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Enterprise Equipment: Switch: Gaining Momentum

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VoicenData Bureau
New Update

The Indian switch market has changed with wide adoption of world-class IT

networks across verticals. Large MNCs are setting up their data and DR centers

in the country. The market continues to increase due to higher PC penetration

and adoptions, boom in ITeS, call centers, and the BPO market. Adoption of metro

Ethernet is also leading to growth. Switch makers have also made strong inroads

into sectors like manufacturing, while the government is emerging as a big

spenders on e-Governance projects as is the banking sector has seen huge intake

of switches.

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The market grew by 24.7% to Rs 1,980 crore during FY '06-07 up from Rs 1,587

crore in FY '05-06.

Cisco continues to be #1 with a market share of 73% (including the unmanaged

switches market, a segment wherein it does not have a presence) in fiscal

2006-07, improving its market share as compared with previous fiscal's 71.8%.

Revenue is up by 27% at Rs 1,447 crore during FY '06-07 as against Rs 1,139

crore during 2005-06. D-Link touched revenue of Rs 129 crore in FY '06-07

compared to Rs 117 crore during the previous fiscal, registering a growth of

10.3%. Nortel is another major player, which has improved performance in the

market, with a turnover of Rs 126 crore during the last fiscal, up from Rs 101

crore in FY '05-06, a growth of 24.7%.

The market share of D-Link and Nortel was 6.5% and 6.4%, respectively. Dax

grew by 26.3% at Rs 24 crore from Rs 19 crore. 3Com revenue is up by 19.7% at Rs

79 crore from Rs 66 crore in the previous fiscal. Enterasys touched a 13.3%

revenue increase at Rs 17 crore as compared with Rs 15 crore during FY '05-06.

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Others like HP Procurve, Accent Net Technologies, LinkQuest Telecom, Raychem

RPG, etc contributed Rs 158 crore to the total switch market worth Rs 1,980

crore.

Major Contributors



Investments in the IT/ITeS space and outsourcing still continue to be
the key growth drivers. In addition, FY '06-07 witnessed a lot of government and

defense led IT infrastructure initiatives, and expansions by telecom service

providers. Commercial mid-market was another large growth driver.

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ITeS contributed a huge 24% to the growth; while BFSI and BPO sectors were

among the large buyers of networking equipment. Competitive pressures in BFSI

resulted in continued investments being made towards expansion of communications

infrastructure.

Switching Trends



Technology additions have dominated market trends during the last
fiscal. The key technology additions have been blades, which now form a part of

the switching technology on security, IPS, IDS, wide area application systems,

and on application oriented networking. Metro Ethernet switches, 10G, more

security related features, quad gigabit switch, that enables the carrier

Ethernet to connect over a WAN, Giga to desk, unified switches, unified

communications, and IP surveillance are some of the latest technology additions.

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The recent major trends in switching will be migration from 10/100 to Giga

switches and also a lot of up gradations from unmanaged to managed switches. The

access layer contains devices that allow workgroups and users to use services

provided by the distribution and core layers. From an access layer point of view

access speeds would triple and we would see a transition from 1 Gb to 100 Gb.

The core layer is responsible for fast and reliable transportation of data

across a network. The speeds here would move from 1 Gb to 10 Gb and, with 40 Gb

in the offing.

With emerging services such as IPTV, there is an increasing trend of

multilayer (L3/L4) Ethernet switches being deployed in the aggregation. Layer 2

switches are popular in last mile and in CPEs, continue to be widely deployed.

Layer 3 switches are used more in value-added networks.

The Indian economy is growing multifold, and same is the case with IT

infrastructures. India is almost in the same track as the US in terms of

technology deployments. Even in the US, Giga switching and 10G at the backbone

drive the switch market.

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Pricing Pressure



Competition and looking for cost effective solutions are definitely a
global phenomenon. However, customers in India do not necessarily want to buy

cheapest products but just require good value for their money. Though few

players at times face some price pressure, owing to the unique marketing

approach, most of their transactions are healthy. Some vendors offer products

and solutions that are innovatively designed, which results in customers saving

20-40% on the total cost of ownership over three years.

Few companies invest a large portion of their revenue on R&D. Right from the

R&D stage, their product philosophy is governed by the Indian philosophy of save

and share. They do not necessarily recommend customers to always replace old

with new. They find ways and methods of extending the current product usage over

newer applications which comes back as a saving to the customer.

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Top Players



(FY '06-07)

Rank

Company

Revenue (in Rs crore)

Growth(in %age)

FY '05-06

FY '06-07

1

Cisco

1,139

1,447

27.0

2

D-Link

117

129

10.3

3

Nortel

101

126

24.8

4

3Co

66

79

19.7

5

Dax

19

24

26.3

6

Enterasys

15

17

13.3

Others*

130

158

21.5

Total

1,587

1,980

24.8

*Others include HP ProCurve, Accent Net Technologies,

LinkQuest Telecom, Raychem RPG, etc

Despite the pricing pressure, Dax, the fourth largest vendor in our ranking,

has bagged a major order from the education segment. All Techquip funded

colleges in Tamil Nadu have deployed Dax switches. In the BFSI segment, Dax

switches were deployed extensively in UBI, Allahabad Bank, Central Bank of

India, and Federal Bank. In government projects, Tamil Nadu, Punjab, and

Jharkand were the major users of Dax switches for their e-Gov initiatives and

departments.

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Bright Future



The high levels of connectivity, along with the convergence of voice
and data, and user-enabled features will contribute highly to the switch

industry growth in the next couple of years.

A lot of markets are getting organized and expanding. Almost all MNC's are

entering India in a big way, have a large investment to share the Indian growth

story.

Who is Offering What

Vendors

On Offer

Cisco

Maximize network value by providing optimal support for

business requirements while delivering superior investment protection

D-Link

High-performance managed switches provide an ideal solution

for workgroups and departments

Nortel

Provides small and medium businesses and large enterprises

high-throughput networking at low ownership cost per port

Dax

Provides a wide range of switches for SOHO and corporate

users. Available in desktop, palm, and rack mountable size

3Com

Addressing the SMB market, launched unified switch with easy

to use, cost-effective solution combining all of the components necessary

for wireless and wired data access and VoIP networking in one box

Enterasys

Announced the availability of four new diamond distributed

forwarding engines, the latest innovation for its industry-leading Enterasys

Matrix N-Series flow-based switches

HP Procurve

Designed for small and growing companies, ProCurve 1400 and

1700 Series switches deliver easy—to—use solutions backed by quality,

reliability, and support

With India showing an 8-9% GDP growth, the switching story cannot be

different. It will continue to gain momentum. The switches industry will see a

good growth this financial year too with many new deployments and upgradations.

State WAN, IPTV, and ITeS industries are the likely drivers for switching. The

desire for higher speeds with ever increasing data flow will lead to migration

to Giga switches. Also, switches with security features and wireless management

capabilities will be a new trend in the coming months.

Baburajan K



baburajank@cybermedia.co.in

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