It was an excellent year for the enterprise
networking industry. Fuelled by a rapid spread of activities among the carriers, the
networking industry grew 92 percent in fiscal 1998-99. The total market for enterprise
hubs, NICs, switches (both enterprise and carrier), routers, and Remote Access Servers
(RAS) was Rs 537 crore.
The main propellers of this growth were the
governments attention on IT and telecom infrastructure, the introduction of private
ISPs, and a realization of the cruciality of a network. All these combined together to
make 1998-99 a good year for sales of networking products, despite the hype about economic
recession and the consumers cash crunch.
Cisco emerged as the number one networking
company with revenues of Rs 148 crore. An incredible performance by the market leader. Its
networking revenue was more than the combined revenues of the following two ranks on the
basis of sales revenue. Cisco grabbed the top spot in all three product segments in which
it completesrouters, switches, and RAS. 3Coms momentum was back as a new team
was successfully regrouped. It retained the number two position. Bay Networks emerged
stronger after being renamed Nortel Networks. It did real good work in the last quarter
and almost caught up with 3Com. Nortel was placed third. Cabletron Systems as usual
managed to endear itself to its loyal customers and won praises for its robust and fast
switches. Cabletron was able to pick up the number four spot. D-Link was fifth in
Networking has become a mainstream industry. It is the fastest growing
among communication equipment businesses today. And it clearly outpaced the overall
domestic IT industry during last fiscal.
An improved telco network contributed much to the success of the
networking industry. And the coming of private ISPs brought in the much-awaited cash from
carrier equipment like routers and RAS.
The final quarter brought in a huge amount of business to the
networking vendors last year. JFM was the star quarter that brought the cheers. 40 percent
of the total business during last fiscal was done during this quarter. Router and RAS
sales peaked like never before during this time frame when ISPs laid their networks across
Networking products came better and also cheaper. Prices of
products dropped by about 15 percent across the board, while the low-end products were
hard pressed to include features that were in higher-end products. This phenomenon was
seen in the Taiwanese NIC and hub categories.
During OND quarter Customs notification came shifting various
products into the Special Import Licence (SIL) category, thus, increasing the Counter
Vailing Duty (CVD) on these items. However, this did not deter networking products to be
shipped into the country in large volumes. The customs duty applicable to networking
products during fiscal 1998-99 varied from 40 percent to about 60 percent of CIF. This is
excluding the SIL charges. The average customs duty on networking products works out to 55
percent of CIF. Which meant that after adding the margins to distributors, every dollar
shipment of products was equivalent to approximately Rs 70 of shipments.
Region-wise, West was the most productive with a markeshare of 38
percent. South and North followed with 35 percent and 21 percent respectively. East is
still slow in terms of deployment.
The buying decisions and contracts of the year reveal that
manufacturing and telecom were the two most lucrative customer segments. Together they
accounted for 50 percent of the total number of orders placed.
Networking products base has grown rapidly during last fiscal. Hubs and
NICs have been commoditized. The number of players dealing in these two products has
become very large.
Networking products are today much more compact, versatile, and
capable of handling speeds. They are comfortable with transporting of video, voice, and
Speed and bandwidth are the most important factors in the choosing
networking products. This is the reason why switches have become so popular. Price was not
always the deciding factor.
Switches grew fast. However, contrary to industry beliefs, hub
also had a good year. It registered a 21 percent growth. A large number of workgroups
throughout the country invested on hubs. The hub moved away from the server. However, it
is increasingly being bought for desktop level communication.
NICs were the ones, which were hit hardest by the price drops. NIC
price tumbled to just a couple of hundred rupees and as a result the NIC market saw a
negative growth in terms of value. The NIC on the motherboard concept has not yet taken
The replacing of hubs with switches continued. As switches also
got cheaper, the higher-end hubs were the ones that felt the pressure from the price
aggression of switches. Rapid deployment of time-sensitive applications like
intranet, and video-conferencing fuelled purchase of switches.
Routers benefited from both sidesentreprise and carrier. A
large number of corporates built or expanded their private WANs while several ISPs
established their point of presence. For both purposes, routers were in big demand. Router
also was in the advantage from the fact that it was the most stable in terms of prices.
RAS was the product, which showed the biggest growth during last
fiscal. As the Internet service providers increase in number, this product is going to be
incresingly growing in demand. The other product that needs to be watched out is
high-speed modems. Leased line prices have been severely decreased. Hence, it is expected
that large number of corporates will deploy private WANs during this year. It is a good
year ahead for both RAS and leased line modems.