KOLKATA, INDIA: Small and medium businesses in India are on track to invest up to $605 million on networking hardware this year, up a healthy 24 percent over last year.

About 40 percent of this spending will go towards purchases of hubs and LAN switches alone, according to a recent survey of Indian SMBs by New York-based Access Markets International (AMI) Partners Inc.

"India's market for networking hardware continues to grow, driven by factors such as higher PC penetration and adoption, boom in ITeS, call centers, and the booming BPO market," said Dipendra Mitra, Analyst, AMI-Partners. "Also adding a boost are factors like the expansion of IT, BPO/KPO companies, mushrooming data centers and disaster recovery (DR) sites by large Indian organizations and MNCs."

Medium businesses accounted for a majority (about 57 percent) of the total networking expenditure last year. However, the contribution of SBs to the overall SMB spend is fast rising as Indian SBs try to catch up with their larger counterparts.

Within the networking arena, routers and hubs/LAN switches will make up a large majority of the Indian SMB annual spend on networking hardware in 2008. Wireless LAN and other networking hardware—like network interface cards, structured cabling, etc—follow closely behind.

SMB wireless LAN spending is expected to more than double in the next 12 months, from a relatively small base in value terms. Some of the key drivers are easy availability of wireless LAN connectivity at many public hotspots, and increased notebook penetration. Penetration of wireless LAN has also risen by over four percentage points in 2007 from 2006 and this increasing trend is set to continue in 2008.

Indian SMBs are moving along the growth path and adding more business partners, nationally and internationally. Many SMBs are planning to open new branches (15 percent of SBs and 20 percent of MBs), and networking will play an all-important role to keep employees connected.

Consequently the need for a secure network connectivity infrastructure has assumed greater importance among SMBs. This is also evident by a rise in VPN spending, which is on track to go up by over 18 percent from last year.

"Indian SMBs are gradually realizing the benefits of connectivity and this will usher in even brighter days for the networking market in India," Mitra said, adding that, "high speed Internet connectivity, cellular phone and notebooks are helping the SMB workers to stay in constant touch. Communications is key, as fast response to customers can make or break deals. Thus, networking capability is a must-have for most SMBs in the country for sustaining their increasing communication needs."

As for vendors, Cisco Systems leads the market in India in both routers and hubs/switches among SMBs. It is followed by D-Link Systems. However, the results are reversed for wireless LAN with D-Link leading the market, followed by Cisco.