DQI Bureau
New Update
Post-merger HP was #1 in overall sales, including PC servers–the company registered over 11% growth to notch up Rs 748-cr revenues in this space
HP led in both the Intel (PC) server space, with revenues of Rs 235 cr, and in the non-Intel server space, overtaking Sun Microsystems
Core banking apps and branch automation by PSU banks drove growth

Fiscal 2002-03 began on a bad note and the industry had a lot to crib about–a

stagnant economy, squeezed IT budgets, CIO expectations of huge discounts and

one of the worst performance years, as a legacy. Despite all these, 2002-03 was

good for server vendors. Also, it was heartening to note that the Indian market

emerged bang on top amongst all others in the Asean (Association of South-East

Asian Nations) region. According to IDC estimates, India superseded Singapore as

the largest server market in the second half of fiscal 2002-03, compared to the

first half of the same year. And India achieved this position by cornering 26.2%

of the total spending. However, it was Singapore which held on to its number one

position in the non-SIAS server segment in the Asean region–though its lead

was slender–with a little less than $300,000 of spending difference separating

it and India.

Banking on IT

So what went right? IT spend was back in flavor, led by the banking,

financial services and insurance segment. And PSU banks were key in bringing

about early gains for vendors. Public sector banks setting up centralized core

banking infrastructure in order to maintain their competitive positioning,

vis-à-vis newer private sector banks helped expand the server market. Projects

by State Bank of India, Punjab National Bank and Canara Bank helped the segment

regain the ground lost in fiscal 2001-02.

Finance and insurance spending remained buoyant in 2002. While there was

reasonable growth in the RISC Unix space, the SIAS market was the focus of much

attention and helped generate a fair amount of growth for this vertical.


In total, the finance and insurance segments accounted for nearly 23% of the

overall units sold in fiscal 2002-03, while value figures present a better

picture with 24% of overall server revenues in the same period. Another key

trend that fuelled server demand was server consolidation. Again, the banking

segment showed the way and a majority of the demand for high-end servers came in

due to this trend. The growing demand for value-added applications such as

credit card authorization, cash and wealth management, ATM (automated teller

machine) switching and online banking also helped sales.

And this trend is continuing in the current fiscal, with PSU banks remaining

focussed on building backend infrastructure to support centralized core banking

(both retail and wholesale), apart from serving customers through alternative

channels such as ATMs and Internet banking.

According to a Dataquest-IDC Megaspenders Survey on enterprise spending in

2002-03, Punjab National Bank–with an overall IT spend of Rs 180 crore–was

the number one IT spender, while Canara Bank–with an outlay of over Rs 135

crore–was pegged at number two. Last year’s leader Life Insurance

Corporation was still strong and came in at #3 this time around–against last

year’s Rs 140-crore IT spend on its ‘Anytime, Anywhere’ program, LIC spent

another Rs 105 crore on IT in 2002-03.


Ringing in change

Other than banking and finance companies, the other segment that doled out

the largest orders to the server segment in 2002-03 was the telecom space. The

biggest name, of course, was Reliance Infocomm. Sun Microsystems saw much of its

growth on account of bagging the Reliance account. Other players like Tata

Teleservices and Bharti Cellular too made large investments to beef up their

infrastructure. Mobile telecom service providers purchased RISC/Unix servers for

deploying BSS (business support systems) applications–such as billing,

mediation and fraud management–and OSS (operation support systems)

applications–such as network management and control, and call switching. It

was orders on this front that underpinned the astounding uptake of servers in

this segment in 2002-03.

Besides banking and telecom, the distribution and manufacturing segments

contributed toward reviving the server segment in India, with buying patterns

largely increased. In fact, manufacturing as a segment emerged third in terms of

the overall value of servers purchased in financial 2002-03. Within these

numbers, entry-level machines generated nearly 82% of total activity.

Competitive analysis

In value terms, Hewlett-Packard, IBM and Sun Microsystems occupied the top

three positions in the overall server space in 2002-03. Robust sales to

financial and insurance companies, coupled with a wide presence in the telecom

and media sectors, helped Hewlett-Packard occupy the top slot in 2002-03.


With total server revenues of Rs 748 crore, the company zoomed ahead of its

nearest competitor, Sun Microsystems. While in fiscal 2001-02, Compaq was the

unchallenged leader in the PC server business, in 2002-03, the new HP not only

retained the numero uno position but also consolidated its stranglehold in the

non-Intel space to emerge as the undisputed leader. With revenues of Rs 512

crore in the non-Intel space, Hewlett-Packard showed a value growth of over 38%,

against the numbers achieved in financial year 2001-02.

Sun Micro’s presence in the telecom and media space remained its key

strength, propelling it to slot number two with revenues of Rs 388 crore. Both

telecom and media continue to offer a wide scope for the vendor. From Reliance

to Bharti to Videsh Sanchar Nigam Ltd, everybody went on to Sun servers.

Overall, one major deal alone–with an IT spend of over Rs 150 crore–boosted

Sun Micro’s fortunes, so much so that the company reported positive growth of

36% after the previous year’s dismal performance of -24%.

The dominance in the telecom space was helped by joining hands with Lucent

and Motorola, which saw lot of Netras being sold with the switches. As with all

other vendors, the banking and financial services segment pitched in to help Sun

Micro attain its growth numbers. For instance, HDFC Bank, ICICI Bank and

Oriental Bank of Commerce went live on Sun servers. Wipro continued to be the

top channel partner for Sun Microsystems and the much-hyped partnership with HCL

also started showing favorable signs.


The other much-hyped partnership between Wipro and IBM brought in the latter

about Rs 42 crore, but it still has a long way to go before it can make a

significant dent on Sun Microsystems’ business from Wipro.

Coming in third with server revenues of Rs 267 crore was IBM, which was in an

aggressive mode for much of 2002-03, and for which the manufacturing and

financial sectors continued to be areas of growth. In fact, of the company’s

total revenues, 38-40% can be attributed to orders from the manufacturing

segment. Largescale installations in the education space also helped increase

sales toward the end of 2002-03.

In the entry-level SIAS space, Hewlett-Packard continued to lead the market

with strong shipments to the banking and financial sector, which remained its

strongest growth area in financial 2002-03. The vendor’s strong position in

the telecom and media segments also contributed to its success. IBM’s fresh

initiatives toward building its channels seemed to be paying rich dividends in

the entry-level server space. Known as VFB–or the very focussed business–the

program did well to increase the company’s presence in smaller towns. In the

RISC Unix space in particular, the vendor’s strong hold in the financial and

education segments continued to pull in values. This should hold good for the

company in the ongoing year as well, given its performance in the first quarter

of financial 2003-04.


HCL Infosystems occupied the number three position in the PC server market in

2002-03 with 11% unit shipment share. In the Indian market, Acer sold almost a

third of its servers to financial services companies. India is among the few

markets in the region in which Acer continues to maintain a healthy market

presence. IDC feels that Acer’s continued success in India is primarily driven

by its aggressive pricing strategy that positions it favorably in more

price-sensitive segments like banking and finance, government and education.


The server market in the country continues to offer high potential,

according to trends. The banking, financial services, insurance and

telecommunications segments will remain the keystones for mid-range server

demand in India through the forecast period (2003-04). Deregulation,

consolidation among service providers and infrastructure expansion in the mobile

telecom services segment will spur demand for servers.

Also, servers will increasingly be deployed for BSS and OSS applications.


Banks purchasing entry-level SIAS servers for branch-level automation will

continue to be catalysts for demand, though there could be some sort of a

slowdown in the near term because major PSU banks might divert some of their

planned spending toward centralized core banking infrastructure. Furthermore,

the deregulation of the insurance segment will spur demand for entry-level

servers through the forecast period. Indian banks will continue to show a strong

preference for Unix for running centralized core banking infrastructure.

Linux’s growth in India will be strongly tied to Internet infrastructure

expansion and replacement of Unix server installations for lightweight

high-performance computing applications–mainly in the education and research


The easing of the US government’s restrictions on the export of

high-technology products to India will help spur spending by education and

research organizations on servers that were in the embargo list post the nuclear

tests in 1998. Education segment-led spending will have a minimal impact on the

mid-range server market in India in the short term. However, opportunities

offered by the life sciences sector are unlikely to make a significant impact on

the overall demand until the latter part of the forecast period.

Aman Muglani

The author is assistant manager (computing products) at IDC India.