Keeping the Edge

The Indian market is moving toward adopting a high performance network as
businesses demand more from IT. Today, performance of the network matters more
than ever before and the criterion for buying and operating a network has
changed dramatically. High performance businesses are driving richer and
ubiquitous applications, which, in turn, are driving the need for faster,
reliable, and more secure networks.

In this scenario, the Indian switch market has changed with wide adoption of
world-class IT networks across all verticals. Switches have continued to
maintain the edge they had in speed while gaining in features. The market is
booming with high PC penetration, helping to buyout the IT, ITeS, and BPO
segments. Convergence of voice, video and applications is driving huge
investments in high performance networks. Metro Ethernet deployment, too, is
fueling this growth.

The market grew by 16-17% to Rs 2,316 crore during FY 2007-08 up from Rs
1,980 crore in FY 2006-07. The market is dominated by Cisco, which grew its
revenue by 20% to Rs 1,736.4 crore in FY 2007-08 from Rs 1,447 crore in the last
fiscal. Cisco continues to be #1 with a market share of 74.9%, improving its
market share as compared to the previous fiscal's 73%.

D-Link shows very marginal growth of 0.8% and registers revenues of Rs 130
crore in FY 2007-08 compared to Rs 129 crore in the last fiscal.

Nortel also improved marginally; from Rs 126 crore in FY 2006-07 to Rs 128
crore in FY 2007-2008.

3Com, on the other hand, has shown substantial improvement in revenues-from
Rs 79 crore in FY 2006-07 to Rs 94 crore in FY 2007-2008, registering a 20%
growth rate.

Dax is another major player which grew by 10% at Rs 26.4 crore in FY 2007-08
from Rs 24 crore in FY 2006-07.

Major Contributors

Continued growth and transformation across all key sectors of the Indian
economy, like manufacturing, infrastructure, banking, retail, government and
defense, IT/ITeS, telecom, and BPOs are the major growth drivers of the switches
market. On the technology front, increased adoption of collaborative technology,
unified communications, data centers, and security solutions in India are the
other growth drivers.

The medium business segment is driving growth in India as it has realized
that IT and networking operations help to retain strong market competitiveness.
Hence, besides basic computerization, the SMB segment is adopting more
sophisticated applications like ERP, thereby leading to the need for a reliable
network infrastructure.

All forms of communication and IT are moving onto the network, which is
becoming a revolutionary new platform. The evolving nature and structure of
networks are generating new rules of engagement and interaction. Furthermore,
collaborative and Web 2.0 technologies on the network will spark dramatic
innovation and productivity increases.

Consolidation of branch offices, new data centers, and increase in demand of
bandwidth applications are some other growth drivers.

Market Dynamics

With increase in the total number of endpoints connected to the LAN,
increasing diversity of traffic flows on the LAN through network convergence,
and more awareness regarding security caused due to an underlying technology
shift in the Ethernet switch market, has resulted in LANs becoming more
intelligent and with increased bandwidth. Gigabit Ethernet and Layer 3 switches,
too, are expected to fuel the switching demand further in the coming years.

Switches are becoming faster with Gigabit switches being the buzzword. These
switches, with their ability to handle high bandwidth, are selling like hot
cakes and the adoption of 10 Gbps is also picking up.

Some of the other trends initiating growth in the switches market are data
centers and server consolidation. Consolidation, virtualization and automation
are key innovations that enable efficient utilization of data center space,
power, cooling, IT resources, and also help in better alignment of IT resources
with business objectives.

As networks grow in complexity and each industry vertical looks for
vertical-specific solutions, enterprises are looking at solutions that will
allow them to integrate security in every aspect on their network, to create an
end-to-end security system.

The switches market is looking at power over Ethernet as VoIP handsets and
other networked devices come to the market. PoE is also becoming increasingly
popular with companies looking to reduce their carbon emissions.

IP communications, wireless and collaborative applications, video, network,
intelligence, and optimization for Web 2.0 are some of the other important
market trends. Besides, IPv6 enabled switches, access control by integrating the
switch with dedicated anti-virus, IDS, IPS devices, bandwidth bundling/load
balancing with multiple Internet links are some of the recent trends in
technology.

Latest Arrivals

Technology additions have dominated market trends during the last fiscal.
Most companies have enhanced their product portfolio by adding the latest
technology. One of the most significant additions in Cisco's product portfolio
is the launch of the Cisco Nexus Series.

The Cisco Nexus 7000 Series is the flagship member of the Cisco Nexus Family,
the first in a new data center class of switching products. The Nexus 7000 is a
highly scalable modular platform that delivers up to 15 terabits per second of
switching capacity in a single chassis, supporting up to 512
10-gigabits-per-second (Gbps) Ethernet and future delivery of 40- and 100-Gbps
Ethernet. It is designed specifically for the data center with improved airflow,
integrated cable management, and resilient platform architecture.

In FY 2007-08, D-Link focused on green Ethernet, switches with in-built
protection against DoS attacks, and unified wired and wireless LAN switches.
Juniper's strategy for the current year is to provide enterprise customers with
a no-compromise, system-based approach to high performance networking that
accelerates the delivery of applications and services across the extended
enterprise.

High-end chassis, 10G enabled L2 switches, switching with time-based access
list, IPv6 enabled switching, multiple port combination switches, data
acquisition and device management, high performance delivery are some of the
latest technology additions for Dax Networks.

In 3Com's portfolio, the latest technology addition in FY 2007-08 is the 3Com
Baseline Switch 2900 Plus with PoE, VoIP support, and Gigabit.

Main Orders

The year 2007-08 seems to be very beneficial for the switches industry. Most
companies were awarded with huge orders. Dax Networks has bagged a number of big
orders from big companies like Eastern Railways, Gujarat Electricity Board,
University of Mumbai, Punjab School Education, Punjab Police, Kerala University,
Central Bank of India, Vijaya Bank, Bannari Amman Institute of Technology, and
SREI Infrastructure Finance.

On the other hand, some major customers who have shown confidence in D-Link's
solutions are Dantiwada University, Sterling Biotech, Goa PWD, East Coast
Railway, Chitkara University, and Central Command.

Key Achievements

With the help of significant achievements, the players have strengthened
their footprints in the switching arena in FY 2007-08. Dax Networks has bagged a
major chassis switches order in the BSNL and STM1 Project. They have introduced
new technology switches with time-based access control and high-density 10G Port
in a single chassis.

Similarly, for D-Link the main achievement in FY 2007-08 has been partner
training. They have trained over 600 partners across the country.

For Cisco one of the most significant achievements this year has been the
launch of the Nexus 7000 series platform. It delivers new levels of operational
continuity, transport flexibility, and infrastructure scalability, built to meet
the demands of the next-generation data center. Juniper's EX Series switches
were launched in January 2008 worldwide, including India.

Problem Areas

In today's increasingly complex business environment, the network is facing
new challenges and must offer more services than ever before. Applications, and
the network infrastructure of switches and routers that transport them, are
crucial tools for enhancing user productivity and increasing the organization's
ability to grow and remain competitive. Large enterprises, small businesses,
educational institutions, and government agencies alike must optimize their
network switching.

Notwithstanding the tremendous growth of the switching industry, a lot of
concerns still exist. The industry's major concern has been inter-operating with
certain existing LAN infrastructure where customers have been made to deploy
proprietary technologies. This is a major hurdle in penetrating some sectors.
However, once end customers are made aware of the facts, they are willing to
move toward standards-based implementation.

The major concern today is that customers have become more demanding, and
good support-both pre-sales and post-sales-is important for them. Today,
organizations are pumping greater investments for providing greater access to
advanced applications across extended geographies.

International Trends

The international networking industry is reaching an inflation point once
again as it did decades back with the advent of the Ethernet. There is a strong
trend toward a high performance network. Switching is moving beyond 10/100 and
layer 2 to more speed to the desktop and operation simplicity for IT managers.

On the other hand, green technology is pervading the networking market as
well, and few companies have announced and launched green Ethernet switches with
high power consumption capabilities.

International consumers are increasingly adopting power over Ethernet
switches instead of using A/C mains to power peripheral devices like access
points, IP phones, and IP cameras.

Industrial switches, hardened switches for extreme climatic conditions, and
fiber-to-the-home switches are major international trends. Besides, declining
prices of Gigabit and 10 Gigabit ports, greater functionality delivered via the
LAN switching infrastructure, and evolution of the SP carrier/metro market are
major market trends.

Outlook

Today's globally competitive business environment has made companies focus
on expanding their business and improving customer satisfaction. Fortunately,
the Internet and networked applications have leveled the playing field.
Companies use their networks to extend their market reach and communicate with
their customers and partners quickly and cost-effectively. But swift and agile
e-business is a double-edged sword-access can also open up businesses to costly
security breaches.

Smart and intelligent switches help enable companies to realize the full
benefits of adding intelligent services into their networks. Deployments of
capabilities that make the network infrastructure highly available to
accommodate time-critical needs, scalable to accommodate growth, secure enough
to protect confidential information, and capable of differentiating and
controlling traffic flows is critical to further optimizing network operations.

From a technology perspective, the Gigabit Ethernet and the 10G Ethernet will
show high growth and from a market perspective, the traditional high-growth
segments will continue to be IT/ITeS and BFSI. In the coming years, the switch
will no more be just a switch. Switching buys will move around 10/100/1000 to
desktops, Layer 3 standardization, embedded power over Ethernet in all switches
(PoE) will be the standard buying criteria.

Arpita Prem

arpitap@cybermedia.co.in