Riding the Wave

The role of networks has evolved over the years; initially, networks provided
basic connectivity among users, bandwidth, and access to applications that
supported business processes, and the “intelligence” existed outside the
network. Today, networks are expected to offer increased and diverse
functionality as organizations face the demand for increasing scalability of
infrastructure, integration of complex technologies, security threats from
hackers and viruses, and escalating costs of systems integration.

Along with the growth of the enterprise requirements, the router market has
also shown significant growth. The market grew by 25.9% to Rs 1,810 crore during
FY 2007-08 from Rs 1,437 crore in the last fiscal. The market is dominated by
Cisco, which grew its revenue by 24.1% to Rs 1,444 crore in FY 2007-08 from Rs
1,164 crore in the previous fiscal. Juniper is the nearest competitor of Cisco
and has clocked revenues of Rs 192 crore, as compared to Rs 152 crore in the
previous fiscal, recording a growth of 26.4%.

DAX reported revenues of Rs 55 crore, registering a 3.8% growth over the
previous fiscal's Rs 53 crore and maintained its market share. BA Systems, a new
entrant last fiscal, made Rs 11.57 crore in revenues with a 0.6% market share.
D-Link registered revenues of Rs 7 crore as compared to Rs 10 crore in the last
fiscal. Others like 3Com, HP Procurve, Entrasys, and Zyxel Technologies
contributed to the growth of this segment.

Today, vendors are introducing routers that have the capability to integrate
key features such as content processing, VPNs, firewalls, and load balancing.

Growth Drivers

In the Indian market, some verticals that will act as key drivers are
distribution, organized retail industry, FMCG, expansion of BFSI, stock trading,
micro finance, and implementation of core banking software.

Networking remains an important pillar of the IT business. Voice, video, and
data are now so standard that users expect to download video, make everyday
telephone calls, and download huge applications over fixed-line networks as part
of their normal working day.

In the enterprise segment, consolidation of server and application,
necessitating the need to build better and bigger WAN infrastructure,
convergence of applications such as voice, video and data, and expansion of the
banking infrastructure are major growth drivers.

Market Dynamics

The trends could be categorized into two segments-service providers and
enterprise. In the service provider segment, customers are moving toward larger
platforms that support multi-terabit capacity, highly reliable, high
availability that allows convergence on the core. In the enterprise segment,
MPLS/MPLS traffic engineering and MPLS VPN are mandatory requirements in
RFP/tenders.

Also, there is a trend toward routers with tight integration and security
features such as firewall/encryption. Besides IP VPN over last mile wireless
links, perimeters security routers are a major market in India.

Large enterprises are seeking a truly futuristic approach to their
routers-moving toward deploying intelligent, optimized hardware and software
platforms to guarantee embedded security, VPN and significant performance; and
at the same time, providing services covering VoIP, videoconferencing, WAN
optimization, and network analysis.

Globally and in India, the market is moving toward integrated devices with
built-in multiple capabilities. Security is a big focus area and it is evident
from new products being introduced by vendors.

Additionally, given the boom in the Indian telecom space, carrier-class
routers with the capability to handle and route data in terabits will be piloted
and deployed.

FY 2007-08 has turned out to be very good for most companies. For D-Link
India, the main orders came from Abhinav Co-operative Bank, Angel Broking, and
Goa Police. BA Systems also got some major orders from the company Motilal Oswal,
Fortune, Magnum, Anugraha, BMG etc.

Changing Technology

There has been a significant technological change in the market in recent
years. Cisco's focus is on providing businesses with the solutions that help
them transform their businesses both globally and in India. The company has
strengthened its product portfolio in the last one year, with the introduction
of many new enhanced products.

For D-Link, the latest technology addition is the new router series, called
Business Gateway, designed to meet the requirements of the SMB segment and
branch connectivity requirements of large enterprises. The year has been more of
consolidation of the existing technologies and adoption by enterprise networks
for BA Systems.

For Juniper Networks, there have been many innovations in the routing
segment, like routers capable of supporting 100G interface, routers that require
less power bit, generate less heat per bit, and require less cooling per bit,
etc.

A major player in this segment, 3Com believes that the growth in the
enterprise router segment has been moderate in the last couple of years due to
lack of true application integration and secure, scalable platforms.

The biggest revenue stream for this segment in the domestic market continues
to be service providers, consumers, retail, education, and government. BFSI,
data centers, and e-government are the other segments that contribute to their
revenue.

The Outlook

India is one of the fastest growing markets in the world. According to a
Gartner report, the Indian market for low/mid and high/ terabit routers is
expected to be around Rs 1260 crore for calendar year 2008, approximately 20%
growth over last year.

BA Systems expects a compound average growth rate of 14%, while specifically
on the managed routers, which are enterprise core/aggregation and enterprise
managed edge, it expects about 30% growth. D-Link, on the other hand, estimates
that the routers industry will continue to show high growth and will grow at
around 20%. Large WiMax deployment rollout will lead to high growth. With the
help of great vendor strategy and initiative, the routers industry is set to
touch new records.

Arpita Prem

arpitap@cybermedia.co.in