is the start-up space that is something you would be interested in to acquire?
Yes, absolutely, if you look at the four biggest acquisitions, as others are smaller ones they all have a very important footprint for us in India. Networking, you know 6-7 years ago, VMware would not have thought of, but today we are one of the top two in consideration of all networking types of deals. And that team now has significant resources in Pune. We acquired a company Airwatch, that had a significant team in Bengaluru and we became one of the prides of Bengaluru in terms of innovation and we acquired them 5 years ago. The last two ones were done recently. Carbon Black did not have a team in India but we are going to invest a team likely in Bangalore or Pune. We have a team in Pivotal, we haven't closed the transaction yet, but we expect to do that.
Those are the four biggest acquisitions they all will have or already have an innovation that is going to be based here and all of those have motions of selling the man. I have been here this week and it has been amazing to me and the customer's demand for Containments on the platform that is our acquisition Pivotal. The customer demand for Carbon Black and Securities has just been off the charts, for the last few days, because every CIO I talked to here cares about Security. In the world of Security, most of the legacy security vendors are not innovating and they are kind of dying, so we come in now with a fresh approach and an innovative approach and customers really like it. I think of all these areas we have acquired we either have an investment in R&D that is very much centred around India but even as important is the interest of customers from the standpoint of sales.
In the Security World, are there attractive opportunities within start-ups. While start-ups have been innovating a lot, at the same time we haven't seen as many companies perhaps grow in this particular space
In all the acquisitions we have made, they were start-ups but where the start-ups headquartered in India, we'll have to see. So far, start-ups have investments of sizeable teams, for example, Airwatch, a significant example. We think there are tremendous opportunity of start-ups that are headquartered. We are going to watch that carefully. We sometimes as a company make investments, so the way in which VMware work is not just acquiring, sometimes we invest in companies. But also we don't need to acquire every company to innovate. We can partner. Many of the things VMware does is not just driven by a build or acquire strategy, it’s also a partner. So we have 75000 partners at VMware and we wanted many of them to flourish without acquiring all of them. There is no great strategy as to acquire everybody. We expect many of the startups that are here like Bangalore and Mumbai and wherever there is R&D to flourish on top of our eco-system. So when I see a great start-up, that comes to me, that based in India, the first thing I tell them Plug into our platform, come to V Forum, proliferate in our eco-system and then we'll see if it makes sense to acquire you. But many of them will never acquire and that is going to be great for the eco-system. I think it is fantastic day innovation is thriving in India and start-up economy is good. I’m a fan of being an entrepreneur myself, because that is how I feel I grew up in this country and had the opportunity to now make an impact in the world economy. So the fact that entrepreneurship is live and strong in India is a great thing.
Before we wrap, what do you think about the investment climate in India? Of course, the climate is changing, there is a lot of policy changes and reforms being looked at and a lot of areas where there is a slowdown. From a foreign investment perspective. Has your view changed on India in the last couple of years leading to slowdown and there are several areas that have impacted investor sentiment. Are you still bullish on India?
Reasonably bullish, I think when Prime Minister Modi has come to the United States, many of our silicon executives or the Indian diaspora met with him. Our CEO Patrick met with him here. When Arun Jaitley was alive, he came to Silicon Valley, we met him with there. So we keep a good dialogue with the government. I'm very encouraged by their pro-positive attitude towards foreign direct investment and I hope that continues. The more that India could have the view that the world economy helps them and they are favourable to direct investment here. That is what really has gotten the tech industry going strong. I'm reasonably way positive on that direction and we would love to see that continuing. I think the most important thing that I'd advise to the government officials to not only invest on the people but more on infrastructure. The airports, the roads, the telecom infrastructure will become world-class, the more you see them increasing.The one-piece of input that I receive is continue to invest in infrastructure. The people in this country are fantastic, I’m an example of that. Some of the people who stay in the country get exported. We also wanted to see the infrastructure also become world-class. It is very much possible because the investment the country has made so far. I think there are examples of what China has done with infrastructure, India could also mimic. But overall, I'm generally very positive. One thing that is also really going for the country is much of the population speak English and that is very favourable to many of the countries that want to invest here. Because when you communicate over a conference call, it is nice what the other person at the other end understands what you are saying. That is a very key part in the way we communicate with engineering teams. Even if it is 12 or 13-hour difference in time zone, the fact that you don't necessarily need to meet them. Through video call or conference call, you can all understand what each other is saying.