Equipment Manufacturing: A David Dares to Do It Again

Manufacturing of networking hardware products in India is a rare incident,
and to talk of a commercially viable proposition out of this business is as
common as sighting the elusive Halley’s Comet. No wonder then, global giants
like Cisco, Nortel and Enterasys dominate the networking space in the country.
However, in recent years, D-Link India, with three manufacturing plants at Goa,
has emerged as a force to reckon with in the Indian networking equipment space.
Till now, its success was confined more to the low-end products like dial-up
modems, NICs and hubs. But with most of these products being gradually phased
out, D-Link is now gearing up to take on the biggies like Cisco and Nortel with
their high-end switches and routers.

Anand Mehta national marketing manager, D-Link India

D-Link had already taken the first step towards this movement up the value
chain by calling off its arrangement with Cisco for selling its high-end Layer 3
switches and enterprise-class routers. This was an association that started more
than five years ago during Cisco’s entry in India. Since D-Link was till now
concentrating only on the workgroup switches segment, there was no inherent
conflict of business interest in this arrangement. Currently, at Rs 57 crore,
D-Link has less than 10 percent of the Rs 841 crore switches market and at Rs 9
crore only 1 percent of the Rs 423 crore enterprise router market. However,
Anand Mehta, national marketing manager, D-Link India, believes that D-Link will
be able to consolidate its position in the Indian networking industry by the end
of 2004. And then it will also emerge as a serious contender to the supremacy of
the Ciscos and Nortels.

But how does D-Link expect to garner adequate market share to challenge the
biggies? For one, in the switches category, Cisco and Enterasys, dominate the
market with 39.4 and 34 percent share respectively. Though currently D-Link
slightly trails Nortel in market share, it hopes to soon pole vault into the
third position considering that Nortel’s share has been dropping steadily and
it is now restricted to the call center vertical only.

In enterprise routers, where Cisco enjoys an embarrassingly high 86 percent
market share, D-Link expects to upstage Nortel as the No. 2 player. With this
strategy in mind, D-Link has also spread its client base, unlike Nortel, across
different verticals. That is why its blue-chip customers include a wide spectrum
of names like the Hyderabad National Games, Mumbai Port Trust, AP Commercial Tax
Department, Tata Internet Services and even MS Ramaiah Medical College and
Hospital in Karnataka.

But D-Link is not hedging all its bets on switches and routers only.
Structured cabling, WLAN and digital lifestyle products are also being planned
as catalysts for its growth. At Rs 31 crore it has over 10 percent of the
structured cable market share, and while it may not overtake the leader Avaya in
the short term, it believes it has the potential to overtake the No. 2 player
Tyco Electronics. Just like it used the Cisco association to gain mindshare in
the switches and routers category, it is attempting to leverage its association
with Corning to increase its foothold in structured cabling. D-Link is using
Corning optical fiber as part of its OpenLink Connect structured cabling
products. When one considers that all this manufacturing work is done only in
India, it assumes greater significance. Even more significant is that D-Link has
already developed its own version of Cat 6 cables. The market for structured
cabling is huge and since Cat 6 is just catching up, even globally D-Link India
could have a real winner on its hands. The company is already exporting this
line of products to West Asia.

Another area where D-Link is expecting huge growth is the wireless segment.
With licensing issues sorted out and prices of wireless equipment falling,
D-Link is expecting large-scale adoption of wireless by India Inc. As part of
its strategy, it is looking at tapping educational institutions like the IITs,
which have huge campuses, for deploying wireless networks. Having been involved
in building Ethernet-based campus networks for educational institutions, the
company stands a good chance of converting or enhancing the Ethernet-based
networks to wireless networks.

Even the software division of D-Link can be a big winner for the company in
its run up to glory. D-Link develops software in the areas of network
management, embedded systems and protocol stacks and this is going to get a
renewed thrust in the coming years. Having built the expertise, D-Link India is
now looking at exploring the option of marketing its software strengths. This
means that it will also look at servicing software requirements of other
vendors.

Rajneesh De