Domestic IT Services Revenue (Rs crore) Facilities Management 2,506 Managed Services 1,154 Maintenance--Own Systems 1,492 Third Party Maintenance 1,987 Customized Software Development 1,603 Packaged Software Implementation 1,676 Network Integration 6,734 Network Management Services 709 Hosting Services 628 Security Services 221 Total Outsourcing 159 Consulting 2,079
Source: DQ estimates CyberMedia Research
Though network integration, AMCs and facilities management are still the bread and butter for most IT service providers managed services an packaged software implementation have emerged as their caviar

However, the need for continuous data availability across a diverse infrastructure with different standards and technologies increased the cost of manageability, and new challenges for enterprises.

The ISP Connection
The Indian IT industry report card is incomplete without an overview of the Internet scenario in the countryin terms of numbers as well as quality of service. With 2007 being christened the year of the broadband, it was more than business as usual for the Internet service providers. Having missed the previous target of registering 30 lakh broadband subscribers by the end of 2005, ISPs faced an uphill task of achieving a 180 lakh Internet subscriber base and 90 lakh broadband base by March 2007.

The Internet subscriber base has reached only the half way mark, standing at 90 lakh in FY 07but it is an almost 29% growth over the 71 lakh total of last fiscal. The broadband connections (>256 Kbps download) too have fallen way behind target, at about 26 lakh at the end of March 2007. However, it has grown an overwhelming 70% since March 2006, when the base was just 13.4 lakh subscribers. The above listed subscriber figures refer to number of connections, and do not reflect the actual number of users of the Internet facility. This disparity comes mainly because many use the Internet at cyber cafes on shared Internet lease line/broadband connections.

As per TRAI, broadband penetration rates in India stand at a dismal 3.5%. The rural market is virtually untapped with broadband primarily reaching the large and medium cities. As per Voice&Data estimation, in FY 07, the number of broadband subscribers was close to 26 lakh. Out of this, 22 lakh are DSL based; 1.42 lakh cable modem; 76,000 Ethernet LAN; almost 21,000 fiber and 12,000 radio customers. There were over 2.3 crore Internet users aged over 15 years at the end of March 2007, compared to less than 1.6 crore a year ago.

Even though bandwidth tariffs have come down significantly, due to a host of factors including high bandwidth prices, lack of adequate content, lack of competition among broadband service providers, and last-mile connectivity issues, broadband usage in India has not yet picked up. In order to take broadband services further into both urban and semi-urban areas, many telcos are backing WiMax. Despite the challenges, the industry is optimistic and raring to go forward on the objectives set for 2010of achieving an Internet user target of 4 crore and broadband subscriber target of 2 crore.

The Rise of Networking
Last year proved to be a relatively better year for networking products, primarily routers and switches, on account of tremendous growth in the BPO/ITeS segments. Most IT companies expanded operations by setting up new campuses, while the BPO vertical was in a consolidation mode. Unified communications also started to generate quite a bit of interest thereby helping sales of networking products and solutions, as there was a lot of talk about IP telephony and collaboration.

Switches and routers continued to be the most revenue-generating products for networking vendors. This was due to several factors: expansion of IT and BPO companies, mushrooming data centers and disaster recovery (DR) sites by large Indian organizations and MNCs, increased spending by governments on e-Governance, and India becoming a manufacturing hub for telecom and auto industries. Banking and finance sector also contributed significantly.

High-end enterprise network users such as private banks, stockbrokers, manufacturers, distribution and retail organizations were amongst the few that invested in VPN-enabled routers. SMBs on the other hand expected lower cost of outsourcing, and bundled service packages offering not just standard support but also critical incidence management, and variable pricing. Adoption of WiMax/Wi-Fi, and SWAN's broadband telecom infrastructure made a start last year.

Owing to increasing security threats in the recent past, buyers went in for routers with reliable attack and hacking protection solutions. Routers that separate the routing and forwarding functionality were in demand.

Though the average price per unit dropped, the growth in value terms was sustained with the help of high-end Gigabit routers that made fresh inroads. As telecommunication companies continue to roll out their networks across the country, the market seems poised for impressive growth in the medium-term. With investments in telecom infrastructure rising, router deployments by telecom service providers have been on the rise. SWANs are major users of low- and mid-range routers to help inter-connecting various government offices.

WLAN continued to be governed by the need for round-the-clock connectivity for enterprises, irrespective of location. Increased sales of notebooks continued to drive adoption. Small businesses started looking at this segment seriously in an effort to stay ahead of competition.

Explosion in the growth of cellular telephony added to the uptake, as more and more handheld devices that are being sold in the market come with the ability to connect to the internal wireless networks. Growth of broadband connectivity was also instrumental in fueling sales. Penetration of broadband was also visible in the home segment in metros and large cities. BSNL, the largest broadband provider in the country, started offering wireless routers to make homes Wi-Fi enabled thereby bringing some good news for manufacturers of these low-cost devices.

It was indeed another year of great performance. And considering the fact that IT in India has just begun, it would only be a pessimist who would not bet on India. If everything goes well, political leaders show the maturity that they have displayed in the last few years, and business leaders continue to have global ambitions, it is going to be a great next decade for the Indian IT industry. Any bets? DQ

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