The Indian network integration market was in excess of Rs. 8500 crore in 2008-09.

Market Dynamics*

The Indian network integration market was in excess of Rs. 8500 crore in 2008-09. Major players included: Wipro Infotech, Datacraft, HCL Comnet, Tulip Telecom, and HCL Infosystems. Others included: CMC, BPL Telecom, Gemini, HCL Peripherals, Houston Technologies, HP, IBM, Integrix, TVS Interconnect, Ornage Business Services, Tata Infotech, Vintron, and Zyxel among others.

The market has moved from a specialized networking integrator market to a systems integrator market with clients demanding end to end solution and higher risk to be taken for the IT program. The industry is consolidating to fewer larger players with the ability to address complex projects and with balance sheets to execute longer duration projects or programs.

Existing large clients are driving cost reduction on massive scale with 20 percent reduction'the base minimum expected from existing IT service providers. The market's focus for cost reduction is eliminating smaller and medium size vendors and giving advantage to bigger and more efficient players who have differentiated cost and service models, PAN India presence, remote management, low cost resources and high project management capabilities. In the vendor community the market is moving to vendors with financial strength and ability to lower the overall cost of the network infrastructure.

Market and Technological Trends

Network convergence is a big trend in the network integration market. Carrying voice, video, and data together on the same network and integrating the same with the wireless technologies to integrate the mobility require lots of integration and communications between different services and applications to work seamlessly.

Shailendra Badoni, Chief Operating Officer Datacraft India Limited says, "The applications and server hardware are gearing up to tackle multiple services; consolidating the environment to reduce the infrastructure and its underlying cost. Virtualization technologies on network equipment with high throughputs and capacity are the answer. Adoption has to happen fast to keep the in pace with the consolidation and virtualization drive".

WAN optimization and acceleration technologies that optimize bandwidth, support better application management, and enhance user experience are some key trends in this market. Fixed-mobile convergence is a new technology that is already in use in certain countries and is probably the best example of deriving benefits out of an integrated network. This technology is likely to catch up in India after necessary regulatory and technology clearances. Ethernet access is being adopted by network providers and seeing an increased demand from the customers. Security is getting higher investment with CIOs wanting to improve the security infrastructure to match the productivity movement (wireless security, tokens for enhanced notebook security ,data centre security, and DLP are among others that are seeing more interest).Virtual Office/Tele-working is becoming an important piece for CIOs wanting to reduce cost of operations as well as improve productivity and this has been enhanced significantly with the widespread availability of DSL broadband services in major cities and towns.

Growth Drivers

T K Padmanabha, Wipro Infotech says, "The Indian networking market is driven clearly by the telecom and government verticals due the liberalization of policies and by e-governance projects sponsored by the Government of India". The government's plans to set up SEZ's, airports, and ports will provide further thrust to the network integration market.

Sanjay Virnave, President Sales, Tulip Telecom says "Growth in Services sector has also proved to be another important growth driver of the network integration space. With the growth in the IT adoption, large number of enterprises are focusing on remote management services. Large integrators are focusing on this aspect and differentiating themselves with end-to-end offerings with more managed service solutions".

BFSI is a another key vertical that drives the growth of the integration market. Banks are setting up branch offices at multiple locations, which will mean setting up a network integration infrastructure for information sharing. Retail sector is also expanding operations and as a result increasing its IT adoption. ITeS, education, and SMB segments are fueling the growth of this market to a large extent.

Challenges

A major challenge faced by the network integration industry are shrinking budgets. Budgets are crunching and projects are being kept on hold. Organizations are focusing on reducing the operational expense that eats up larger portion of the IT budget. Sanjay adds "The enterprise faces several challenges including managing and controlling communication costs, building technical domain expertise along with retaining them and managing technological changes while protecting investments, and providing an array of services to the existing infrastructure. The task of maintaining networks has become more challenging with the onset of new technologies".

The other big concern is how to keep pace with changing technology, and adopting the apt solution/architecture that allows organizations to seemingly accommodate new technologies to meet future business requirements, and also safeguards the investments already made.

Fluctuating exchange rates in the past have also put pressure on the service providers. The increase in costs due to the fluctuation is opposed by the customers as they are not willing to accommodate the increase, in times of shrinking budgets. Customers are now placing importance on quality levels and the need for end to end solutions. This has led the service providers to move up the value chain and offer its customers good returns on their investments in terms of costs savings.

Impact of Slowdown

The current slowdown has definitely made enterprise to be more selective towards their capex plans, though, opex remains intact. This surely has put lot of pressure on companies rollout plans towards expansion & consolidation, thus, impacting network integrators. On the other hand, government as a segment continues to grow, hence, would act as a cushion for all network integration players. In due time, network integration business will be back on traction once the economic cues are more favorable

Smaller vendors are being forced out of business facing the dual challenge of clients demanding lower cost and their inability to have scale of operations; this is benefiting the larger and efficient players. Specialized firms have to utilize their key talent internationally to increase their profitability and keep afloat.

Future Outlook

Saurabh Sanghoee, Head- Consulting and Solutions Integration, Orange Business Services, India says "The network integration industry has grown significantly in the past few years, and despite the economic slowdown this trend would continue as companies are looking at increasing video conferencing and server consolidation into the cloud to save on travel and infrastructure costs.

Markets are expected to reach USD 33.9 billion (Rs. 169,500) by 2011. Market growth is fueled by the convergence of voice and data networks in to an Internet protocol infrastructure. Consolidation of the industry is the way of future with big service integrators and telecom companies playing a major role in the networking market. From a technology point of view, video is the next big wave for enterprises to increase client contact and drive better productivity. Consolidation and outsourcing of data centers is another movement which will become norm in the coming years. High speed WiFi (11n standard) is another key technology that will drive higher throughput to enterprise users.

Growth will continue and there will be a key trend for technology refresh as networks are at end of life and need to be upgraded to support new converged communication applications and deployments and upgraded for the security gaps.