The market for switches is exploding. The market for enterprise switches stood at Rs 1302 crore in FY 2004–05 compared to Rs 993 crore for the same period in FY 2003–04. This translates to a growth of 31 percent.

Trends
The Indian market has changed with wide adoption of world-class IT networks across verticals. The market continues to increase due to higher PC penetration and adoptions; and the boom in ITeS, call center, and BPO market. Adoption of Metro Ethernet is also leading to growth in the switching market.

Last fiscal the telecom industry underwent a revolution and the buoyant market saw large deals coming from telcos like Reliance, Bharti, Tata Indicom, BSNL, and MTNL.

The industry moved towards convergence. Verticals like defense, government, BFSI, ITeS, and BPO made huge purchases.

ITeS is a strong market as every user needs to be wired and this constantly fuels the equipment market. SPs with continued Metro Ethernet deployments have also created a sizeable market.

BFSI and BPO sectors were among the large buyers of networking equipment last year-together the two comprised 50 percent of the total demand. Competitive pressures in BFSI resulted in continued investments being made towards expansion of communications infrastructure.

Government and defense also contributed their bit to the total networking pie, as did manufacturing. But the big surprise was growth of the SME market for switches, which jumped 40 percent over last year. BPO companies made heavy deployments of mid-range modular switches.

Sales of Fast Ethernet switches exceeded those of Gigabit Ethernet switches in 2004. Overall, the enterprise switch market revenue totaled Rs 1302 crore, fueled by an increase in the average selling price (ASP) and strong demand for Gigabit Ethernet LAN switches.

Gigabit is the buzzword and is clearly being preferred as an option as it has the capacity to handle high bandwidth. The industry saw increased gigabit-switch deployments in the campus networks.

2004 was a turnaround year as service providers began spending to replenish capacity in their networks, add capacity for broadband aggregation, and offer new services such as Ethernet services and MPLS IP VPN.

Layer 2 and layer 3 Ethernet switch revenue began to accelerate in the middle of 2003, and continued to grow through the years. Worldwide port shipments are predicted to grow 75 percent over the next two years.

The Ethernet switch market reflected high growth and revenue from 10GE chassis port deployments in service providers' metro networks, along with 1GE mushrooming to desktops/laptops as a standard interface.

Gigabit Ethernet and layer 3 switches are the products to keep a watch out for in the LAN market over the next few years. The rise of enterprise IP telephony and WLAN access points has shown a significant impact on the sale of PoE equipment.

Though Fast Ethernet switches saw big buys, Gigabit Ethernet switches are definitely becoming a preferred option.

Increase in the total number of endpoints connected to the LAN; increasing diversity of traffic flows on the LAN through network convergence; heightened security awareness; need to replace aging equipment and; a drop in ASPs across all Ethernet switch product segments: are the trends causing an underlying technology shift in the Ethernet switch market. This is increasing deployments of both L3 Ethernet switches and Gigabit Ethernet switches at the network edge, as LANs become both more intelligent and offer increased bandwidth.

Vendors
Cisco is the the leader in this category with 70 percent market share with D-Link and Nortel occupying the second and third slots.

Cisco registered a 79 percent growth with Rs 911 crore in FY 2004–05, compared to Rs 510 crore in FY 2003–04. For layer 2, fixed-configuration products Cisco leads but D-Link is hot on its heels followed by Nortel. On the other hand, in the high-end enterprise backbone market (layer 3 modular LAN gear) Cisco raced far ahead of competition. Nortel and Enterasys, who had a two-digit market share a few years back, are now confined to single digits. Nortel leads in Web switches or load balancing, followed by Cisco. Foundry Networks (has a tie up with D-Link) leads in the emerging 10G  arena, in India.

Cisco has done very well in the Telecom and BPO space. The way ahead for it is growth from large-campus/building networks. They have specialized in edge switches. Key wins for Cisco were with the Tata group, SBI, Mahindra & Mahindra, IDRBT, Wipro BPO, and BITS. The Metro Ethernet deal for Tata VSNL was for a $100 million.

Metro broadband will drive business and residential services. Wireless networks for innovative data and video services and converged networks will further fuel the growth.

In 2004, Cisco launched the 3750 GE Series with 3560 series aimed at service providers and to address full layer 3/4 services. These boxes came with PoE configurations. It also launched the Cisco Catalyst 6500 and 4500 series with enhanced security and integrated 10 Gigabit Ethernet support.

Cisco-mainly in the enterprise, commercial, and service provider space in the past-with the Linksys acquisition has made a strong entry into the SOHO and home network market. Linksys partnership saw an increase in business in the unmanaged switches segment. The business more than doubled last year for the company.

The SAN switch market is growing and Cisco bought Andiamo last year to gain entry into this market. Cisco is trying to get established in the storage switch market with MDS 9000 Fiber Channel SAN Switch, which has seven percent of the worldwide storage switch market.

Nortel has ramped up its activities in India and has shown better overall revenue growth. But its switching revenues were down in 2004-05 at Rs 85 crore compared to Rs 110 crore in 2003–04. Nortel is focusing on a range for the PoE market for the future.

Bucking the trend, 3Com saw a dip in its revenues at Rs 78 crore from last year's Rs 86 crore. The 3Com Security Switch 6200 will integrate security features into new and existing networking devices and IP switching gear. It is making significant presence in the gigabit switch space. Last year, projects from BSNL (National Internet Backbone) and MTNL (broadband), based essentially on Switch 7700 gave it the much-needed presence in gigabit fiber switching space. The 7700 series has the capability to prioritize network traffic for different applications.

Enterasys, earlier a strong player, has been loosing market ground for the past few years. The company has been facing severe financial problems for the past two years and has not been able to pull itself up. In India, from nearly 17 percent market share it has dipped to nearly two percent. It has been only for the past two to three months that the company has started streamlining its activities in India. But the way it has been addressing the issue, it still seems a long way before it could regain its position.

Amongst the other global players, Dell has not made its entry into layer 2/3 switches yet in India. The company will use its extensive Web and channel network once it enters this market in India. The Foundry–D-Link alliance has been gaining traction and ramping up its market share.

What the Future Holds
Broadband plans of service providers and creation of Metro Ethernet networks are driving the growth of gigabit switches.

Vendors are concentrating on enhancing the speed of switches and the result is a major change in interfaces. Gigabit Ethernet will overtake Fast Ethernet.

Another trend that will drive the switching market is adoption of MPLS-based networks. Vendors expect MPLS metro switches to be a popular item this year.

Layer 3 switches have proved to be effective within the enterprise, but these will not replace routers for sending data over a WAN. However, layer 3 switches are increasingly being preferred in metropolitan area networks (MANs). Organizations planning multi-location WANs are opting for switch-based MANs, as the switches today offer many routing features like Border Gateway Protocol 4 (BGP4) with a clear benefit of 100 times the speed.

Now layer 3 switches incorporate features such as access control policies-traditionally a router feature. The number of ports has also increased. A minimum port count of 12 and more often 24 is standard, with 48-port switches being deployed in the call centre industry.

WLAN combined with wired LAN and Power over Ethernet (PoE), will also see high growth. LAN switching market is continuously on a growth path with more large campuses and networks coming up. Power over Ethernet, though not a mainstream need yet, is visibly being adopted.

PoE will ultimately become a de facto technology embedded in LAN switches. As enterprise IP telephony and wireless LAN technologies become more mainstream in 2005, PoE shipments are expected to more than double in FY 2005–06.

Minu Sirsalewala