Network Management Services

NMS players bank on SMEs to grow

The Network Management Software (NMS) segment isn’t doing as well as expected today, but as Indian corporate networks grow in size and complexity, the demand for NMS is also expected to climb, predicts Shipra Arora

The Indian network management software (NMS) market is a case of perceptions—some feel the glass is half-empty, while others feel it’s half-full. Caught between growth prospects and market inhibitors, this segment is struggling to move up the value chain. While the optimists (mostly NMS vendors) are high on hopes, the cynics are not convinced; considering the low maturity levels, they question the viability of the vendors’ growth projections.

Cautious optimism has been and will continue to be the prevailing sentiment in this market. According to IDC, the segment is expected to grow at around 11-13 percent this year, as compared to a decline of around 5-7 percent in 2002 over 2001. IDC put the size of the NMS market in 2002 at $7 million. With the expected recovery, though moderate, 2003 may well turn out to be the year of NMS making significant inroads into the Indian market, and strengthening the foundation on which future growth can be effectively built upon.

NMS constitutes a relatively small proportion of the total networking market. In terms of a worldwide average, NMS forms around 2-3 percent of the total cost of the network. In India, this figure is significantly higher because customers who have purchased hardware are now beginning to buy NM solutions. According to Arun Ranganath, analyst, Software and Services Group, IDC India, the worst is behind us, and we can expect to see higher growth in the coming years—a prognosis which should add to vendor confidence.

Looking back at 2002
Last year, the NMS market was impacted by the non-performance of the service management tools component. This went a long way in bringing down the overall performance of the NMS space. Further, CTOs and IT managers were reluctant to invest in NMS due to the overall caution in IT spending.

Vendor opinions differ; they claim positive growth, though small. Says Abhik Biswas, manager, product marketing, network management, Cisco Systems India, “India being a nascent market for NM, early demand came from existing large networks, which till about last year had set up a fairly mature network infrastructure and hence started looking at NMS to solve manageability issues. These were in the first stage of NMS sales.”

While on the surface the slowdown does not seem to have impacted the NMS market, experts caution that it is still too early to be able to adequately calculate the effects of the slowdown. The actual offtake of NMS in India will largely depend on how much time other enterprises take to follow suit. Generally, there is a significant time lag between early adoption and mass adoption, as not so IT-savvy businesses with non-critical network requirements do not immediately follow the early adopters. Add to this the fact that these less mature enterprises far exceed the early adopters in numbers, more so in the Indian market.

Growth drivers
But there are enough reasons for optimists to believe that the glass is half-full. There are certain dynamics within the market which are favourable to the NMS segment and are likely to keep it afloat in 2003, and probably lead the way to much higher growth in the coming years. According to IDC, growth in 2003 will be primarily driven by the spurt in the setting up of internal networks within organisations. More and more organisations are going to be internally connected during the year, not only in terms of LANs and WANs but also in terms of more real-time networking for requirements like accessing databases across the enterprise.

Says Bithin Talukdar, market development and alliances manager, software global business unit, HP India, “Large enterprises, which were in various phases of defining the network enterprise architecture, are today suddenly facing the issue of tremendous complexity—a complexity driven by devices, standards, inter-operability, scalability and multiple applications to address multiple issues. This is driving the need for NMS.”

In terms of vertical segments, IDC expects the manufacturing, telecom and government segments to drive growth, considering the size and scale of their operations, which create a need for strong network management capabilities. Apart from these, vendors are also betting on financial services and BPO organisations since their dependency on networks is high.

On the technology front, emerging technology areas other than data are going to drive the demand for NMS solutions in India. VoIP is getting increasingly adopted, and the quality of service is also improving. Thus, VoIP implementation and enhancing the usability of the network will prop up the network manageability issue.

Biswas feels that another area which holds the promise of growth is wireless technology; it can well turn out to be the wild card for NMS in India. A lot will depend on how wireless technology picks up in 2003. If it takes off, we will see major investments allocated to network management. This is because wireless brings in a whole lot of issues like complexity of security. Wireless will make it all the more necessary for organisations to check network break-ins and this will spur the demand for NMS. On the whole, the growth of the Internet is going to change the status of network management from an afterthought to a necessity.

Biswas points out that this shift is becoming apparent as more customers insist on good NM support. This support is also one of the primary factors in network hardware sales.

Rajiv Singh, managing director, India and SAARC, Computer Associates, points out that within the next five years most new equipment will be manufactured with some kind of built-in networking capability. “The more ubiquitous the network and its technology become, the more points that need to be managed. Eventually, management becomes part and parcel of the environment, and this warrants the need for network management software.”

Trends for 2003
The mood this year as compared to the last one will continue to be the adoption mode as opposed to the evolution mode. Right now it is more an issue of getting people to adopt and use NMS. Even awareness levels are not very high, so vendors will have to work on this. As awareness (NMS functionality and its impact on business processes) improves, businesses will start demanding more in terms of enhancements and evolution. Till then, it is a matter of sticking to the basics and getting them right.
The key functionality of network management, which will drive business in 2003, will be the ability to monitor and configure the network so as to optimally utilise it. According to Ranganath, the primary component of the NMS solution in 2003 will continue to be network availability management. Last year, this comprised almost 55-60 percent of the total NMS market, followed by the network configuration management component. Most customers are still pursuing the monitoring areas, but have not thought about areas like OS and image management on a network. Even today, for a majority of customers, security features are not high on their priority list. But as the market matures, awareness about security will rise. According to Talukdar, security has seen increased visibility and will gain further prominence since secure and trusted computing platforms are essential for the realisation of Web services and wireless networking.

IDC opines that the two significant trends of 2003 will be the emergence of the small and medium enterprise (SME) segment in terms of new markets, and the end-to-end solutions approach in terms of vendor strategies. SMEs, which had been the most affected by the slowdown last year, are expected to adopt NMS in 2003. As SMEs mature, their networks grow larger and applications running on their networks become mission-critical.

As far as vendor strategies are concerned, there should be an emphasis on the ‘total solution’ and ‘customer-centric’ approach. The year 2003 will see a growing movement away from box-selling towards creating an end-to-end solution, with an effective portfolio of services built around the software. In the past, the key service has been that of setting up a network; it ended there with little demand for additional services. IDC expects this to change; the complete services approach will gain prominence during the year since continuing customer relationships will become critical. This trend will be further driven by the skills shortage and the growing complexity of networks. From the vendor perspective, it is going to be extremely important to build services on top of software; it will bring them to a different level since it will position them more as consultants rather than mere box-pushers.

What will also need to be taken care of by vendors is the approach in addressing return on investment (RoI). In the US and Europe, a huge variable is the cost of manpower, which is high. By contrast, the cost of manpower is not an issue in India. Here, it is the gap between skills and technology. It is the absence of necessary skill-sets to manage the network that is going to be the primary driver for NMS in India—an insight that needs to be highlighted.

The RoI factor, to a great extent, depends on how important network-based applications are to an organisation. If all the branches are connected to the network, then RoI is far easier to calculate. In the Indian context we are still at too early a stage to be able to calculate RoI effectively. This inability will have to be overcome by vendors while making the business proposition attractive enough; indeed, a lot will depend on how vendors take up this challenge.