Networking

Networking devices: All set for a connected tomorrow!

The networking products market in India has come a long way and looks set for rapid growth thanks to a slew of newer, scalable and more efficient technologies, finds Stanley Glancy

‘The network is the computer’, said Scott McNealy, the CEO of Sun Microsystems. The import of this now famous statement has never been truer than in the context of our own time. Whether large or small, computers are almost never standalone devices; networking is an essential constituent. Studies have shown that 30 percent of a company’s cost is on networking.

The standalone NIC is already on the way out as it is being integrated with the motherboard, says Milind Kamat

Though the global economic meltdown saw a slight slowdown in the networking space with more and more organisations setting up LAN and WAN infrastructure, we have also seen the demand for network hardware rebound. These devices no longer remain the exclusive domain of a few large corporates but have become an essential part of our everyday life. High-speed access to the Web is now coveted by all including the small and medium enterprises and the small-office-home-office (SOHO) segment.

Improved sentiments in the domestic and international market have also led to the picking up of demand for networking products. This is despite the prevailing sentiments due to the Iraq crisis. The global market, according to Uday Birje, country manager for Enterasys in India, is witnessing a significant investment on security products, 10 gigabit Ethernet and wireless LAN products. Significant growth drivers in India for the networking market have been the government, banking, education and defence research laboratories.

Sectors like call centres and BFSI are also growing at a fast pace. Even the telecom sector has started picking up once again. The Indian market is very bullish as companies that had already deployed networks are now expanding them or bringing in new technologies.

The low PC penetration ratio has also acted as a growth driver for the Indian market. In the US, PC penetration is well over 50 percent while it’s 45 percent in Australia. But in India the scenario is dismal with less than 1 percent of the population owning PCs. And this means that there is a potential for such products in India. Worldwide, the devices market has saturated. What the developed markets are looking for is newer, more fantastic and feature-rich products. As Anand Mehta, manager, new business areas development for D-Link says, “Only new, high performance products can generate interest in these markets. We in India still have a long way to go before we reach that point.”

But what are the products currently available in the Indian networking products market and where will they be a year from today?

Modems
The number of Internet connections is expected to rise by at least 40 percent year-on-year for the next five years. This should provide the required surge to the modem market. There are many technologies available in the market including dial-up, DSL and Ethernet to the home (ETTH). Leased line modem is expected to do well as a market segment till 2005 but industry pundits predict that it will be overtaken by broadband technology. Broadband is expected to account for 50 percent of the modems market by 2005. But the Indian broadband modem market, consisting of cable and xDSL modems, is yet to mature.

Cable modems, which usually have an Ethernet output, can provide Internet access to multiple PCs. The only hitch is that computers should be connected by a local area network (LAN). The Ethernet output will enable a cable modem to connect to a LAN with a standard Ethernet hub or router. But according to Mehta, cable modems will be phased out in the next two years. Internal modems are expected to replace the external modems by 2004. Dial-up 56K modems will transition to ETTH and broadband, which will be on board by 2005.

In countries where broadband enters late, xDSL would have the edge. In India, the fight would be between xDSL and ETTH with both technologies taking up decent market shares. Currently ETTH has the edge. But Mehta opines that ETTH is a better technology, as it provides higher bandwidth and networking performance at up to 100Mbps, and can be used for mass deployment.

NICs
The Network Interface Card (NIC) market will see a transition to 1000 Mbps by 2004. The trend of using on-board 100 Mbps LAN has already started. There will be a wider acceptance of on-board NIC as default by 2005. According to Milind Kamat, country manager for India and SAARC region, SMC Networks, NIC is a very mature technology. The standalone NIC is already on the way out as it is being integrated with the motherboard. Opines Kamat, “NICs, as we know it today, will soon disappear from the market. It is going to follow the route taken by serial ports and printer ports. Earlier these devices had to be bought separately. But today hardly any mention is made of these devices, as they have become a part and parcel of the PC.”

Hubs
Both Mehta of D-Link and Naresh Wadhwa, vice president-West for Cisco Systems, agree that hubs are on their way out with the 10/100 Mbps hubs already being phased out of the market. In fact, the total market for hubs in 2000-01 was just Rs 49 crore. A trend that has been witnessed in this segment, is that unmanned switches are replacing most hubs. User preference for built-in ports on motherboards and the rapidly falling price of switches, due to increasing competition, are the key reasons for this, feels Wadhwa. Also, increasing multimedia transmissions require more bandwidth and speed, and with high-end switching hubs available at competitive rates it is slowly replacing the low-end hubs.

Switches
IDC states that this is one of the fastest growing segments in the LAN equipment market. Dropping prices and a rapidly growing user base has made this the killer technology of the networking industry. According to Wadhwa, the market for switches has been witnessing a growth rate of more than 70 percent. According to Birje, the market is going through a consolidation phase at the moment. He attributes the increased level of activity to more and more organisations setting up a LAN infrastructure. Adds Kamat, “Organisations are becoming more and more conscious of resource utilisation.” Switches enable the user to control bandwidth. In the process it makes usage of bandwidth more effective. Mehta expects access technology to undergo a major technology leap in the next year. Currently, most corporates use 100 Mbps for access and 1000 Mbps (1Gbps) for backbone infrastructure. This will be enhanced to 1000 Mbps (1Gbps) for access and 10,000 Mbps backbone (10 Gbps) for backbone infrastructure.

Users prefer switches because of the flexibility it provides. For instance, only a switch can allow multiple services on the same network to support voice, data and video. But the key growth drivers, according to Wadhwa, are the manufacturing segment, the burgeoning ITES sector and SMEs. In terms of technology, LAN switches and WAN routing technologies are being converged onto a single platform called switch routers. This is expected to provide another major boost to the switching segment. Kamat feels that convergence will see the SOHO and SME segment going in for switches in a big way.

Mehta says that the market is going to witness a fight between layer-2 and layer-3 technology. Vendors like D-Link believe that Layer-2 switches will become the default in managed switches. But ultimately in the days to come, industry analysts believe that both technologies will co-exist with each other, catering to different segments of the market.

Explains Kamat, “Layer-3 switches are defined more towards large networks with more than 100-150 users. Though it can be used by smaller networks, it is more useful as a backbone for the network.”

Routers
IDC predicts this to be one area of application that has immense potential with ISPs and service providers being the key growth drivers. Though router technology of the past has become faster, denser, and more efficient, its single processor has posed a problem to organisations catering to a large number of users because of its non-scalable nature. Though virtual routers have tried to cut across this problem through use of software, the monolithic architecture of routers still poses several problems.

All the players Express Computer spoke to predict increased speeds and more feature-rich, high performance devices replacing the existing products. More features will come in to complement performance. Raw performance, according to Mehta, will have no meaning. Agrees Kamat, “We will see improved applications coming up in the next few years. Hence routing and switching platforms have to be intelligent enough to support all these applications when they come in.”

Multirouters are also expected to take off in a big way. This is expected to solve the problem of scalability and reliability that users face with the existing monolithic architecture. Multirouters consolidate many individual routers onto a single hardware platform. This provides the scalability and autonomy needed to collapse multiple racks of carrier class networks into a single system. This is also more cost-effective compared to having more than one router handling your networking needs. Kamat also foresees the SOHO and home user segment adopting routers in a big way.

Wireless Products
The run rate of wireless business has gone up with the ease in licensing norms. A comprehensive range of combo wireless products for frequency of 2.4 GHz and 5 GHz have been recently introduced in the Indian market, and this range is expected to grow rapidly all through 2003. The expected market growth is more than 200 percent as mobility and accessibility become prime considerations in networks.

Various technologies are available in the market including 802.11a, 802.11b and 802.11g. We are seeing faster and higher frequency technology being made available by vendors. Currently, 802.11b provides 11Mbps at 2.4 GHz. But the enhanced 802.11b provides up to 22 Mbps and is 100 percent compatible with 802.11b and also 100 percent faster than the original 802.11b. In terms of security the upcoming technologies provide 256 bit encryption and we should see more enhanced features in the coming days. 802.11g is the next technology we are looking at. This technology, according to Mehta, will be 327 percent faster (36Mbps) than 802.11b and will feature 256-bit encryption.

Wireless will happen in a big way but it won’t completely replace the traditional cable, which is still an important part of the corporate networking component. The main reason for this is that corporates have invested huge amounts in setting up cable and fibre networks. Though Kamat expects wireless technology to capture market share in a big way, he feels that many people would continue using their existing terrestrial connections. Key reasons, according to him, are that wireless doesn’t provide the bandwidth provided by cables or fibres. Though he adds that very soon we will see 100 Mbps wireless networks in the market. Another reason cited by him is that with wireless, a vendor can’t guarantee quality of reception as the RF (radio frequency) can vary from region to region.

But the rapid advancement of the Internet, lack of reliable terrestrial connectivity and need for mobility are expected to drive growth in the wireless networking products space.

VOIP / IP telephony
Enterprises are the target audience for these products. Though vendors are predicting big figures, the fact of the matter is that the market is still nascent. Hence, no real market estimates are available at the moment. But vendors are still optimistic as the focus is slowly shifting to modem-based dial-up IP Phones. Cost is still a major issue. But volumes can grow with the introduction of low-cost models which are likely to be introduced in the coming few months. Says Wadhwa, “IP as a protocol has become ubiquitous. As long as you have an IP network communication becomes simpler. It is a big shift from the traditional phones. But the market is accepting the fact that IP has to be deployed.”

Finally
The Internet is going to be the key growth driver for the adoption of networking devices. And with LAN, modems, NICs and wireless devices coming on-board, networking is going to be as inseparable as the keyboard is from the PC. But users opting for high-end products will have to go in for a standalone device.

India is still a couple of years behind the developed countries when it comes to networking technology. But that has also proved to be advantageous for us as we didn’t have to go through the evolutionary stages. The best of products are available for us to choose from. This has also helped India to cut costs in terms of money that would otherwise have been spent on development work. The price has also come down considerably because of the intense competition in this space. Says Birje, “We have a scenario wherein there are a significant number of solution providers for one pie of the market. In such a case the customer is more aware and is looking for a vendor who can provide value addition at cost-effective prices.”

The challenge is in catering to such customers with the right mix of partners and sustaining it in the long run. Customers today are looking at vendors who can provide solutions that offer price, performance and increased productivity. Newer technologies are available at the price of traditional ones. This has again proved beneficial for the evolving Indian market, as they are faster, highly scalable, more reliable, and most importantly, extremely efficient.