ISP activity slowed down, corporates turned cautious, but the banking and finance sector stuck to ambitious ramp-up plans. Industry bemoaned the slowdown, but networking still notched up 50%-plus growth
A year of reckoning would sum it up nicely. For the
networking industry, challenges popped up unexpectedly, but these were managed quite emphatically. Internet service providers (ISPs) continued to scale
up their infrastructure, but the excitement seen in the beginning of the year
faded as the year went by. The global slowdown had its impact, and those
depending heavily on the ISP and the Internet data center segments found their
targets were running away from them. The more seasoned and mature players
reacted by reworking their targets—this helped them tackle the situation, with
the top five growing at an impressive 89%.
New entrants with fresh ideas also brought enthusiasm into
the market. Stable enterprise sectors—banking, insurance and telecom—contributed
significantly to the overall growth of 50%, a jump of 15% over the previous
year. The resulting surge in market size: to Rs 1,851 crore, from Rs 1,234 crore
last year.
Caution ruled the moods
After the chaotic buying of networking products last year, a
result of the Internet madness, this year turned out to be somewhat somber. Not
many in the industry were expecting this sudden drop in the buoyancy in customer
mood, and were dismayed by the fact that selling was suddenly more challenging.
Network infrastructure providers were the most affected.
Top
Five : Shrugging off the Slowdown
Company
Revenue (Rs crore)
Growth
1999-00
2000-01
(%)
Cisco
360
765
125
Enterasys Networks
119
268
126
63D-Links India
160
250
63
3C50om
140
210
50
Nortel Networks
110
201
83
Average (Top Five)
889
1694
89
Total networking industry
1,234
1,851
50
*DQ Estimates
The slowdown began to pinch in Q3 and Q4,
but overall growth wasn't affected.
Industry grew upwards of 50%, and the Top Five notched up 89% growth.
The flurry of demand remained undiminished in the first half
of the year, but dark clouds loomed large in the second half. Even leaders like
Cisco Systems and Nortel Networks had to wade through some rough waters. The
global economic conditions, coupled with a continually low agricultural output
at home, had a negative bearing on the economy. The resultant southward swing in
demand for industrial goods forced corporates to lower expectations. To contain
outflows, corporates reacted by slashing infotech budgets, and networking deals
weren’t spared the hatchet. Gradually, a cautious mood set in—it was time
for introspection and return to reality.
Cisco’s business in India remained robust, even as the
parent company cut costs and downsized its workforce by 17% in other parts.
India remained a thrust and growth area for most of the larger players, with
Cisco, Lucent and Nortel setting up huge development centers for outsourcing
activities. Lower development costs and overheads in India should see them
remain bullish in the country, especially given the changed economic scenario.
