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The good times that arrived a year ago, stayed on, and a steady downpour of orders kept revenue levels ticking. Upbeat, vendors launched a range of new products, and tried hands at some innovative solutions too.

The smooth transition of new technologies after previous year's ratification of Cat 6 standards in copper and OM3 in fiber, aided. The market experienced a steady growth in all quarters of the fiscal, though there was confusion during the beginning of the last quarter of FY 2004 due to duty cuts made in the mini budget.

Overall, the market grew at a healthy rate of 23 percent, performing generally better than expectations. There was plenty for all and the sundry. All vendors ramped up their toplines, and bolstered their bottomlines too. Good times couldn't have got better....

That's just the macro view. On a closer look, an even more eventful tale unfolds. In particular, the manner in which various players attacked this bigger cake was quite interesting.

Those Who Shared the Cake
Market leader Systimax, earlier Avaya, took a contented approach, biting only Rs 11 crore. But even that was enough to help it reach Rs 100-crore mark during the fiscal 2003–04. That meant a modest growth of 12 percent on a year-on-year basis. However, one needs to factor in the transition that the company underwent as it completed change of hands from Avaya to Commscope. The process was completed in February 2004.

Tyco, the no. 2 player wasn't too attacking either. Still, it retained its market share with Rs 79 crore. In fact, there were no upsets in the rankings. Tyco clocked a growth rate of 14.5 percent.

D-Link made the biggest splash and took away much bigger slices than others would have expected. D-Link, the only major player to be headquartered at Mumbai (most others are based at Bangalore) gulped down 45 percent more than what it could in the previous fiscal. It clocked Rs 45 crore, compared to Rs 31 crore last year.

Bangalore-based Krone also posted a decent growth of 25 percent. From Rs 16 crore earlier, it grew to Rs 20 crore. Like Systimax, Krone too had changed hands, in the previous fiscal. ADC of the US bought it out and the process got completed in May 2004. With this, German presence in the Indian market came to an end.

For Molex, growth remained flat, while Panduit grew from Rs 8 crore in the previous fiscal to Rs 11 crore this fiscal. TVSICS and Dax too made their presence felt significantly with Rs 10 crore and Rs 7.5 crore in revenues, respectively. Belden, which started operations in February 2003, completed a full financial year in India. For the period April 2003 to March 2004, it did business worth Rs 10 crore. Thus, Panduit, Belden, and TVSICS were seen in neck-to-neck competition during the fiscal.

V&D estimates CyberMedia Research

Of Winners and Losers
Even though there were no upsets in the rankings, almost all major players lost their market shares, with the exception of D-Link, whose market share was up by two percent. Belden, the new entrant, also disturbed the distribution of revenues by usurping Rs 10 crore of the pie and taking away 3 percent of the market share. Systimax's loss was the most significant, at 2.9 percent, followed by Tyco, which lost 1.8 percent. At the end of the fiscal 2003-04, they held market shares 31 percent and 24 percent respectively.

D-Link successfully leveraged its manufacturing base in India as a competitive tool. The advantages of having a local manufacturing facility are manifold as it helps in reducing the costs, shorter lead times, better service levels, and since all its SCS products are designed and developed here, greater customization is possible. According to the company, it was able to pass all the manufacturing advantages to its clients. This helped it ramp up topline and gain market share. It also fared well in the fiber business due by leveraging its exclusive tie up with Corning.

Adieu Cat 5
As far as the vendors mentioned are concerned, Cat 5 became an obsolete technology and was no longer promoted by any of them. Even Cat 5e started losing ground to Cat 6, especially in the BPO/ITeS and banking and finance segments. However, Cat 5e was widely deployed during the fiscal., primarily because Cat5e is still good enough to handle existent and near-future traffic levels in many organizations.

Overall, 40 percent of the deployments were Cat 5e and 45 percent were Cat 6, while the remaining 15 percent were fiber. A significant development was that all users, including the government, used only fiber in the backbone. The tremendous drop in rates was a major factor behind the use of fiber in big projects. Fiber also gained in the backbone due to its capacity of offering vast bandwidth.

This is not to mean that all vendors made deployments in the same proportion. Systimax, for instance, did 85 percent in copper and 15 percent in fiber. Within copper, it had a ratio of 45:55 for Cat 5e and Cat 6, respectively. For Tyco, Cat 5e constituted only 30 percent of its overall structured cabling business, while Cat 6 was at a 60 percent high. Fiber stood at 10 percent only.

Cat 6 may become a default standard like Cat 5e in a year or two, once the price levels come to more acceptable levels and the market becomes demanding. Cat 6 still costs about 25–30 percent higher than Cat 5e and therefore volume consumers like government prefer Cat 5e.

For D-Link, fiber had a higher share of 20 percent. It also had a higher share of Cat 5e vis-ΰ-vis Cat 6, unlike Systimax and Tyco. It put the ratio of Cat 6 versus Cat 5e at 40:60.

Interestingly, Dax put the fiber sales at a high of 40 percent. The remaining was copper. Of the copper, 70 percent was Cat 5e and 30 percent was Cat 6. However, the volume of Dax's sales was not big enough to affect the market ratios in a significant manner.

The Orders Came from...
Major growth for the market came from segments like BPOs/call centers, banking and finance, telecom services, government and PSUs, and IT and software. While, Systimax largely dominated the banking and finance, and IT and software segments, while doing sizable business in the BPO/call center segment too. For Tyco, as much as 40 percent of its revenues came from BPO and IT segments, while telcos contributed another 20 percent. Banking and finance, and government contributed 15 percent each, while corporates accounted for the remaining 10 percent.

For D-Link, the biggest chunk, 15 percent of revenues, came from banking and finance. Government was the next biggest buyer of D-Link products, and contributed 14 percent to the company's structured cabling sales, followed by corporates at 13 percent. BPOs/call centers and broadband projects made up for 10 percent each. Educational institutes, IT and software, and manufacturing contributed 8 percent, 6 percent, and 5 percent respectively. Others accounted for the remaining 20 percent.

Krone experienced maximum buoyancy in BPOs/call centers, banking and finance, and government sectors.

In the BFSI segment, some of the biggest buyers were State Bank of India, LIC, and ABN Amro. In the IT and software space TCS, Satyam Computers, Wipro, Infosys, SAP, Computer Associates, etc. were some of the large customers.

Trends and Expectations
The market showed rapid maturity in terms of technology acceptance. Cat 5e and Cat 6 completely replaced Cat 5 in the copper, as users embraced the superior technologies. At the same time, they increased pressure on pricing by taking good advantage of the competitive scenario. The average price of Cat 5e for a 300 m box was Rs 3,300 while Cat 6 sold at an average price of Rs 4,500 for the same length.

V&D estimates CyberMedia Research

Vendors made attempts to contain prices by way of offering superior technologies. The approach did work to a considerable extent. Even though Telecommunications Industry Association (TIA) mandated a performance of 250 MHz only for Cat 6 cables, vendors came up with significantly higher performances ranging up to 600 MHz. Systimax strengthened its GigaSpeed XL suite of Cat 6 products, while Krone introduces an augmented Cat 6 structured cabling system, which it claimed could enable 10 Gbps Ethernet transmission over a 100 m length.

In the fiber category too, new solutions were introduced. Systimax today offers OM3 fiber solution under its LazrSpeed brand. According to the company, it supports 10Gbps speed up to 550m and 1Gbps up to 1 km. D-link launched an SMF 28e fiber range in single mode fiber and multimode OM3 fibers from Corning in the last fiscal.

The minor reduction in duty from 30 percent to 25 percent in the previous fiscal helped players offset the rise in copper prices worldwide. However, vendors still didn't find enough clarity in the customs tariff on cabling components between connectors, patch panels and outlets as all are classified under different subheads. Even when it comes to copper cables, they are subject to different duty structures between IT and telecom. Moreover, the local and central sales tax differs across states as often IT cabling components are classified under electrical wiring.

Looking at the sustained buoyancy in the market, vendors continue to be bullish about the fiscal 2004–05. And many Indian as well as global enterprises are poised to make major investments in India and the Saarc region.

Deepak Kumar