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The switches market in 2002–03 was unable to repeat the spectacular 28 percent growth it witnessed the previous year.

However, it still clocked an impressive Rs 841 crore—a growth rate of 7.4 percent over last year’s Rs 783 crore.

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Of the total Rs 841 crore pie, fast Ethernet accounted for business worth Rs 426 crore, gigabit Ethernet around Rs 58 crore, while the balance Rs 357 crore came from vanilla Ethernet. Layer 3 switches grew by 14.4 percent in terms of number of ports, while Layer 2 sales remained more or less stagnant. The transition from hubs to unmanaged 10/100 switches under Rs 10,000 was nearly completed during the year. This especially helped certain vendors like D-Link who were leader in hubs to increase their market share in the switches segment. Unmanaged switches essentially sold well in class-B and class-C cities, with Dax Networks being one of the principal beneficiaries. It set up offices in Jaipur, Dehradun and Ranchi while even State governments in Guwahati and Gangtok made purchases worth Rs 2 crore. In the managed switches category, 24-port continued to rule the roost, though there was substantial movement of 8-port switches too in the unmanaged category. This was particularly evident in smaller branch offices of PSUs like the SBI and the LIC. Typical deployment costs ranged from Rs 65,000 for a 24-port switch to Rs 70 lakh for high-end enterprise-class switches. However, 8-port vanilla switches are set to die a natural death soon, considering the vanishing margins this year.

While gigabit Ethernet slowly made its presence felt in 2002-03, a more esoteric technology like optical Ethernet also arrived on the scene. It was promoted as the means for removing the need for multiple protocol conversions that create significant management headaches for network/telecom operators. Nortel Networks, which otherwise saw a large portion of its market share dwindling, being cannibalized mainly by Enterasys, was particularly active on the optical Ethernet front. Reliance Infocomm, GAIL and Bharti all opted for optical Ethernet during the year.

Who Made the Purchases...
Though BFSI and telecom continued to remain as two major verticals for switches, government organizations turned out to be lucrative contributors. Market leaders like Cisco and Enterasys dominated most of the government orders, the main thrust being provided by e-governance projects. Andhra Pradesh, Maharashtra, Gujarat, MP, Karnataka and a few other state governments offered projects on rate contract basis to these vendors. Market leader Cisco sold in large numbers for the APWAN (APNIC) project, for National Highway Authority of India as well as for the Gujarat WAN project (connecting 225 talukas). Even D-Link made its presence felt by selling a few managed chassis switches to the AP government during the Hyderabad National Games.

One of the largest government contracts came from BSNL as part of its MPLS/VPN installation, while a few other noteworthy projects came from LIC (for all their 1,600 branch offices), Power Grid Corporation, ONGC, Indian Oil, National Coalfields, MP Treasury and Central Railways (for networking the entire sprawling Victoria Terminus station in Mumbai). Sales remained more or less stagnant in the manufacturing sector save one or two large LAN deployments in Asian Paints, Goodlass Nerolac, Haldia Petrochemicals or in Telco in Pune. BFSI space continued to be dominated by Cisco with orders of substantial sizes from Bank Of India, Punjab National Bank (connecting 1000 banks by 2004), 3000 branches of State Bank of India as well as 85 branches of Syndicate Bank. On the other hand, Enterasys got a large order from the Central Bank of India. Usually, most of the PSU banks made purchases from multiple vendors, thereby keeping a sort of backup provision for themselves. Cisco also bagged deals from private banks like HDFC, ICICI and Bank of Punjab. In fact, it supplied switches to nearly 80 percent of the ATMs in the country. Apart from LIC, other insurance players like New India Assurance (600 branches), United Insurance, National Insurance Company, Tata AIG, ICICI Prudential and Bajaj Allianz were also active purchasers of switches.

Even educational institutes had some significant deployments, with Enterasys being the principal beneficiary. National Institute of Fashion Technology (NIFT) had large LAN deployment in five of its campuses, with IIT Roorkee, BHU, MIT Gwalior and IIMs Lucknow and Calicut following suit. D-Link too made its mark here with sales in IIT Kanpur, Lucknow University, Allahabad University, Goa University and REC in Trichy. Software services firms like TCS, MBT, i-flex, Veritas, Cognizant and Lucent made large purchases of LAN switches. Wockhardt in Mumbai was another substantial customer. The Call center market, principally dominated by Cisco and Nortel, however, came close to saturation. Call centers were especially crucial for Nortel, contributing nearly 40–50 percent of its total revenues from switches, with AirTel and iSeva being two big clients. Cisco too had its share of the call center pie with sales to Transworks, Talisma and the new 900 seater Prudential premises coming up in Mumbai.

Vendor info
In the workgroup switches segment, D-Link remained numero uno, selling close to 80,000 units, with Dax offering the main competition by selling around 30,000 switches. Some of D-Link’s blue-chip customers during the year, apart from the Hyderabad National Games, were Mumbai Port Trust, AP Commercial Tax Department, Tata Internet Services and MS Ramaiah Medical College and Hospital in Karnataka. On the other hand, Dax’s impressive client roster included names like Chennai Port Trust, National Informatics Centre and the various Railways. However, competition from 3Com in this space gradually dwindled away in the face of the D-Link and Dax onslaught.

In the layer 2 segment, Cisco’s Catalyst range of products reigned supreme, pushing D-Link and Dax out of the reckoning.

The principal clients for Cisco’s layer 2 switches in 2002–03 were SBI (connecting 3,000 branches), Punjab National Bank (1,000 branches) and Syndicate Bank (85 branches). The Layer 3 segment witnessed a seesaw battle between Cisco and Enterasys, with the scales tilting in favor of the latter during Q4 because of the huge order from the Power Grid Corporation. However, Cisco too had its fair share of the spoils here with sales to Reliance, Bharti, BSNL, MTNL and BPL Mobile. Accton, which rechristened itself as SMC Networks, was also pretty active with its flagship Nophra project. In the layer 4–7 segment, Nortel continued to lead though Cisco and Enterasys with its X-Pedition range of products. SMC too had a representation here, especially with its project for the Western Naval Command. Unfortunately, top global brands like Extreme and Foundry failed to cut much teeth owing to poor marketing. MRO-Tek, which was selling Extreme switches in India, was able to push only 400 units, thus generating a total revenue of Rs 6 crore.

The year witnessed some interesting reorientations among top vendors, leading to changes in market share. While Cisco more or less maintained its No. 1 position and about 39 percent market share, Enterasys gained largely at the expense of Nortel and 3Com to come a close second with 34 percent. Though D-Link at Rs 57 crore still had less than 10 percent market share, it tried positioning itself alongside the biggies. For a start, it stopped selling layer 3 Cisco switches, an exercise it had been doing for more than five years since Cisco’s entry in India. This preceded D-link’s own entry into this segment, though it hopes to consolidate its position here only by the end of 2004. Nortel might have lost on the overall market share, but at Rs 64 crore it still remained a force to reckon with in certain verticals like call centers and some banks like ICICI and Citibank.

Though Dax remained a little South India-centric, it still managed to do business worth Rs 11.91 crore mainly in B- and C-class cities.

The major system integrators were all responsible for the growth of individual vendors. Both Wipro Infotech and Datacraft generated Rs 80 crore worth of business from Cisco, while HCL Comnet and CMC followed suit with substantial orders.

Enterasys announced a strategic tie-up with Wipro e-Peripherals (which in turn acquired 80 percent stake in Select Technologies) to compete against Cisco mainly on the switches front. Even smaller system integrators like Ramco, CMS, L&T Infotech, an Accel ICIM pushed both Enterasys as well as Dax switches. Dax switches were also sold by a host of regional distributors like Kaybee Infotech, Dataforce, Highlink while the SMC push was provided by Adino Telecom, Telexcel, Gemini and Microsys.

Rajneesh De