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Over the past years, the network integration industry has shown considerable growth as enterprises small, medium as well as large and governments have realized the benefits of creating a centralized high-end networking platform to power up varied applications being used by various functional groups.

Network integration is one segment which has shown no signs of slow down for a long time now.

Last year saw a major shift towards services and many integrators added or expanded their service portfolio. The year also saw many small players making it big in the integration market. The large integrators differentiate themselves with end-to-end offerings with more managed service solutions.

Though there has been some impact of the economic downturn, this segment is showing the promise to sustain the same. The network integration segment grew to Rs 9,000 crore in FY 2008-09 from Rs 8,079.9 crore in FY 2007-08, clocking a 11.4% rise. Registering a 11.7% increase last fiscal, Wipro Infotech retained the top slot with Rs 1,217 crore as compared to the Rs 1,089.1 crore in FY 2007-08. HCL Comnet came close at Rs 1,107.6 crore, an increase of 10% from last fiscal's Rs 1,006.9 crore.

Revenues of Datacraft, which registered a marginal growth of 5.7%, touched Rs 1,015 crore in FY 2008-09 compared to Rs 960 crore in the previous fiscal. HCL Info reported a substantial growth of 27% in the network integration segment by clocking Rs 876.3 crore this fiscal. Another major player, Tulip's revenue decreased by -21.4% as compared to Rs 508.9 crore during the last fiscal.

The main and key verticals continue to be ITeS, banking and financial services, government, and telecom sectors. Other emerging verticals are manufacturing, health care and the service industry. These sectors are growing from a very small base but are growing rapidly. Retail is also drumming up a lot of interest, and the sector is planning to consolidate. The other segment that is growing very rapidly is small and medium businesses.

Trend of the Day
The top trend from the networking standpoint is collaboration. Unified communications solutions allow customers to collaborate within their organizations, between their functional groups and communicate more effectively with their partners and customers. This was the trend last year and will continue into this year, especially with regards to large companies.

The second big area that is catching a lot of interest around is data centers in large organizations. In order to access the right information at the right time, the right policy and getting information to both the customers and the internal stakeholders, data centers and technology around the data centers are increasingly becoming important.

This consist of storage area networking, security at the data centers, application enhancement, application performance as well as virtualization technologies. This is the other big thing as there is a lot of consolidation in the data centers. Companies are looking to maximize the utilization of resources through virtualization. to enable multiple departments to share the same service or storage device rather than replicating that for each department and each organization. So data centers as a whole, with consolidation and virtualization, are two strong trends.

A third area that continues to gain momentum is overall network security. The security aspect is gaining importance as companies build up their IT departments. As the number of laptop users increases, so does the number of people accessing the network.

Another big trend that continues to grow is network convergence. Carrying voice, video and data together on the same network and integrating the same with the wireless technologies to integrate the mobility is gaining ground. All these require a lot of integration and communication between different services and applications to work seamlessly.

Technologies in Demand
In the last few years, various technologies have matured and are now available for enterprise deployment. Most of these technologies allow enterprises to increase employee productivity and reduce their overall costs. India is emerging as one of the most lucrative markets for such technologies given the phenomenal growth of applications such as e-learning, tele-medicine and e-governance. Mobility, location tracking and seamless integration between wired and wireless world is the enterprise demand. This also includes technology in cost reduction, mobility, anytime anywhere access, network optimization, network consolidation, network virtualization, network management, and applications acceleration.

Innovative technologies like Wi-Fi, WiMax, videoconferencing, tele-presence and unified communication have been key technologies dominating the market this year. A key focus area is to provide a solution and management platform for customers to manage network integration appropriately and easily. When one provides product solutions such as data centers, security and wireless, there is a need for integrating network management into it.

Achievements
The FY 2008-09 has been an average year for the major players in this space. Tulip Telecom have had wins across industry segments. Some of the key wins include various SWAN projects with state government, one such being the Madhya Pradesh SWAN.

Tulip has signed new customers including Indian Railways Catering and Tourism Corporation, State Bank of Patiala, MP State Electronic Department, West Bengal Education Department and Commercial Taxes Department, and the Future Group. Tulip has also partnered with Citrix Systems to create various bundled offerings for the Indian enterprise markets. Some of the other network integration projects acquired by Tulip are National Informatics Center, Maharashtra State Electricity Board, and MPSEB.

This year IBM also achieved some big contracts. Some of the companies who have shown confidence in IBM's soultions are Vedanta, TTML, and HPCL. Some of the key technologies that were introduced in 2008-09 by IBM for its clients included Telepresence solutions, unified communications with realtime collaboration, and asset tracking with RFID.

One of the new entrants in this space, Nu Tek has also marked its presence and bagged some major contracts. It signed an LoI with Huawei. It has strengthened its on-going offerings to clients like Ericsson. Nu Tek has done a number of projects with big telcos like BSNL, Reliance Communications, and MTNL.

Bottlenecks
Although there are no major concerns for the network integration services in terms of business opportunities, but one common challenge witnessed across the industry was an increase in competition. The major competition was felt from small and regional palyers who lacked the scale and the geographic spread, but were competitive enough in terms of pricing. This resulted in pricing pressure and hence the declining margins.

Regulatory issues are also hampering the growth of the networking market in couple of areas such as:

• Unified Communications: While progress has been made for a single infrastructure PBX, the denial of permission for interconnectivity of enterprise voice networks to PSTN is a major deterrent for adoption of unified communications. Also with transformation of most telecom networks into an IP centric network, the opportunity exists for the regulators to free the market and enable low cost SIP centric services for the network buyers.
• 3G/WiMax Auction Delays: Lack of wireless high speed broadband services is delaying the launch of new applications to be made available for enhancing business productivity.
• Bandwidth prices in India is much higher compared to other countries. And regulatory challenge is not opening up the available copper access infrastructure, putting the mid market and SMB customers at a big disadvantage.

The Outlook
Budgets are crunching and projects are on hold for at least this quarter and probably next quarter also. Organizations want to reduce the operational expenses. Opex model offerings are being looked upon aggressively. More than ever, IT organizations are under pressure to improve profitability by linking technology implementations to business objectives. It is believed that as the backbone for IT communications, the network element for enterprise architecture is increasingly becoming critical.

Customers are looking for technologies and existing business processes to enhance communications, foster collaboration and boost revenues. CIOs are aware that the new generation workforce expects to work in an environment driven by technology development, adoption and usage.

There is an increasing demand for bandwidth savvy applications, such as video and multimedia which have resulted in the rapid growth, especially for service providers who then need to upgrade their infrastructure. So, CIOs are expecting a lot of transformation with regard to network integration.

The outlook for network integration industry for 2009-10 will be promising as the government is taking many colossal steps toward putting its basic IT in place for which network integration is a key enabler. The network integration market is expected to boom in the current financial year with more organizations going in for networking their businesses.

Arpita Prem
arpitap@cybermedia.co.in