While the first half remained anything but encouraging, the skies did clear up in the second, with the BPO and telecom spaces ringing in largish orders and saving the day. The die was cast—a revival looked set and just around the corner... but it was still much too early to break open the bubbly.

The Fab 4—Driving growth
So what finally went right? For starters, the networking industry once again had four verticals to thank—BFSI (banking, financial services and insurance), telecom, business process outsourcing (BPO), and the government—for driving demand, much as they did in 2001-02. Several banks opted for automation, imparting a healthy ring to the equipment vendors’ cash registers. The Punjab National Bank and State Bank of India led the charge for the banking industry with huge equipment orders for 1,000 and 3,000 branches, respectively.

On the telecom front, massive expansion drives by Bharat Sanchar Nigam Ltd, Bharti Group and Reliance Infocomm showered vendors with huge requisitions for routers, switches and other equipment. BSNL placed a large order with Juniper Networks for high-end routers for the rollout of its MPLS VPN network, which is India’s first IP infrastructure network to be run on an optical backbone.

Projects like Andhra Pradesh WAN, Gujarat WAN as well as one under the aegis of the National Highway Authority of India stood out, and signalled the government’s contribution to the networking industry’s resurrection. Life Insurance Corporation also accounted for large router and switch sales, which the insurance major required for wiring up its 1,600 branches.

A rapidly-expanding BPO industry gave networking vendors several reasons to rejoice, as large orders poured in with the entry of global players, along with the continuing push provided by domestic BPO players. The proliferation of call centers, literally by the dozens—Prudential and Airtel centers in Mumbai, and an HCL center in Noida—propped up demand for networking equipment. However, the manufacturing sector remained dormant in 2002-03, with a few isolated LAN/WAN deployments at companies like Asian Paints, Telco and Imperial Tobacco Company (ITC).

Integrators bloomed
Not only equipment vendors, even network integrators (NI) got more orders in fiscal 2002-03. Large projects from the banking and telecom sectors provided a fillip to the NI segment. For instance, State Bank of India and Punjab National Bank placed orders worth Rs 88 crore and Rs 75 crore, respectively, while Reliance spent another Rs 90 crore on network integration. Year 2002-03 also saw the emergence of an interesting trend—that of total outsourcing of network infrastructure management. Big contracts from the likes of Asea Brown Boveri, Tata Iron & Steel Company and Whirlpool spelt big bucks for top network integrators like Wipro, IBM and Hewlett-Packard India.

Increasing competition kept up the pressure on network integrators’ product margins, while services including network design, implementation and management ensured good revenues for them. Many NIs focused on value-adds like security, network audits and storage consultancy. In terms of marketshare, Datacraft raced to the top, leaving last year’s winner Wipro well behind, as Tulip sprinted to third position on the back of its booming wireless integration business.

The big networking bazaar
Thanks to the buoyant activity in the BFSI and telecom sectors, the router market found the going good and finished the year with a growth number of 8.5%—for revenue of Rs 459 crore. Substantial orders from the Gujarat, Andhra Pradesh and Madhya Pradesh state governments also stood the router market in good stead. Market leader Cisco Systems made further inroads, garnering a whopping 87% marketshare.

Hubs finally made an exit from the main stage, giving way to low-end 10/100 switches during the year, although miniscule sales still continue. As was the case with the router market, the market for LAN switches also benefited from the increase in activity in the BFSI and telecom sectors, apart from significant orders for government projects, to reach a figure of Rs 500 crore, showing a healthy growth rate. It was D-Link and Dax which ruled the low-end workgroup switches market, while Cisco Systems, Enterasys and Nortel Networks were leaders in Layer 2, Layer 3 and high-performance switches, respectively.

Unexpected windfalls from the lottery industry provided some relief to VSAT vendors, though the segment clocked a negative revenue growth of 7% in 2002-03, despite growing at a healthy 17% in volume terms. Playwin placed a whopping order of 5,000 VSATs with Hughes Network Systems, which helped the latter emerge as the market leader, capturing 52% of the overall marketshare. Gilat and Viasat rounded off the top three slots, with 34% and 13% share, respectively.

The IP telephony market also saw hectic activity, with Cisco Systems crossing the 20,000-mark in IP phone shipments to Indian customers. Besides, Tata Avaya launched its range of IP telephony and voice over Internet protocol (VoIP) products in first month of the fiscal. In structured cabling, though huge orders from Reliance and several BPO units propped up vendor bottomlines to some extent, they still had to grapple with a negative growth of 1.8% during the fiscal. Broadband rollouts by many big telecom companies also helped stabilize the market somewhat. Avaya led in this space with 33.5% marketshare, while Tyco and D-link followed with shares of 26% and 11.7%, respectively.

Market trends
Clearly then, it was large and medium enterprises that led the sector’s growth and kept it afloat, as they did in year 2001-02, while small and medium enterprises still grappled with elementary network connectivity. Hubs and low-end switches were still the main attraction for SMEs, especially in ‘B’ and ‘C’ class cities. Though 10/100 unmanaged switches gradually found favor over hubs, the latter continued to be active in the marketplace throughout the year. It’s an interesting phenomenon as there’s not much of a difference between the price of an eight-port hub and a low-end eight-port switch, while a switch offers obvious operational advantages.

In the LME segment, growth was driven by initiatives aimed at building more intelligence into networks. Next-gen services like IP telephony, security and network storage found increasing acceptance with large enterprises. Applications like VoIP and enterprise resource planning drove them to upgrade networks and small switches were promptly replaced with large enterprise-class options.

The upgrading of networks by telecom companies had a twin impact on the networking industry—first, the introduction of next generation networking services by telcos, like broadband and video-conferencing, spelt large orders for the vendors of high-end networking equipment. Second, since telcos will now start offering new services, there will be additional demand generated by end-users for low-end networking equipment—in order to use these services. The effect may be most visible in ‘B’ and ‘C’ class cities, which have not had access to such services so far.

In a welcome development and what should trigger a good trend for the wireless networking industry, the government relaxed few policy guidelines, easing the license fee structure for broadband radio equipment. The development is already creating impact as Bharat Sanchar Nigam is expected to go in for a wireless deployment using LMDS technology in a major way. The government has also allowed the use of WiFi indoors (See ‘The Age of WiFi’).

The general trend of customers shifting to higher bandwidth networks continued during the fiscal, even as CAT6 found far more acceptability as a default standard for cabling. As gigabit Ethernet made its presence felt during the year, a new technology—optical Ethernet—made an appearance during the year, with companies like Reliance and Bharti opting for optical Ethernet in a big way.

Vendor push
Owing to a sluggish economy, distribution channels found a shrunk market as few vendors came forward to work directly with the decision-makers in enterprises. This was particularly the case with large projects involving multi-location deployments.

As network security emerged as a hot topic, Enterasys focused its energies on tapping the market with its intrusion detection system. Cisco Systems, on the other hand, kept its focus strongly on training resellers and partners to increase end-customer satisfaction. By the end of the fiscal, the company had trained about 1,500 sales and technical personnel through its training program—called Cisco University—in aeras like LAN, switching and routing, VPN and other security products, IP telephony and wireless.

Large orders from call centers enabled Tata Avaya to end the year on a high note, with a growth rate of close to 24%. The company continued to bet big on convergence and most of its products launched in the year supported tightly integrated VoIP functionality.

Way to go
The way to go is forward if indications from the second half of the 2002-03 fiscal are anything to go by. Though the year ended with almost stagnant growth, the sudden influx of orders in the latter period has the network industry hoping that good times could be back again. Looking ahead, it seems that the onus of driving demand and in turn growth, will once again fall on the Fab Four verticals.

As the country is still going through the elementary computerization phase with low levels of networking in place, there is tremendous scope for industry to grow as more and more organizations wake up to the benefits of being wired.

RISHI SETH

Why NMS is Hot...

Layer 5 Switches Gain Popularity

As networks kept getting increasingly complex, a shortage of qualified IT staff prompted Indian businesses to actively outsource their network upkeep needs to network management service providers. For most Indian businesses, almost 40% of the overall networking costs go into administering and maintaining the network.

Coming at a time when the industry was reeling under the effects of the slowdown, the demand for NMS provided a much-needed market opportunity for a number of Indian network integrators who branched out into this lucrative business space. The total network management services market last year was pegged at Rs 171 crore.

Visible trends
The NMS market in year 2002–03 was dominated by the likes of Datacraft and HCL Comnet. Other leading market players were Wipro Infotech, Satyam Infoway, GTL, Microland, Comsat Max, CMS, and Bangalore Labs. In addition, NCR and Euro Networks built their reputation by managing hosts of ATM networks of different banks.

While cost was definitely a strong motivation for Indian businesses to outsource their network management needs, organizations without qualified staff and resources to manage their networks increasingly found outsourcing an attractive option. Also, outsourcing provided a significant competitive advantage for most companies who looked at rapidly expanding their networks across the country.

There was an exponential demand for managing enterprise network services such as LAN, WAN, VPNs, VoIP, intranets and extranets for deploying various applications. Some NMS vendors like HCL Comnet and GTL even offered value-added services like disaster management as part of their service bouquets.

The promise of the sector was such that even traditional VSAT players like Comsat Max and Gujarat Narmada Fertilizer Corporation (GNFC) joined the NMS bandwagon. With years of experience in the VSAT space, Comsat Max was in a position to provide customers a complete end managed digital network for data, voice and video transmission.

The Indian corporates increasingly took to wiring up their branch offices, mostly due to the growing dependence of businesses on networks. Banking was a major sector pushing for networking its branches. While SBI increased its branches by 900, Punjab National Bank and Syndicate Bank ramped up their networked branches by 400 and 85 respectively. More significantly, their purchase orders mentioned that the networks would have to be managed end-to-end by the service providers.

The lack of will on the part of corporates to continuously upgrade their technology infrastructure was another key factor driving the NMS space last year. In direct contrast, most of the serious NMS vendors kept on investing substantially in technology and in constantly upgrading their skill sets to address emerging issues in network management. This made them an ideal choice when it came to outsourcing network management needs.

The NMS space in India is expected to accelerate faster than other markets in Asia-Pacific. Pure-play players like Microland and Bangalore Labs are looking aggressively at tapping new emerging verticals. The Indian market potential is considered quite high in the BFSI, call center, and service provider segments, as also in the courier services and FMCG companies.

Vendor infrastructure & clients
It is difficult to make a clear estimate of the market share of various NMS players since many of them are still clubbing their revenues with their integration business. However, among companies who are already providing NMS revenues under a separate head, Datacraft emerged on top with nearly Rs 56 crore worth of business followed by HCL Comnet, which did business worth Rs 32 crore.

Others like Wipro Infotech, Bangalore Labs, Ramco, Comsat Max, and Sify were in the Rs 12–14-crore bracket. In terms of infrastructure, all major players invested substantially in establishing their NOCs. For example, the NOC at HCL Comnet provides end-to-end WAN management services. One of HCL Comnet’s largest projects worth Rs 3.14 crore in 2002-03 was for Punjab National Bank. It also had Fabmart, TVS–Suzuki and Indiatimes among its customers.

Datacraft also set up its NOC in Bangalore through which it offered its STARtrac management services. A large chunk of its Rs 88 crore integration project for SBI was contributed by the NMS sector. Datacraft even launched its own iBOSS integrated network management system (iNMS) tool. Sify came up with ‘Beacon’, a product for network management. "The Hindu" newspaper group became the first buyer of Beacon, while other clients included British Council India Library, New India Assurance, ABN Amro Bank, Amul, and ISRO.

Wipro Infotech’s NMS service also offers special emphasis on security, as its NOC in Bangalore has the capacity to continuously manage and monitor 1,000 firewalls. Some of Wipro’s clients include Apnaloan.com, Essar Group, Indal, Kotak Securities, ICICI, LG Soft, i-Flex, HDFC, KPMG, Canara Bank, Haldia Petrochem-icals and Seagram Manufacturing. Microland used Wipro’s NOC to service clients like Blue Dart, IDBI Bank, and Procter & Gamble.

GTL’s NOC in its Mahape facility is used for remotely managing the networks of about 10 of its blue chip clients. These include centre operations and network security on a 24x7 basis that involves trouble ticketing for leased lines.

Bangalore Labs too invested substantially in setting up its International Management and Resource Center (IMaRC), a vendor-plural NOC facility. Some of its primary customers are Pidilite, Shoppers Stop, Hathway, and IIM Lucknow.

Comsat Max, through its 24x7 NOC in Delhi, services clients like Hero Honda, Thomas Cook and Exide, while Ramco has clients like Bombay Stock Exchange, Indian Oil, Amara Raja Batteries, Ericsson, Coca-Cola, AirFreight, Hughes Escort, ONGC and Tata Institute of Fundamental Research. Even banking service providers like NCR and EuroNetworks have joined the NMS bandwagon. While NCR manages the entire ATM network for SBI and HDFC among others, EuroNetworks manages the shared ATM network for IDBI Bank, Standard Chartered, Citibank and UTI Bank.

TEAM DQ

The Age of WiFi

Vedor Revenue (Rs crore) Price Movements of Key WiFi Equipment over Two Years

An awkward licensing regime was a big roadblock in the largescale adoption of WiFi—till about a year back. The regime required users to take individual licenses for each node connected to the wireless network and in case more nodes were to be added, more licenses had to be procured. The government has now delicensed the indoor use of WiFi in 2.4GHz (802.11b), setting the market on the proliferation path.

The earliest adopters of the technology continued to be the biggest markets for WiFi —hospitality, airports, and educational campuses. The year saw some WiFi implementations cutting across industries, from manufacturing (Asian Paints, Imperial Tobacco Company) to banking (HDFC bank, Punjab National Bank) and even government (INS Valsura). In fact, there were also a few e-governance projects that involved WiFi implementation.

However, other enterprises by and large continued to shy away from adopting WiFi — mainly due to the cost differential between wireline and wireless equipment, and a perception that there is little to gain by going in for WiFi. The situation could change in the near future as WiFi equipment prices have tumbled sharply in recent times, bringing them within striking distance of costs for similar wireline equipment.

On the client side, Intel launched its Centrino platform for notebooks, which integrates built-in WiFi support on the processor. Big notebook vendors like IBM and HP started selling notebooks with multimode (802.11 a, b and g) support. In times to come, WiFi is slated to be the de-facto standard for laptops and notebooks to get on to the network. The market also saw many new product (access points, NICs, WiFi routers) launches by vendors including D-Link, Enterasys and Cisco, with improved security and support for higher traffic and higher bandwidth standards like 802.11g.

The total market size for primary WiFi products (access points and PCMCIA cards) was around Rs 12 crore in 2002-03, according to Voice&Data estimates.