Enterprise Equipment: Network Integration: A Well-knit Market

The country's network integration market has churned one more growth story
during the fiscal 2006-07, clocking a whopping 29% growth to touch Rs 6,733
crore as compared with Rs 5,219 crore in fiscal 2005-06.

The aggressive steps taken by the government to bridge the digital divide is
a huge stride forward. The broadband policy of India, the various eGovernance
initiatives, CSC initiatives, and computerization of G2G and G2C services are
the main growth drivers. The falling bandwidth prices, increasing PC penetration
and the emergence of knowledge workers have contributed significantly to this
positive phase.

Among the network integration majors, Wipro Infotech won the race during
fiscal 2006-07, with a revenue of Rs 1,028 crore, growing by 54% over the
previous fiscal's Rs 670 crore.

HCL Comnet finished second, registering 65% growth to touch an income of Rs
812 crore as compared with Rs 491 crore during 2005-06. Datacraft, which clocked
30% growth, slipped to third position with a revenue of Rs 675 crore against Rs
519 crore in the last fiscal. Tulip also gained a lot, registering a 23.2%
increase. HCL Infosystems is another player with 51.8% growth. GTL's revenue
growth was 19.6%. Other companies contributed an additional Rs 2,896 crore to
the NI market. It is estimated that the banking and finance segment has been the
largest contributor to the NI business, with a total spend of more than Rs 900
crore. The IT-ITeS-BPO sector was the second largest contributor, with a total
spend of Rs 871 crore. Government buying accounted for about 21% of the total
market share and telecom for about 11%.

Indian SMEs have also changed the Indian IT scenario beyond recognition. SMEs
look for best-class services and solutions in affordable prices and packages.
They invest heavily in applications, consultancies, communication platforms,
storage, security and other industry-related solutions. Marketers are,
therefore, burning the midnight oil to tweak their solutions to cater to the SME
segment.

TECHNOLOGY FOCUS

Vendors have tried to offer value additions in the form of
technology. The focus was on key elements such as virtualization, consolidation,
WAN acceleration, network re-engineering, bandwidth optimization, surveillance
network and integrated NOC.

MARKET TRENDS

An enterprise trying to build a network or upgrade an existing one
must look at the entire value-chain of network integration services, comprising
consulting, products, project management, integration and implementation, and
network management. While large projects continued to dominate, another
interesting trend was the advent of total outsourcing and remote management
services.

The technology for enterprise and service industry in India is moving towards
total convergence, security, compliance, multi protocol label switching,
metro—E, and Internet data center. At the service provider level, there is a
fusion of network, data storage/processing and communication related
infrastructure. More and more customized solutions need to be churned out at an
amazing speed to cater to varied customer requirements.

The market has witnessed the emergence of efficient packaging of services
under one umbrella, which helps to grow the market size for a particular
platform. The greater need for newer bandwidth intensive applications has also
lent a fillip to growth. Clients are demanding integration of their legacy PBX
networks with their data network.

The major growth drivers in the domestic market are adoption of IT in the
retail segment, expansion in the communications field, government investment on
IT projects in non-IT fields, network re-engineering, and value-added services
from the service industry. Indian companies are now willing to outsource their
entire IT environment to a strategic technology partner. Companies want to focus
on their core competencies and sign managed service contracts with stringent QoS
clauses with service providers.

Outsourcing has added to the revenues of network integration companies
substantially. Networks have become too complex and critical to be managed by
in-house teams alone. Managed service providers (MSPs) have come into the
picture. They are a more evolved form of the traditional network integrator.
Logically, it is the next step in their learning, business ability and evolution
process.

Enterprises now run a plethora of applications on their network, which has
resulted in fatter bandwidth pipes. Thus, the volumes of bandwidth consumption
have increased considerably. With innovative business lines coming up, NI majors
will be able to bring world-class communication solutions to the customer, on
IP, and will succeed in maintaining the base profits.

HAPPENINGS ABROAD

Global markets are moving towards security, total convergence, and
compliance. The US, being a developed economy, is moving towards a pure triple
play next generation network (NGN) scenario. Any sort of digital interaction is
being integrated to a single platform, popularly known as the unified
communication scenario.

Service providers play a key role in the enterprise marketplace. Most of the
key networking vendors have their own services businesses. Various levels of
network integration and management services are provided through this
arrangement.
 

MAJOR DEALS

Tulip, one of the leading players in the data space, has bagged
orders from Haryana SWAN, Maharashtra Electricity Board, Goa State Data Center,
NIC, Safe Express, HDFC Bank, Airtel, and India Bulls, among others.

During the last fiscal, Wipro won comprehensive networking projects from
clients like the Bharti Group, Dena Bank, HDFC Bank, Federal Bank, and Hyundai.
Wipro Infotech also acquired 3D Networks and Planet PSG, which has a strong
presence in business communications, convergence and voice integration. This
acquisition enhances its technology capabilities and gives it a structural
advantage in the rapidly evolving unified communications and messaging segment.

Besides opening a new facility in Gurgaon dedicated to network integration,
Targus Technologies has opened three more fully functional sales, services and
technical design offices in Pune, Gurgaon and Mumbai. It has bagged clients such
as Nokia, Bharti Airtel, EXL Services, C-DOT, Dabur, HFCL and Genpact.

Datacraft India has networked more than 10,000 branches of the State Bank
Group. This networking project is one of the largest of its kind in terms of
technological complexity, geographical reach and benefits. All associate banks
and the bank's Kerala and Bangalore circles have been fully networked. This
enables the bank to render quality services to more than 100 million customers.
The SBI Connect project, which commenced in June 2002, has been executed in
three phases. The project provides seamless connectivity for SBI and its
associate banks using leased lines, ISDN and PSTN links, which are managed
solely by Datacraft. Adequate security measures have been implemented to ensure
confidentiality, integrity and availability of data.

Datacraft has also secured a US$2.6 mn contract for 3 years from a Fortune
500 global IT services company to provide uptime maintenance services for its
clients' networks in 10 Asian markets. Datacraft has also been selected as the
company's sole partner to supply Cisco networking equipment required for new
infrastructures or to refresh older technology currently used by the company's
outsourced clients.

FORECAST

The Government of India will be the largest enabler of IT coverage in
the country. Companies with existing infrastructures will look forward to
reviewing and streamlining them in accordance with requirements. Converged IP
communications will continue to gain force as a unified platform on a triple
play format. WiMax implementations and their benefits will gain significance
later in the year, once the authorities have resolved the spectrum—related
licensing issues. Pricing pressures may continue, as the profitability per port
has certainly reduced during 2006-07. However, the outlook is very positive for
further growth and expansion in the market.

Baburajan K

baburajank@cybermedia.co.in