CSA 2011: Detailed Analyses by IDC India

Detailed analyses by IDC India of all segments in Customer Satisfaction Audit 2011.

Enterprise Software and IT Services

Market Direction: Enterprise Applications (comprising Enterprise Resource Management, CRM, SCM, and other applications) are poised for a healthy growth in 2011 and beyond, given the fact that Indian enterprises have started spending on revamping their IT infrastructure to expand and compete on a global level. This is true not only for large organizations, but also for mid-sized enterprises. BFSI and Telecom have the major spenders on applications.

Telecom is a major spender on ERM and CRM applications. Now that the ARPU (average revenue per user) has reached a limit, the differentiating factor for telcos would be better customer service. For this, they are spending on ERM to streamline their back-end processes, and also on customer relationship management and contact centers to retain their existing customers as well as to target the potential customers.

The manufacturing vertical, which has been the mainstay for ERM deployment, has begun investing in SCM and CRM applications. Government has also deployed applications for better services to citizens through projects like Citizen Service Centers, Complaint Forums, etc. Other emerging verticals are retail and wholesale, travel and transportation, and healthcare.

Large Customers: For the large customers, a proper business case and RoI for the implementation is primary, whereas deployment cost is a secondary matter. They pay due attention to the type of technology deployed, proper implementation and integration, a skilled implementation partner, and necessary training for their employees.

SMB Customers: Value for money is the mantra for this segment. They want to achieve more with less. Hence price is a very important consideration for them.

Security Solutions

The security software market in H1 2010 was $58.5 mn and is growing at a CAGR of 12.3% since 2007. The security software market is estimated to reach $168 mn by 2012. There are a multitude of threats which are driving the security market in India. These threat factors are both internal and external to an organization, technological as well as non-technology related issues.

Technological advancements also entail security issues to be addressed in these new technology environments. New technologies like virtualization and cloud are exposing new security challenges. Mobility of employees in enterprises brings to the front seamless and continuous operations coupled with data protection at all times. Vendors have started to take notice of this critical aspect and are addressing end point security for these increased end points.

The web continues to be the prime source of threats. Malware, phishing attacks to gather critical data continue to dot the security landscape. On the DLP front, large vendors are making considerable effort in propagating DLP solutions in the market. DLP solutions are being offered mainly by large vendors, and are being pushed in the market as part of integrated solutions. The uptake of DLP solutions as ofr now is restricted to large enterprises. The consumer segment is price sensitive and is being driven by low priced offerings. Large vendors are reaching the consumer segment by bundling security software with branded desktops and notebooks. Vendors focused on the consumer segment are offering multiple user licenses at competitive price points.

There are also threats to IT Security from cyber terrorism and cyber warfare, critical government wings need to be secured from these dangerous threats. Government spending will be directed towards addressing these threats from different geographies of the world. Enterprises also need to comply with various regulatory issues in India as well as those from other regions of the world, especially in the IT/ITeS sector. BFSI, telecom and government were the key adoption verticals for security software.

The security appliances market in H1 2010 was $61 mn and the market is growing a CAGR of 18% since 2007. The security appliances market is estimated to reach $180 mn by 2012. The growth was driven mainly by increased spending from verticals like IT/ITeS, government and BFSI. The UTMs market is faring well due to the focus of organizations to deal with the increased threat levels. The uptake of UTMs in education is growing. The UTM market at low price points catering to SMEs is getting very competitive. Vendors are offering scaled down versions of products as well as modular solutions to cater to requirements of SMBs. IPS is also gaining increased attention from organizations in BFSI, IT/ITeS and government verticals. Vendors are increasingly focusing on adding channel partners with a regional focus to increase their reach. Market shares will be significantly impacted by pricing and channel strategy.

The trend in the market is now towards integrated security solutions rather than standalone applications. Going ahead, enterprises will focus on securing increasing endpoints as well as the network. Security assessment of enterprises to assess the security situation in their enterprise will be increasingly undertaken to prepare a roadmap for future security related spending. The security solutions market will continue to be addressed by vendors from a consultative approach to enlighten clients on the new and emerging threats and steps needed to be taken to tackle them.

Desktop and Notebook

The overall India PC market sales touched 27.9 lakh units during the July-September 2010 quarter recording a 27% year-on-year (July-September 2010 over July-September 2009) and an 18% quarter-on-quarter (July-September 2010 over April-June 2010) increase. Desktop PC sales accounted for nearly two-thirds of total PC sales at 16.7 lakh units, representing a 15% increase year-on-year (July-September 2010 over July-September 2009). The sales of notebook computers grew at 52% year-on-year (July-September 2010 over July-September 2009), to cross 11.1 lakh units for the quarter.

In terms of desktop PC sales Dell clinched the top position for the first time in the India PC market with a share* of 9.8%, followed by HP, during Q3 2010. For the notebook PC, Dell retained its position on the top with a market share* of 27% in Q3 2010; HP remained at the second place.

Large Enterprises responded to the improving global economic cues by ramping up IT infrastructure spending, resulting in overall improved traction, particularly for desktop PCs. With the momentum likely to continue in Q4 2010, release of revised rate contracts for government sector buying should further bolster the prospects of the commercial PC segment.

Launch of multi-color models, complemented with aggressive promotions and discounted bundling schemes augmented consumer PC spend, especially in the portables segment. However, the rate of growth of mini notebook PC shipments dipped marginally in Q3 2010. This points to the need for vendors to add more functionalities to cater to evolving consumer demand.

Enterprise Storage

The external disk storage market for Q3 2010 registered a modest y-o-y growth and a q-o-q decline. In Q3 2010 storage revenues were pegged at $65.8 mn with a 7.8% y-o-y growth and a 5.9% q-o-q decline. Capacity shipments showed considerable growth of 64.3% y-o-y and 16.2% q-o-q.

Telecom, manufacturing, IT/ITeS along with banking were the major drivers for IT spending and accounted for more than 3/4th of the storage revenues.
IT and banking dominated the spending on high-end storage while manufacturing, telecom and IT spent more on mid range and entry level. Government again emerged as the focus vertical for the major vendors with upcoming greenfield opportunities.

While users had information growing at moderate to high double-digit rates, they refrained from spending more on storage. Instead they managed data growth by rationalizing the use of available storage, bringing more storage efficiencies, many a times through deduplication, thin provisioning and storage virtualization solutions.

Customers were cautious about IT spending and churning out value from every dollar spent. Investment protection, lower TCO, SLA improvements were high on the buyers checklist. Storage virtualization and management showed increased adoption across various industry verticals especially where customers are upgrading their data centers.

Cloud service providers had some significant wins to showcase their storage infrastructure provision capabilities through Platform, Infrastructure as well as Software-as-a-Service. Storage on cloud is being looked upon with interest as well as apprehension. Some users see it as a significant cost reduction and investment protection tool while others feel potential loss of control and governance of their information. However, there have been some early adopters.

Virtualization continued to drive storage spending along with demand for unstructured data management arising out of file sharing and surveillance solutions deployment

Storage vendors reshaped their strategy as an information management solution provider, trying to deliver more value to customers with less expenditure.
The growth was healthy for iSCSI deployments along with FC SAN, but remained flat for NAS installations. BC and DR opportunities were again driving the IP SAN opportunities. DAS is less focused on by storage centric vendors, and had revenues plummet significantly. Vendors with go-to-market around unified storage, saw continued momentum in their mid range solutions.

High-end storage systems doubled in growth especially due to major data center and IT refresh investments, while the other two classes showed nominal decline.

Laser Printers & MFDs

Inkjet and laser printers are widely used in different user segments.

The penetration of multi-function devices in the overall inkjet hardcopy printing market is increasing drastically. Since the inkjet devices are largely used in the consumer segment, consumers prefer to buy a single device that can do multiple functions at the same cost. The penetration level of multi-function laser devices in the overall laser hardcopy printer market is comparatively very less due to the higher cost. It has also been observed that the entry level multi-function laser devices are priced in the `10,000 range whereas the entry level single-function devices are priced in the `5,000 range.

A multi-function device is more preferred than a single-function device due to the decreasing price gaps and lesser space. The same doesnt hold true for laser technology. Adding to this, the single-function mono laser devices are increasingly used in the transactional printing segmen where dot-matrix printers are used traditionally. This is largely due to its better print quality, cost and printing speed.

Home and SMBs are the important segments for inkjet printers. With the surge in sales of digital cameras, photo printing is picking up and thus the use of photo printers in the home space is registering an uptrend.

Cartridge price is the key concern for inkjet devices. For the SMB segment, cutting down on the running cost is top of the mind, thus vendors are coming up with technological innovations to bring down the printing cost. Epson came up with ME (max economy) series catering to the corporate and offering low ink cost in the form of ME 143 ink. Similarly, market leader HP came up with the concept of e-printers.

Canon, focusing on the home segment, came up with models that have better aesthetics; one of their newly announced model, MG 8170, has the feature of full HD movie prints.

The recently launched HP multi-function laser devices come with eco-friendly options such as auto-off when idle, easy plug-in and print etc. These devices are also very competitively priced.

Samsung launched a device, which is positioned as the smallest laser printer in the single-function laser market.

Server

The Indian server market has witnessed a constant upswing in demand over the last five year except 2009, which was impacted due to global slowdown in the economy. 2010 grew by around 17% over the previous quarter in terms of unit shipment, which was a clear indication of recovery from recession.

IT/ITeS continued to be the demand center for the server market, followed by Communication & Media, Manufacturing, Banking and Government.

Demand for rack- and blade servers is increasing while tower servers are witnessing decline in demand. The reason could be SMBs also moving towards rack with the growing awareness of cost of ownership and scalability.

Pricing remains the key factor for demand generation in government and the SMB segment, while application environment, data criticality, scalability, technical features play key roles in buying decisions of large corporates.

Kamal Vohra, manager,
software and services research, IDC India; Sumanta Mukherjee, senior manager, consumer computing products, peripherals and channels research, IDC India; Anant Joshi, manager, enterprise computing products research, IDC India; K Vijay Kumar, assistant manager, peripherals research, IDC India; Vikas Jain, assistant manager, enterprise computing products research, IDC India
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