Poised For A Takeoff

border="0" hspace="2" vspace="2" align="right">For the networking industry, 1997-98 was a

year of sluggish growth. While the overall networking industry grew at 32 percent-from Rs

330 crore to Rs 434 crore-the total sales of hubs, Network Interface Cards (NICs),

routers, and switches was much lower at Rs 280 crore. This amounts to a growth of only 7

percent over the previous fiscal.

Severe price cuts and the sliding rupee value are some of the reasons for this

slowdown. As profit margins got thinner, volume got balanced down by the plunging prices.

And the situation worsened as economic crisis made imports costlier.

The brighter side of the year for this segment was that large government purchases and

investments coming from educational and R&D institutions brought succor to dipping

moods. WAN was another reason to smile. As signs of growing in this almost dormant segment

appeared last year. Institutions like RBI and BPCL increasingly connected their offices

with VSATs, while the Internet subscriber base almost doubled.

The nature of the market saw some changes. It was a fragmented market, with a clear

distinction between the high-end and the low-end market. In the high-end, it was the

channel link which mattered, while in the low-end it was price on which the players

competed. Channels are increasingly becoming important. Whether they be integrators or

distributors. The whole range of networking products, that is hubs, NICs, switches, and

routers, are being increasingly sold by channels.

HUB: The hub market penetration is

certainly rising. And a large number of small networks that are coming in are witnessing

deployment of hubs. Hub represents the workgroup-the lower end of the networking segment

where channel penetration and attractive price points are critical. But for larger

networks the switch is clearly impacting the hubs. 3Com, Bay Networks, D-Link, and Accton

are the major players in this area.

NIC: NICs are being sold bundled along with PCs. D-Link is a major player here and so

is Apcom. In NICs, Fast Ethernet technology is catching on rapidly. While 3Com and Intel

are the major players in Fast Ethernet, Compex, D-Link, LanBit, and Accton are focused on

the 10 Mbps segment. As a number of PCs in the home segment are not of a particular brand,

unbranded NICs also constitute a major portion of the market.

SWITCH: Switch is a product which saw the

maximum number of companies competing for its marketshare. The low-end switch market

witnessed an intense tussle between established networking vendors and new vendors who

were trying to cash in on this market. This Internetworking product continued to replace

hubs in new networks implemented last year. Thereby, eating into the latter's marketshare.

However, switch prices plunged last year, dropping by almost 60 percent. Thus the

actual sales of switch ports were much larger in relation to sales in terms of revenue.

Switching as a technology has arrived in India. They are being used to reduce the

congestion at existing networks by increasing the bandwidth availability. However,

currently, more unmanaged switches are being sold than managed ones. The market is

nevertheless seeing intense competition. Intel came in, with its muscle and reach, making

strong inroads. IBM is also looking at making rapid inroads into the market. One player to

watch out for this year would be Compaq. The company is planning to launch its suite of

switches here soon.

ROUTER: Another Internetworking

product which saw good growth was router. One of the interesting developments in the

router scene last year was the coming together of router vendors and VSAT vendors.

Consequently, as the VSAT base grew so did the router base. So, it was the high-end

segment that went in for interconnecting its networks, which was the main buyer of

routers. The low-end router market was a disappointment. Prices of routers remained

stable, thus making it a lucrative segment to enter. This in fact is the reason why

companies like Motorola, 3Com, ACC, Proteon, and Xyplex are attacking Cisco's turf.

However, Cisco still maintains a monopoly over the router market for the present.

STRUCTURED CABLING: The

structured cabling market continued to post a moderate growth. It was a year when fiber

started seeing good growth, with many campus-wide networks choosing fiber as the medium in

the backbone. For premises cabling, CAT 5 was the hot product last year, continuing to

replace CAT 3 and co-axial cables. The systems approach got more popular as channels

became important for the vendors to do well in the market. The choice of cabling products

and brands grew high, with many new companies setting up shop and Lucent Technologies

still continuing to dominate the market. Though competition is increasing, AMP, which

leads the competition, is getting aggressive while others are increasingly playing on

prices to attack the market leader, Lucent. The importance of channels was seen in the

performance of the vendors. Lucent performance can be largely attributed to Microsell and

Wipro. Godrej Pacific is the new player to watch for. While HCL Infosystems continued to

score for the vendors. Ramco and Network Solutions were the ones who brought in the

business in the case of AMP.

Overall, the networking market experienced

a slowdown, but this pattern may not remain for long as networks became more crucial

amidst growing online culture among corporates. The proliferation of Internet would act as

a boon to the networking industry, as it would open new opportunities, both product-wise

and segment-wise.