Networking moves to the next level

On the threshold of a new year, the networking segment seems to have left many of its woes behind—though problem areas still exist, quite a few regulatory issues have been sorted out in 2003, and the tech downturn is now history. Technology is racing ahead as fast as ever and market predictions in most segments appear quite rosy too, says Gaurav Patra

For quite some time after the dot-com bust, no one was dipping into their pockets to spend on IT. After that time passed, the era of caution came in, which resulted in low volumes for vendors. But enterprises still preferred to make the most of their existing IT infrastructure and the low-volume, high-utilisation syndrome continued till vendors decided to lower equipment prices and offer varied schemes for equipment purchases and special schemes for SME (small and medium enterprise) customers.

Thanks to these initiatives, and revival in the global IT market, the networking market has started picking up now. IDC has estimated the total size of the Indian LAN equipment market at $216 million for 2002 and $262 million for 2003, implying a growth of 23 percent. This may not look terribly impressive, but compared to the situation in other Asian economies we certainly are better off. The only growing economies in terms of LAN market sales are Australia, India, Singapore and Malaysia, with the general trend in the Asia-Pacific region showing a decline in business over previous years.

One reason for India’s slow but promising growth is that a lot of unstructured companies and SMEs are now putting LANs and WANs in place because they have begun to grow in size and reach. Hence, despite a negative trend elsewhere, India has shown a positive trend in terms of volumes.

Network Devices

Switches
The need to simplify business processes and enhance value at every stage of the business is driving the switching segment. Its growth can be evenly attributed to all verticals, though BFSI, BPO and telecom continue to remain major markets. Government and educational institutions are buying switches for their connectivity solutions, while manufacturing and BPO are promising markets for switching gear.

Cat6 will be the prevalent standard in 2005, but till then Cat5e will rule the market, says Anand Mehta

Within the segment, 10G Ethernet switching is becoming the standard as a backbone for organisations with over 500 nodes. “Although 10G Ethernet is becoming a standard, until one sees 1G on the desktop 10G switching in India will be a far-flung reality,” insists Anand Mehta, marketing manager, D-Link India.

The demand for greater bandwidth, security and productivity, together with the increasing complexity of applications, has forced switch vendors to think of advanced features such as scalability, management and multimedia support. “Beyond the capability of handling multiple types of traffic, it is important that networks offer a single point of management and address scalability issues as well,” says Dhananjay Ganjoo, national sales manager, Nortel Networks.

A continuous move of intelligence from generic computing devices into network infrastructure will be the trend for router technology, predicts S V Ramana

Optical Ethernet is another technology that is fast gaining acceptance in the market. In addition to being faster, it is simpler and more reliable.

Meanwhile, fundamental shifts are taking place in the national LAN switching market. “The Indian market is maturing and moving towards adopting switching at the cost of hubs; the market is also shifting from Layer 2 to Layer 3 switching,” says S V Ramana, vice-president, systems engineering, Cisco. Another major trend is the shift in the market to centrally managed network components by using managed switches. Yet another significant shift is that more Indian enterprises are looking to move from data-only networks to networks optimised for voice, video and data.

Network Interface Cards
According to earlier estimates, with servers and desktops constituting 25 percent of total IT expenditure, the NIC market was expected to show positive signs. But in spite of both the desktop and server segments growing, NICs are being looked upon with a lot of scepticism due to the growing popularity of built-in NICs.

Hubs
PSUs/government organisations and educational institutes account for a sizeable chunk of the market since their networks are still based on older specifications. Even today, SMEs and SOHOs (small offices/home office) find hubs to be less complicated networking equipment. But when one is moving towards a multi-service environment like content delivery and audio-video applications, the hub has little role to play. Now that the prices of unmanaged switches are coming down, this segment is heading for a dim future.

Routers
With a drop in Internet access prices and the availability of broadband services, the need for different types of routers has increased. “Most users found that adding more boxes to their networks only increased management and maintenance costs. With the growing use of data by enterprises, users want routers to handle large amounts of data traffic; they also need flexibility to support content processing, VPNs, firewalls, load balancing, VLANs and a lot of other functionalities,” says Ganjoo. Leading vendors have sensed this need and have started offering routers that facilitate a convergence of voice and data.

“A continuous move of intelligence from generic computing devices into network infrastructure will be the trend for router technology,” predicts Ramana. New switching gear, both at the backbone and various switching layers, have got routing capabilities, thus affecting the router market. Multifunctional routers are a massive hit in small set-ups and intra-city LAN settings where there is little management and packet workload. This interchange of functionality has paved the way for a new breed of routers.

RAS

Leading ISPs continue to drive the RAS market in India. The market took a hit last year with several ISPs exiting the business. However, that will change with incumbents like BSNL and MTNL now bullish about Internet services. Additionally, there are other private operators like Reliance, VSNL and Sify who are investing in the broadband opportunity based on Ethernet and DSL technologies. IDC estimates that the RAS market in India will be worth $75.69 million by 2006; it stood at $43.83 million in 2001. The research agency opines that further growth in the segment will be slow, and that it will be some time before access prices start rising again.

“Many ISPs have lately realised that it is better to focus on investing in products or platforms which will enable them to quickly deploy a host of value-added services over the dial-up. These operators will be going in for RAS,” says Ranajoy Punja, vice-president, marketing, India & SAARC, Cisco.

Wireless

Wireless is one segment that looks really promising. Gartner predicts that there will be 70 million users of public hotspots by 2007. Even in India, wireless networks are on the rise, moving beyond enterprise LANs into public hotspots and (very soon) into homes. “Nearly 12 percent of CTOs in India have already initiated wireless in their enterprises, and another 30 percent are going to do so in the coming year,” says Prabhod Vyas, director, sales, D-Link.

Although wireless technology has gained substantial mind share, it has yet to gain proportionate market share. This is because organisations are still waiting for wireless technology to mature and stabilise. However, steps like the delicensing of the WLAN spectrum will help the market to grow. “Reforms may not always mean an open delicensed environment. Delicensing of appropriate frequency bands is necessary since much of it is to deregulate other bands for licensed usage. The healthy proliferation of wireless will depend on business plans that may follow an unregulated or regulated usage of spectrum—or both,” says Joydeep Bose, director, strategy, corporate technology group, Intel India. Last mile connectivity is a key driver for wireless. Wireless will also be a major enabler for broadband services. If India has to add 150 million telephone connections by 2010 it will require brand new transmission networks, but these will be difficult to build in the next six years. Wireless is a definite solution here.

An increase in productivity-linked mobile usage in the enterprise segment is already driving demand for WiFi. There has been some growth in the notebook and PDA user base in the BFSI, retail and FMCG segments. This, along with the requirement for relevant mobile applications, is spurring wireless growth. The growth of the customer base in GSM and CDMA telephony will also create a pull for rich data services. Location-based WiFi networks will complement today’s 2.5G networks, and a mixed handset client will become a reality.

The government will also be a key user of and a role model for wireless technology. E-governance projects could be rolled out with ease using wireless to reach difficult-to-access areas.

Cabling

According to K K Shetty, more than 70 percent of cabling shipments in high-end markets are made up of Cat6 UTP

It’s going to be a big fight between structured cabling standards such as the existing Cat5/Cat5e and the emerging Cat6/7 on one side, and fibre on the other. With the prices of fibre coming down and functionality going up, this war seems to be heating up by the day. “Cat6 will be the prevalent standard in 2005, but till then Cat5e will rule the market,” says Mehta.

However D S Nagendra, country sales manager for Krone, feels that in terms of cabling technology there is a fair amount of growth happening in Cat6. “Cat6 is fast becoming a commodity product. More than 70 percent of shipments in high-end markets are on Cat6 UTP,” adds K K Shetty, country manager, AMP Netconnect, Tyco Electronics.

Growth in the cabling market is primarily coming from B & C class cities, while the verticals that are driving growth are BPO (including call centres), software and BFSI. Also, the high-end market is moving from Cat6 to intelligent cabling.

Managed network services

Managed network services (MNS) offers a total networking solution that reduces operational costs and frees enterprises to focus on their core business. According to Gartner, 32 percent of a company’s IT budget is spent on internal resources to service IT. Research has proved that a company with about 5,000 employees can benefit in the range of $9 million to $18 million every year by outsourcing its IT infrastructure management. This can be achieved through MNS.

Although globally organisations have recognised the great opportunity in outsourcing, in India, apart from large corporate houses, not many companies are going in for MNS. One major factor that prevents many enterprises from outsourcing their network management—or more importantly, their networking needs—are information security concerns. However, the recent move to adopt IP VPN as the main backbone will provide an impetus to India Inc to outsource its networking needs.

Network management software

Network management is now recognised as a priority by many companies in India. The BFSI and government sectors are key drivers of NMS. Others include service providers, manufacturing, retail and large enterprises. “Network management services will grow significantly and provide tremendous opportunities to system integrators,” says Abhik Biswas, manager, product marketing, network management, Cisco India. According to Frost & Sullivan, revenues in the Indian advanced and technical support services market are estimated at $48 million in 2001. The market is expected to post a CAGR of 13.3 percent year-on-year to reach $115.4 million in 2008. Experts opine that the higher cost of NMS is restricting the market to larger enterprises. But vendors do not feel so. “I do not believe that the price of network management software is on the higher side.

It is essentially the perception/misinterpretation of costs that create such an idea,” says Bithin Talukdar of HP. However, affordability for small and medium businesses is definitely an issue. Adds Rajendra Dhavale, consulting director, Computer Associates India, “We have taken initiatives to address the SME segment by launching cost-effective solutions in the area of complete network management.” It is also observed that there is a thrust from vendors towards improving resource utilisation in data centres and server farms. This is because optimum resource utilisation at these places is the key to operational excellence in today’s cost-driven economy.

Adaptive Enterprise is another evolving concept. Adaptive Management is the integration of people, processes and technology to run IT as a business and automate the dynamic link between business and IT. NMS will play a major role in this space. Most vendors are also preparing themselves with solutions to discover and manage Wireless Access Points—both voice and data.

NMS vendors are definitely tuning themselves for wireless network management. In terms of technology, the market will see the convergence of voice and data and increased dependence on IT networks, thereby driving up the cost of downtime and increasing the need for NMS. New technologies like wireless LAN, OSPF, HSRP and advanced routing will create new opportunities for NMS.

Network integration

With developments in technology, the concept of network integration has also changed. Today, apart from LAN/WAN, network integrators are also focusing on areas like network security implementation/audits and checks, bandwidth provisioning, deployment of new technologies such as WLAN and IP telephony, defined quality of service for certain applications, etc.

“More fault-tolerant network equipment is seeing its way into the core of enterprise networks,” says Ramesh Narasimhan, country manager, integrated technology services, IBM Global Services, India. Besides, there’s wireless technology. These trends are driving network infrastructure growth and also creating opportunities for the integrator. Spurring this trend on are banks, service providers, government networks, defence and law enforcement agencies. “The network is no longer limited to leased lines and VSATs but is now shifting towards the wireless-based WAN,” says Col H S Bedi, managing director, Tulip IT Services. Apart from this, metropolitan area networks have also begun to grow. Clearly, network integrators have some definite opportunities in these upcoming markets.

A growing inclination towards e-business is also driving the market. As customers prepare to extend their business to the Internet, it is necessary for them to have state-of-the-art infrastructure that supports new demands and business applications.

Voice-over-IP

VoIP’s growth is being driven by multiple factors on three fronts: applications necessitating voice convergence, the spread of broadband, and cost benefits. “VoIP witnessed significant growth both in the carrier and enterprise segments. While the major driver for VoIP deployments on the carrier front was network utilisation since carriers wanted to optimise usage of their network capacities, on the enterprise VoIP front the drivers are manifold,” says Ganjoo of Nortel.

Corporates have started running their internal networks on IP. The first wave saw different houses deploying station gateways across various branches to lower communication costs. Next IP phones came in and now basic IP-PBX solutions are being installed. But the issue of VoIP being restricted to closed user groups is still a problem that deters widespread acceptance.

In spite of that, VoIP is expected to grow substantially and BPO units, service companies and enterprises will drive growth.

Mobile devices

Mobile devices have become necessary for improving the productivity of mobile workers. Other reasons given for the purchase of handheld devices include improvements in wireless networks and the need to provide mobile access to enterprise applications. The decrease in the price of these devices has also contributed to the mobile revolution.

Yet, concerns remain. Once again, security tops the list on both the data security side and the device security side. Other reservations include the proliferation of different devices and technologies, the strain of managing the devices, and the need to modify applications to support wireless access. In terms of device operating systems, Windows CE/Pocket PC has surpassed Palm, while Linux-based devices still remain a distant dream. Interest in wireless connectivity through handheld devices continues to grow.

Bharti has recently launched its EDGE network in the Delhi mobile circle. Hutch (Orange), BPL Mobile, Bharti and other leading mobile service providers are already providing GPRS data networks.

Conclusion

2004 will be an interesting year when it comes to growth—in both mind share and sales. Standalone networking devices and equipment will pave the way for unified products. Unified networking gear in turn will show the way to unified networks that give us data, video and voice on a single platform. The IT vendors’ new-found love for the SME segment will lead growth, but also compel vendors to scale down the prices of their wares. The use of wireless technology seems to be on the rise and will witness a steady growth in India. It’s wait and watch for managed service providers and network integrators till they gain the confidence of users and are recognised as partners, while cabling might see some breakthrough innovations. In a line, the future of the network certainly appears bright in 2004.

gaurav@expresscomputeronline.com