The upcoming 4G rollout, next-gen Ethernet and steady growth in network traffic are all likely to be growth drivers for the networking market this year. By Venkatesh Ganesh
The market continues to be driven by productivity enhancing applications, such as collaboration and video and technical advances in IP routing, mobility, and security. It is still predominantly driven by service provider core / edge routers and carrier Ethernet switches. After network refresh cycles that happened in the last couple of years, 2011 was muted when it came to networking spends. Telecom, which, tends to lead the way when it comes to spends was mired in scams. The IT/ITES sector also saw pressures of a different kind. Despite growing at around 16%, significant investments were held back due to rising uncertainties in the global markets.
A new look
Another reason for lack of significant investments has to do largely with the way this sector is being looked at. Industry watchers opined that the traditional days of equipment or services buying were slowly changing even in the Indian context. Companies, instead of adding more boxes to their mix are asking how to get more out of existing investments and are increasingly looking at consolidating their switches (especially at the low end) and are focusing on cost savings in their data centers. These savings, in turn, are ploughed back into their IT spends.
“Couple this with the increasing interest in Cloud, Indian companies are still figuring out ways to get more bang for their buck rather than commit spends on networking gear,” according to Nareshchandra Singh, Principal Analyst, Gartner.
With the interest in Cloud computing growing, enterprises are beginning to consolidate their IT requirements into a single pool where they have the flexibility to scale up. Deploying enterprise applications like ERP, SCM is becoming a norm even amongst SMBs located in remote areas. Multinational companies establishing their presence in India are setting up connectivity between their domestic offices.
“With increasing growth stagnation in the developed markets, more multinationals are setting up their key centers in India and this is driving their second wave of networking growth,” said Alex Connors, Head of Products, Cable and Wireless Worldwide.
While the IT/ITES sector kickstarted the need for networking in India, increasingly multinationals in different sectors like automotive, FMCG, financial services and others are driving demand.
Further, newer networking technologies and applications are proving compelling for organizations that are deploying networks on a scale and complexity that hasn’t been seen before. The pressure to reduce costs amongst budget constraints and competitive pressure is making organizations search for innovative ways of designing, building and managing networks.
“Enterprises are taking a fresh look at ways to design a network in the backdrop of technological changes including virtualization, Cloud computing, security and mobility. Also, business relationships with partners and end consumers are undergoing change with collaboration technologies like UC straining the networks,” said Ashish Dhawan, Country Lead – Enterprise Business, Juniper Networks India.
A sign of this trend can be seen in the recent wins with the Essar Group for deploying Junos Pulse Mobile Security Suite and SA Series SSL VPN Appliances initially in India. “This enables Essar to provide remote and mobile employees, customers and partners with anytime, anywhere secure SSL VPN access to corporate network resources and applications from a wide range of mobile devices,” said Dhawan.
The concept of a perimeter in an enterprise is blurring and this has intensified the challenge of ensuring security across multiple access points. “In the past, organizations had defined models and makes for phones, laptops or any other end points, which they would allow into their network. Now, the times have changed and individual users have their own devices including smartphones which have to be given access. Therefore, the device border has been broken,” said Lalit S Chowdhary, Sr. Vice President, System Engineering for the India & SAARC Sales Organization, Cisco. This user access needs to be fully secured without compromising the policies of the enterprises. The location border has been broken in order to drive flexibility, productivity and to support changing business needs.
Further, a combination of rapidly changing customer expectations and radically different technological advancements is driving a new generation of on-demand security services which are transforming the way that organizations operate and innovate. It has become imperative for companies to build protection with secure usage practices and policies in their risk management strategies.
Many state governments, PSUs and banks have realized the importance of IP networks and are planning huge network roll outs. “This sector has the capacity to push the average network growth rate to 45%,” asserted Chowdhary.
Last year, a Neilsen survey found that despite the advertising blitz, only 19% customers said that they planned to use 3G services. The percentage of actual users is much lower with about 10-12 million of the 860 million cellphone connections in the country availing of 3G services to date.
Interest seems to be growing in 4G as incumbents like RIL who have thrown their hat in the fray are promising increased data speeds at more affordable costs as compared to 3G. This is one of the many reasons that is forcing consumers to stay away from 3G and wait for 4G.
The ecosystem is already being put in place as companies like Altera with their SoCs, Programmable Logic Devices (PLDs) and other solutions have came out with their offerings. The thing to wait and watch is the whether service providers will jump into the LTE bandwagon in 2012.
Surging interest in GbE
Apart from the Cloud, interest continues to surge in Gigabit Ethernet technologies. Vendors are bullish about the fact that network traffic is growing by the day and, eventually, once spectrum issues get sorted out, there would be a deluge of data traffic. The uptake of 10 GbE is starting in India, despite hiccups such as recurring costs. “With much better performance from Ethernet, an increasing number of applications are getting hosted in the data center,” said Lt. Col. HS Bedi, Chairman and Managing Director, Tulip Telecom.
The trend of gradual migration by companies to 10 GbE from existing multiple 1 GbE connections in 2010 continued in 2011, but at a slower pace. India could account for 30% of the revenues accrued from Ethernet services globally; according to Dell’Oro.
According to research by Frost and Sullivan’s South Asia and Middle East, applications that enable enterprises to monitor and optimize their networks in real time using a single window to monitor network uptime, bandwidth usage, billing details etc. from a remote location are the kind of services that are being offered by carriers.
Last year, Tata Communications, rolled out its Next generation Ethernet (NGE) architecture across 11 Indian cities. These nodes will connect the carrier’s domestic NGE network with its international backbone in Mumbai and Chennai. Further, Tata Comms announced tie-ups with Cloud.com to provide Cloud-based offerings to its customers. The company devised an emerging market strategy and in December last year the TGN Gulf cable went live. “We will create a regional Ethernet hub and companies that have immediate short term or long term plans in regions like Middle East, Africa stand to benefit,” said Radwan Moussalli, Managing Director, Middle East & North Africa Region, Tata Communications. With Indian banks and other financial institutions setting up branches in the Middle East and Africa, the demand can be seen.
Meanwhile, Aircel rolled out WiMAX for L&T’s DIAL project and is working with mid-sized companies like Jindal Stainless Limited, East West Designs, MMTC and others. Recently, it entered into a partnership with Virtela to launch an application acceleration service to fuel the global expansion of Indian enterprises. To make the offering more compelling, this Cloud-based application acceleration service enables enterprises to make business applications run up to 25 times faster and leverages a per-hour pricing, which according to the company starts at Rs 25 per hour.
Bharti Airtel, which is up against incumbents like Verizon, AT&T, RCom, Tata Communications in India, has decided to throw in its hat in the ring. “MNCs cater mostly to their global clients and still do not understand Indian companies’ specific needs. We will target SMBs in India who have global ambitions and infrastructure,” said Milan Rao, CEO, Enterprise Services, Bharti Airtel. The company plans to offer the whole gamut of services and feels that Ethernet deployments in Indian SMBs will be on the rise going ahead. ““Ethernet can scale easily to support new technologies as it can sit on top of existing investments and this allows a company to increase or decrease its bandwidth pipe as per its requirements. Also, upfront investments in IT can be managed a lot better,” opined Singh.
Interest is rising with regard to hybrid networks. International service providers like Verizon, France Telecom’s Orange Business Services, Cable & Wireless, AT&T and others are entrenched in the Indian market and continue to see demand from MNCs who either have a presence in India or want to outsource their networking needs to India. “With workforce mobility being a big thing at MNCs, coupled with a plethora of devices (such as smartphones and tablets) entering their networks, Verizon Business is seeing increased business,” said Chung Sen, Product Marketing Manager APAC, Verizon Business.
Adoption of social networking within enterprises is pressuring the networks. Essentially, the industry is generally moving in the direction of an Ethernet-enabled, Cloud-based ecosystem in which ‘everything’ is a service and we begin to see ‘dial-tone’ for business applications, summed up Sen.
Structured cabling
The structured cabling market, which consists of copper and fiber cabling solutions, is set to record a 20.5% CAGR until 2013, led by high growth in the data center segment, according to IDC. IDC also said that the data center market segment alone accounted for 17% of the overall cabling market. The market is dominated by plain vanilla solutions providers who provide basic cabling requirements. India Inc. has been steadily adopting cabling solutions and a bulk of them have jumped on the Cat6 bandwagon during the last few years. In recent years, technology uptake has matured and businesses are increasing their dependence on technology. With enterprises using bandwidth-intensive, Internet-led applications such as VoIP and video-conferencing, structured cabling solutions have become a critical element of the IT infrastructure.
Hospitality and realty are other sectors that are going for cabling solutions. Apart from Cloud computing, 40G solutions, FTTH adoption and data centers continue to be growth drivers.
Earlier the trend of organizations placing cabling requirements and then upgrading as and when needed is continuing. However, with data center build outs happening in India, the requirements for cabling is on the rise. Also, with business and tech parks coming up rapidly, traditional builders are providing future ready cabling solutions.
Companies are placing increased emphasis on the quality of structured cabling within their IT infrastructure and maximize the performance of their network cabling. They want the structured cabling to be future-proof and to easily accommodate moves, adds & changes.
“We see increased deployment of fiber-optic systems including components and MPO/MTP solutions. This will be in line with the growing performance needs of data centers and networks. We intend to continue building on the success of 2011 and offer high performance cabling solutions that meet international quality standards and are modular so as to be highly flexible and future-proof,” commented Gaurav Ahluwalia, Managing Director, R&M India.
“For an infrastructure provider, cabling investments are long term and despite changing tenants, it is important that his cabling requirements are current and future ready as organization requirements are changing in a fast manner,” said Viswanathan Natarajan. Managing Director, India and SAARC, CommScope Enterprise Solutions.
While sectors like IT/ITES, telecom and BFSI have been driving growth, industry watchers feel that others like healthcare will see a huge surge in growth this year.
“Safety standards in hospitals need to be more stringent and existing PVC cables create a lot of smoke. Our solutions generate 15% lower smoke as compared to competitors and hence are finding favor in hospitals and other healthcare businesses,” said Natarajan.
Further, HD video, high-quality voice and data services, remote access of applications require higher bandwidth that can be addressed by deploying fiber-optic based solutions. As these services gather momentum, the demand for fiber-optic cabling solutions will also increase.
“Projects that were on hold earlier due to global financial uncertainty have been resumed in addition to new projects being proposed in 2012. We are seeing growth in Tier 2 & Tier 3 cities where projects are being initiated as well,” added Ahluwalia of R&M India. So there is cause for optimism although the economic scenario for some sectors is less sunny. Analysts opined that sectors like healthcare might continue adoption but when it comes to others like IT/ITES and to a certain extent even hospitality might be affected due to slowing tourism activity.
