The IT giant is strategizing with governments from Saudi Arabia to South America on their technological futures—hoping to score mega-contracts

Two limos hurtle through the desert north of Jeddah, Saudi Arabia, at 110 miles per hour, blown at times into the slow lane by the winds coming off the nearby Red Sea. The delegation from networking giant Cisco Systems (CSCO), including Senior Vice-President Paul Mountford, is running late for a gala groundbreaking ceremony hosted by the Saudi king at one of the biggest construction projects on the planet. King Abdullah Economic City (KAEC) is mostly sand dotted by cranes now. But by 2020 the Saudis expect 2 million people to be living in a futuristic metropolis three times the size of Manhattan, with some of the most advanced technology money can buy. As the black Lexuses arrive, one traveler remarks on the frenzied pace, and Mountford laughs. "That was nothing," he says.

Not with so much at stake. King Abdullah plans to build four brand-new cities and upgrade the country's infrastructure at a cost of $600 billion over the coming years, and Mountford is chasing scores of similar projects in emerging markets around the world. This goes beyond China and India. Mountford's mandate is to tap the next tier of emerging nations, from Saudi Arabia and Russia to Brazil and Chile. It's a sprawling group that Cisco, and companies like it in technology and beyond, is counting on for much of its growth. But as the financial crisis hammers many of these economies, Mountford will have to hustle to deliver.

The groundbreaking at KAEC makes clear how hard Cisco is pushing. Its executives form the largest Western contingent by far, and, after the event, the company hosts the king in an adjoining tent for a demonstration of Cisco technology that allows a person elsewhere to appear on stage as a holographic image. All this before the company has won a dime of business for its products.

Cisco isn't just selling technology. Mountford's pitch is that Cisco, more than any other company, can help countries such as Saudi Arabia modernize their economies and become leaders in the Internet Age. The company argues that, by investing in the Internet infrastructure Cisco sells, these governments can better educate their citizens, improve health care, and boost national productivity. They may even be able to create their own tech sectors, giving citizens the opportunity to become well-paid "knowledge" workers like those in Bangalore or Guangdong, China. It's the promise of the Cisco Effect. "This is a chance for Cisco to [influence the world] on a much bigger scale," says John T. Chambers, the company's chief executive. "It's about raising standards of living and creating large middle classes."

TRAINING CENTERS
One parallel is Bechtel. Just as the construction giant built dams, power plants, and airports last century, Cisco believes it can build essential infrastructure for today. It sells everything from the million-dollar routers that direct traffic through the Net to $300,000 videoconferencing systems for executive suites to set-top boxes for cable TV. But it does more than peddle gear: Cisco provides consulting services to help government officials figure out how best to use the Internet and pays for training centers to churn out the technicians to make such plans real. All told, the company is investing billions in emerging markets in hopes of snaring future business. "Cisco is getting itself designed into the fabric of these countries' economic plans, because Cisco is helping their leaders imagine the future," says tech consultant Geoffrey Moore of TCG Advisors. "It's thought leadership at a level I've never seen before."

The question is how much these countries will pay for vision, especially in tough economic times. Despite Cisco's efforts, it lost out on the first major contract from King Abdullah Economic City. The developer of the city gave the $84 million deal for a citywide phone and Internet system to Ericsson (ERIC) after the Swedish equipment maker submitted a bid more than 20% lower than Cisco's, sources say. "I was shocked," says Ahmad Al-Yamani, the top technology officer for the Saudi Arabian General Investment Authority, a government group that worked closely with Cisco on the blueprint for the new city. "But sometimes dollars talk."

As governments struggle with the current financial turmoil and scale back on their grand plans, Mountford faces the sales challenge of his life. For years he's been a fair-haired boy at Cisco, delivering annual sales growth of more than 30% and building his group to $4.5 billion in revenue. Cisco needs that growth more than ever. The company's stock has stalled in recent years, largely because investors doubt an outfit with $39 billion in sales can maintain the double-digit annual growth Chambers has promised. Those fears were fanned on Nov. 5 when Cisco said revenues in the current quarter could fall 5% to 10% because of the economic slowdown.

If Mountford can keep delivering strong growth, Cisco will have a shot at hitting Chambers' target. But analysts are skeptical given the global tumult. Richard Dean of Pyramid Research just slashed his forecast for Mountford's group by more than half, to an average of 15% over the next three years. Overall, Dean thinks Cisco will increase revenues by an average of 5% through fiscal 2011, far short of the double-digit goal. "Mountford can influence Cisco's fortunes over the next few years like no other business leader in the company," says Dean.

All of this has Mountford, a convivial, six-foot-three Brit, squarely on the hot seat. He's the son of a World War II vet who fought the Germans from Dunkirk to El Alamein in Egypt. Mountford the son was determined to escape his working-class town in the British Midlands, so he skipped college to work as a salesman for a garden-tools company. He later joined Cisco and boosted its sales in Britain from $165 million to $1.2 billion in three years. When the dot-com boom turned to bust, Chambers brought Mountford to Silicon Valley to tackle one of the company's most pressing problems—a potential mutiny by the tech resellers, or middlemen, that bring in more than 90% of Cisco's sales. He developed new programs that boosted their profits for helping Cisco move into key markets, such as office phones and network security.

A CHANGE OF PLANS
In 2005, Mountford started looking for a fresh challenge and began to focus on the nascent rise of emerging markets. Countries such as Saudi Arabia and Chile were thriving with the surge in commodity prices, while Turkey and Poland were developing broader economic strength. Yet Cisco approached these markets in the same simplistic way as most Western companies: It had a few sales offices and distributors but no specialized effort. Chambers tells the story of how Jordanian King Abdullah II promised him Cisco would make money in his country after convincing Chambers that the company should work with the government to create the Jordan Education Initiative in 2003. "I said, 'With all respect, Your Majesty, I'll never make money in Jordan and I probably never will in the Middle East, either,' " Chambers says.

Mountford was convinced otherwise. He believed that a growing coterie of progressive governments recognized the need to invest heavily in technology and other capital improvements. Those in the Middle East, in particular, faced a surge of young people coming of age. Without the creation of good new jobs, there could be a host of problems, including a further rise in Islamic radicalism. So in early 2005, Mountford proposed breaking these hot spots out of the existing business units at Cisco and creating a specialized emerging-markets group, which he would lead. Robert Lloyd, then head of the Europe, Middle East, and Africa operation, helped him hatch the idea.

Chambers quickly assented, giving Mountford responsibility for 132 countries in 23 time zones—"so we can have an hour off for lunch," jokes Mountford. But the CEO set a high bar. The straitlaced Chambers, who'd felt facial hair was unprofessional ever since his days as a young IBM (IBM) sales rep, made Mountford promise to lose his beard if the new unit didn't deliver a 35% increase in sales in its first full year, ending in July 2006. Mountford agreed—but only if Chambers would grow his own beard if Mountford hit the mark.

Certain markets were rough going at first, particularly in the Middle East. Tensions between the U.S. and Saudi Arabia lingered after September 11, straining business relationships. Cisco's American employees were hesitant to visit the country. Saudi businesspeople were offended by charges that their nation supported terrorism and by having to wait weeks for visas to the U.S. As Cisco struggled, Chinese companies such as Huawei Technologies were quick to fill the void. "You wouldn't believe how much business Huawei has taken out of Cisco's mouth," says Haitham Abu Aisha, general manager of a Riyadh Internet service provider called Sahara Net.

Still, Mountford's team thrived elsewhere. Particularly in countries such as Russia and Brazil that opened up telecom markets to competition, new carriers were eager to buy Cisco gear. Sales surged for fiscal 2006, to $1.68 billion. At a Cisco conference that year, Chambers made a show of appearing on stage in front of thousands of staffers with a skimpy beard.

In December 2006 the company took a step deeper into emerging markets. It established a huge campus in Bangalore from which teams of engineers could be dispatched to deliver on promises made by Mountford and other salesmen. The India-based staffers began to create products tailored to specific markets, such as a Web site in Turkey that lets small textile companies bid on a variety of contracts. The customized products are then marketed to potential buyers in other, similar countries.