DQ August 2nd Issue 2011 by Dataquest

INDUSTRY OVERVIEW

SPECIAL ISSUE

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Vol XXIX No 16 & 17 I August 31-September 15, 2011 (Combined Issue)

The Business of Infotech

Vol-III

BACK TO

GROWTH

Driven by impressive performance in the home market, IT industry registers its highest growth in three years 24%

96.1 INDIAN IT INDUSTRY 2010-11 2010-11: US$ 1=` 45.62 2009-10: US$ 1=` 47.58

50.4

40.0

66.4% EXPORTS ($63.8 bn)

77.2

` GROWTH 19% 12.9

ALL THE NUMBERS / 20

15.5

11.7 4.2

3.4

12.5

10.1 (Revenues in $ bn)

2010-11

33.6% DOMESTIC ($32.3 bn)

0.4

244 pages including cover

PERSONAL COMPUTERS / 59 MONITORS / 70 PRINTERS / 74 CONSUMABLES / 82 STORAGE PERIPHERALS / 84 UPS / 90 SMARTPHONES AND TABLETS / 102 PROCESSORS / 106 NETWORKING PRODUCTS / 108 SERVERS / 114 SECURITY / 118 STORAGE / 130 SYSTEM SOFTWARE / 140 ENTERPRISE APPS / 142 INFRASTRUCTURE SOFTWARE / 150 VERTICAL APPS / 156 DOMESTIC SERVICES / 164 IT SERVICES EXPORTS / 174 BPO SERVICES / 187 ENGINEERING SERVICES / 190 SEMICONDUCTOR DESIGN / 194 RACKS AND ENCLOSURES / 197 STRUCTURED CABLING / 207 ATM / 213 DISTRIBUTION / 217 IT TRAINING / 223 E-COMMERCE / 232 E-WASTE RECYCLING / 236 UNIFIED COMMUNICATIONS / 240

0.6

11.6

2009-10

`100

GROUPS IT SERVICES EXPORTS BPO EXPORTS OTHER EXPORTS HARDWARE SOFTWARE SERVICES

TATA / HP / WIPRO HCL / MAHINDRA

Special Subscription offer on page 224

CONTENTS August 31 - September 15, 2011

GIANTS

36 38 44 48 52 56

Group Overview

Tata Group: Differential or Integral

We are not talking about going back to the school calculus, but on the future roadmap of Tataâ&#x20AC;&#x2122;s IT companies HP Group: Converging on Cloud

The converged infrastructure (CI) approach is clearly the way to go for HP India; it perfectly synergizes various business functions, encourages cross-selling and cross-marketing and leads to harmonious functioning between various group entities Wipro Group: The Failed Experiment

The joint CEO strategy failed, Wipro was overtaken by Cognizant, low BFSI exposure is hurting...what does the future hold for Wipro?

HCL Group: Big Momentum

The 2 HCL group companies have ďŹ nally decided to compete

Mahindra Group: Tech Rise

Though the big merger did not happen, Mahindra Group moved a step closer to leveraging synergies within the group even as it went for a new tagline

REGULARS Online Content ...........................................................................................9 Edit.........................................................................................................12 Inbox .......................................................................................................14 Ganesha ..................................................................................................18 Afterthought..........................................................................................242 6 | August 31 - September 15, 2011

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THE DQ 20

20| Top View

143| Enterprise Applications: The Widening Base CRM and BI were the star performers as the applications market witnessed solid growth with mid-tier enterprises adopting in a big way

All The Numbers

Overview 27| The Year That Was The industry just failed short of reaching the $100 bn mark even as growth and innovation marked FY11 59| Personal Computers: Fighting it Out With news trickling in of HP deciding to do away with its PSG business, the Indian PC market is poised to see changes in market dynamics as competition will get tougher between Dell, Acer and Lenovo for the # 1 position 68| Monitors: A Larger Canvass Monitor market is rapidly shifting towards LED and demand for larger screens is scaling up, pushing small screens out of the league 74| Printers: Printing a New Paradigm Reducing capex led to growing adoption of MPS and web printing, new vendors entered into the fray and established players looked to tap upcountry markets 82| Consumables: Survival of the Fittest A burgeoning SME market, increasing internet usage in homes, and evolving methods in large enterprises, especially the government sector had a positive impact on the overall market 84| Storage Peripherals: Tech Consumerism The market started moving towards high-end products, as the products became more of fashion statements 90| UPS: Sustained Performance The UPS industry is slowly coming out of recessionary trends. Growth was not that impressive and in the end it’s all about vendors retaining their market share 102| Smartphones and Tablets: Getting Smarter In a year in which innovation ruled supreme, vendors who offered the best of hardware, form, function and apps emerged as winners 106| Processors: The Domination Even with AMD’s emergence later in the scene, Intel’s market position remained unshakable. In the smartphone segment, ARM captured the maximum market share 108| Networking Products: Infrastructure Drives the Market Cisco still leads the market, though other vendors have started giving stiff competition in certain sectors 114| Servers: Mixed Bag FY11 can be termed as far more benign compared to FY10. While x86 witnessed modest growth, the non-86 servers saw signiﬁcant degrowth 117| Security: Cyber Security: A Priority With growing online threats, both the network and content security market in India grew; UTMs is poised to become the single biggest market by the end of CY2011 131| Storage: Big Data on Cloud Nine Cloud computing and the big data concept were the primary catalysts behind the revival of the Indian storage market 141| System Software: Interesting Times Ahead With mobile and tablets becoming popular, the system software market is expected to undergo a complete transformation. Last year, though, was celebration time for Windows 8 | August 31 - September 15, 2011

150| Infrastructure Software: Significant Run Indian enterprises showed increasing interest in infrastructure software 156| Vertical Apps: Indicating a Healthy Market Solid growth in vertical apps is an indication of market maturity. Banking was the star performer with financial inclusion plans of banks driving adoption 163| Domestic Services: Think Global, Act Local Government projects like SDC, UIDAI, CWG, and technology adoption on cloud and mobility showed signs of a healthy market 173| IT Services Exports: The Year of Change From leadership to strategic visions, from business restructuring to pricing models, from insipid growth to promising figures, FY11 was a watershed for Indian software exports 187| BPO Exports: Transformation Time While many companies are transforming, captives have made their presence felt, for the first time in many years 190| Engineering Services: India is Engineering! The engineering services segment bounced back after the recession, catapulted by the beginning of big spending by the aerospace segment 194| Semiconductor Design: Upward Swing The global demand for electronic products and the need for product innovation acted as the growth drivers for this segment 197| Racks and Enclosures: New Awakening With the growing proliferation of data centers, the sales of enclosures and racks is increasing manifold 207| Structured Cabling: Back on Track The demand for high-end technology by end-users has brought an opportunity for the structured cabling business to grow 213| ATMs: Money Matters The present number of ATMs in the country is posing challenges as well as throwing up lucrative opportunities for the players 217| Distribution: Back with a Bang The national distributors are back, with the trend this year in the distribution segment being expansion within boundaries and contraction within geography 223| IT Training: The Modern Face of Education Post-recession. the Indian IT training segment is witnessing change in content due to change in demand, and focus is shifting from customers to employees, and from the private sector to the government sector and education 232| E-commerce: It’s Working This Time While investors have been vying to make investments, FY11 witnessed growing roster of acquisitions in all areas of e-commerce 236| E-Waste Recycling: Turning Threat into Opportunity The formal e-waste recycling segment is small and fragmented. But the industry is getting a lot of attention 240| Unified Communication: Leaders All With the landscape marked by leaders for different segments, consolidation can help cater to customer demands better

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DATAQUEST (not afﬁliated with Dataquest Inc., a division of Gartner Group, USA), is printed and published by Pradeep Gupta, on behalf of Cyber Media (India) Ltd, printed at M/s Karan Printers, F 29/2, Phase II, Okhla Industrial Area, New Delhi, published at D-74, Panchsheel Enclave, New Delhi 110017, India. Editor Ibrahim Ahmad. Distributed in India by Mirchandani & Company Ltd, Mumbai. Subscription (Inland): `1200 (24 issues), `2400(48 issues), `3600 (72 issues). Subscription (Foreign): US $145 (SAARC Countries), US $75 (Rest of the world) By Airmail. (For subscription queries contact our Reader Service Executive: rsedqindia@cybermedia.co.in) Dataquest does not claim any responsibility to return unsolicited articles or photographs unless accompanied by adequate returnpostage. All rights reserved. No part of this publication may be reproduced by any means without prior written permission from the publishers.

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Categories

FY 2010-11 In INR

Servers

FY 2009-10

In USD

In INR

Growth

In USD

In INR

In USD

2,709

0.6

2,699

0.6

Desktops

13,341

2.9

12,264

2.6

Laptops

13,101

2.9

9,337

2.0

Total PCs

26,442

5.8

21,601

4.5

Total Systems

29,151

6.4

24,300

5.1

Smartphones

8,796

1.9

4,465

0.9

105

Inkjet Single function

100

0.0

145

0.0

-31

-28

Laser Printers Single Function

550

0.1

642

0.1

-14

-11

Dot Matrix Printers

251

0.1

389

0.1

-35

-33

Inkjet MFDs

242

0.1

341

0.1

-29

-26

Laser MFDs

509

0.1

620

0.1

-18

-14

PoS Printers

250

0.1

147

0.0

Large Format Printers

131

0.0

102

0.0

Total Printers/MFDs

2,033

0.4

2,386

0.5

-15

-11

Monitors (standalone sales only)

2,624

0.6

2,203

0.5

Storage Peripherals

4,265

0.9

2,676

0.6

Consumables

4,339

1.0

3,467

0.7

Enclosures & Racks

524

0.1

452

0.1

3,278

0.7

2,980

0.6

17,063

3.7

14,164

3.0

Routers

2,966

0.7

2,648

0.6

Switches

4,421

1.0

3,081

0.6

Modems

378

0.1

340

0.1

WLANs

1,079

0.2

776

0.2

Structured Cabling

1,345

0.3

1,033

0.2

10,189

2.2

7,878

1.7

SAN

877

0.2

790

0.2

DAS

146

0.0

171

0.0

-15

-11

NAS

186

0.0

163

0.0

PCs

Printers/MFDs

UPS Total Peripherals Networking Products

Total Networking Products Storage

20 | August 31 - September 15, 2011

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top view

Products/ Services

Categories

Fy 2010-11 In Inr

Fy 2009-10

In USd

In Inr

Growth

In USd

In Inr

In USd

Storage Software

325

0.1

264

0.1

Secondary Storage

140

0.0

125

0.0

SAn Switches

304

0.1

133

0.0

129

138

Total Storage

1,978

0.4

1,646

0.3

ATMs

1,720

0.4

1,485

0.3

Unified Communications

1,829

0.4

1,475

0.3

151

0.0

118

0.0

Total Others

15,867

3.5

12,602

2.6

Total Hardware

70,877

15.5

55,531

11.7

ATMs, Unified Communications, Biometrics

Biometrics

Systems Software

System software

2320

0.5

1,691

0.4

Enterprise Applications

ErP

1625

0.4

1,495

0.3

SCM

717

0.2

571

0.1

CrM

956

0.2

738

0.2

1147

0.3

833

0.2

333

0.1

264

0.1

Total

4,778

1.05

3,901

0.8

rdBMS

1,629

0.4

1,434

0.3

Middleware

1,421

0.3

1,162

0.2

Infrastructure Management

1,365

0.3

1,160

0.2

development Tools

1,494

0.3

1,361

0.3

800

0.2

748

0.2

Total

6,709

1.47

5,865

1.2

Core Banking

1,084

0.2

858

0.2

PLM

684

0.1

561

0.1

Graphics Software

655

0.1

610

0.1

Telecom Software

1,322

0.3

1,213

0.3

134

0.0

112

0.0

Total

3,879

0.85

3,354

0.7

Total

15,366

3.37

13,120

2.8

BI Others

Infrastructure Software

Productivity Suite

Vertical Applications

Others

Total Applications

24 | August 31 - September 15, 2011

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Chris enjoys playing sports.

Chris is an IT professional.

Chris is motivated.

Chris gets recognition.

Chris achieves more.

Chris has an ISACA certification. 速

www.isaca.org/certification-dataquest

Recognition s Success s Growth December Exam Date: 10 December 2011 Early Registration Deadline: 17 August 2011

TOP VIEW

Products/ Services

Categories

FY 2010-11

Security Products

Network security

942

0.2

880

0.2

Content Security

630

0.1

460

0.1

1,572

0.34

1,340

0.3

Total Software

19,258

4.2

16,151

3.4

IT Services (domestic)

39,325

8.6

32,070

6.7

BPO services (domestic)

12,876

2.8

11,600

2.4

Gaming & Entertainment Services

3,176

0.7

2,639

0.6

Training

1,640

0.4

1,611

0.3

Total Services

57,017

12.5

47,920

10.1

Total Domestic

147,152

32.3

119,602

25.1

In INR

Total security

FY 2009-10

In USD

In INR

Growth

In USD

In INR

In USD

EXPORT Products/ Services

Categories

FY 2010-11

IT Services

Application Development & Maitenance

87,642

19.2

81,108

17.0

Infrastructure Services

27,602

6.1

22,922

4.8

IT Consulting & Package Implementation

16,783

3.7

12,342

2.6

8,432

1.8

7,053

1.5

Engineering Services

18,528

4.1

15,179

3.2

Others

54,773

12.0

37,717

7.9

Total

213,760

46.9

176,321

37.1

Semiconductor Design1

16,201

3.6

14,112

3.0

BPO Services

58,735

12.9

55,132

11.6

736

0.2

710

0.1

289,432

63.4

246,275

51.8

1,712

0.4

1,617

0.3

Total Export

291,144

63.8

247,892

52.1

Total IT Industry

438,296

96.1

367,494

77.2

In INR

Testing

Training Total Services Hardware

26 | August 31 - September 15, 2011

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FY 2009-10

In USD

In INR

Growth

In USD

In INR

In USD

DATAQUEST | A CyberMedia Publication

The Year That Was The Indian IT industry bounced back with a solid 19% growth

OVERVIEW

2011: An IT Numbers Odyssey The industry just fell short of reaching the $100 bn mark even as growth and innovation marked FY11 SHYAMANUJA DAS shyamanujad@cybermedia.co.in

fter almost three and a half months of living through all the numbers—growth figures, market shares, ups and downs, segmental numbers, sub-segmental numbers—it is extremely difficult to get yourself off that and tell the story—the story that many wait for throughout the year. The big message that we would like to give to the rest of the world—who are not into IT—the one line that many of you would put as the first slide in your ppts for the next few months. Can that story be told in a number—or for that matter, in a few numbers? Well, it could have been. But we just fell short of that. The Indian IT industry—that includes exports from India as well as the Indian domestic market for IT—managed to cross $96 bn. Had that figure been $100 bn, that would have been the story—our story, your story. The mainstream media would have picked it up; you would have discussed about it

28 | August 31 - September 15, 2011

for some time. Everyone loves a round figure. Especially, if it is big. The story that this year’s analysis throws in one form of numbers may be important, but not new. The exports-domestic equation has not changed drastically, though the domestic industry has grown slightly faster than the exports—it has been doing so since FY08, with the exception of FY09. The rupee growth and dollar growth disparity still remains—though it is not as different as it was 2 years back—when you struggled to find out whether the industry had actually recorded a good performance or not—so disparate were the 2 figures. Some individual segment numbers tell interesting stories—we will come to that—but they are not the story. The story that would have come in our writing of segments and company profiles, but unfortunately, cannot be summed up in a table like our Top View, is the fact that the economic slowdown,

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OVERVIEW

Top Domestic PlayersFor DQ Top 20 Guiding Principles Rank

Company

Revenue Revenue FY11 FY10

Growth

were adopted. Tough times also bring in innovations. And both the exports and domestic industry started focusing on genuine innovations. It was easier to come by for something that was still nascent. So, most of those tangible innovations are seen in the Indian domestic market. A strong belief that India could be a role model for the developing world drove the MNCs to carry out those experimentations, which they could export to other emerging markets. Many domestic-focused companies started looking at Middle East, Africa, and AsiaPac to try the India model there.

19,022

14,992

26.9

HCL Infosystems

11,773

11,836

-0.5

Ingram

9,766

8,824

10.7

Redington

9,274

7,024

32.0

Cisco

7,015

5,391

30.1

IBM

6,832

5,888

16.0

Dell

6,439

5,275

22.1

Exports: BPO is a Work in Progress

Intel

5,619

4,690

19.8

Both IT and engineering services markets bounced back though the BPO exports growth slowed down. This was the ﬁrst year in which not only did the IT industry see good opportunities, but it did not have to bother too much about currency ﬂuctuations—something that is almost as challenging for this industry as slower market conditions. Almost all large companies—with the exception of Wipro—registered good growth. Engineering services too bounced back emphatically. There too, India’s emergence as a market drove global aerospace industry to look at India, which fuelled their engineering engagements in India. In BPO, though, the industry is undergoing a major transformation. Almost half of the top companies are completely transforming themselves as next generation leadership takes over. BPO growth was the dampener in an otherwise good story in exports.

Wipro Infotech

5,487

5,268

4.2

SAP

4,374

3,204

36.5

Microsoft

4,334

3,575

21.2

Oracle

3,973

2,700

47.1

Lenovo

3,566

2,393

49.0

TCS

3,435

2,392

43.6

Acer

3,421

2,749

24.4

Schneider Electric India

3,390

2,260

50.0

Emerson Network Power India

2,725

2,500

9.0

Tulip Telecom

2,351

1,965

19.6

Samsung

2,208

1,664

32.7

Savex Computers

1,916

1,166

64.3

lasting for more than a year, made this industry really change—probably for the ﬁrst time in last 10 years or so, that is, after it became a globally respected industry. Some of those changes are very, very noticeable, such as accountability becoming a big buzzword and being manifested in so many leadership changes. Some of them were not immediately noticeable and some were partially noticeable, in bits and pieces. One of the big changes was that the slowdown made the industry far more mature. Today, they do not take things for granted. The exports industry started seriously looking at non-linear models—something that was till then only discussed in industry forums and were then forgotten. It proved its resilence alright, but it started believing that being headquartered in India does not mean you are blessed and would not face the challenges that others face. For the ﬁrst time, some of the global best practices DATAQUEST | A CyberMedia Publication

Domestic Market: The Global Target India’s domestic market was 1 of the global pockets of growth during the slowdown that continued in FY11 too. This made India into a ‘must-be present’ business location for most companies, perhaps this is why FY11 saw CEOs of most IT companies make a beeline to visit India. And in this landmark journey of transformation toward becoming a matured market, the new rule of engagement was utilizing technology for business advantage providing a solution customized to local requirements. Moreover, the IT usage moved on from the traditional maintenance and product support services for internal business improvements to adoption of customer facing projects like core banking and developing B2B platform. Customers actually tried upcoming technologies like cloud, mobility, social networking, etc.

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August 31 - September 15, 2011 | 29

OVERVIEW

Exports with Captives Shorter Rank Company

2010-11 2009-10 Growth (`crore) (`crore) (%)

got the beating this year as companies deferred IT spending. Verticals like manufacturing, infrastructure, retail, healthcare utilities, and education were the next level markets, with a lot of discussion around cloud. Predictably vendors too were toying with their plans of deploying private clouds to be on the cloud.

TCS

29,801

24,289

Infosys

25,477

21,141

Cognizant

21,393

15,581

Wipro

19,421

16,681

Domestic Market: A Segmental Overview

HCL Technologies

13,264

10,104

IBM India

7,349

6,442

Accenture India

5,502

4,464

Mahindra Satyam

4,797

4,855

-1

Hewlett Packard (including MphasiS)

8,634

6,713

Tech Mahindra

4,144

4,297

-4

Oracle (including OFS)

3,504

3,369

Capgemini

3,077

2,410

Patni

2,920

2,961

-1

Aricent

2,502

2,234

L&T Infotech

2,311

1,802

CSC India

2,267

1,937

Syntel

2,178

1,694

Polaris

1,395

1,216

Mindtree

1,388

1,205

Zylog

1,245

543

129

Battling a dismal FY10, servers grew marginally as market indications pointed to a revival of sorts as some amount of IT spending did happen for server purchases acting as the growth driver. FY11 was a year of virtualization as vendors took to aggressive campaigns promoting consolidation and virtualization. In x86 domain even though the overall growth wasn’t spectacular, but both IBM and HP had a good year attributing the demand to 3 key drivers: the SMBs started buying more x86 servers; large enterprises that had kept on hold their server buying decisions started refreshing their hardware; and both SMBs and large enterprises augmented their server infrastructure for future growth. The story in the storage market was starkly different. Shrugging off the recession aftereffects, FY11 saw the storage market going back to normalcy especially in the H2 of 2010 growing by 20% to clock `1,978 crore, making it one of the third biggest market in the APJ region as per IDC. While technologies like virtualization, de-duplication, thin provisioning, compression, and automated tiering started to ﬁgure high on CIOs agenda; it was cloud computing that garnered the maximum mindspace because as a technology it is changing the way storage companies do their business. EMC as the leader, took cue from the prevailing market dynamics, and in FY11 underlined Big Data (convergence of cloud and enterprise data) and cloud computing behind all its initiatives. In fact its historic product wherein it launched 41 new storage technologies and products too was a part of the same strategy. Its arch rival NetApp too aggressively chased for a bigger pie of the cloud market offering its storage technology to cloud-service providers across categories like IaaS, PaaS and SaaS. Like EMC, it too announced the single biggest product launch globally. But it was IBM that managed to beat its own forecasts ending the year on a good note, thanks to a solid sales performance especially the XIV (launched in 2009) ; and the refreshed DS8000

With the economic recovery almost complete, the market looked in ship shape in FY11. Customers preferred short-term projects with more visibility, domain knowledge, accountability of business, outsourcing linked to number of customers. The service providers meanwhile invested in acquiring skill and getting deeper into the vertical. From a vertical perspective, government/enterprises/SMB resumed IT spending. While a large part of business came from the BFSI as RRBs signed deals for core banking deployment under mandate from RBI for overall ﬁnancial inclusion, it was the government that contributed the lion’s share with its APDRP projects, state data center deals, UID project, CWG projects, or other standalone deals from various state authorities. With no large deals happening owing to the involvement of key players in the 2G scam, telecom DATAQUEST | A CyberMedia Publication

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August 31 - September 15, 2011 | 31

OVERVIEW

series with the fourth generation; the other product that proved to be the clincher for IBM was its Storwize V7000, part of the mid-range disk system, that saw good success in the SMB and midmarket space. Long a second cousin to the storage market, especially when it came to revenues, the peripherals market, came into its own witnessing a phenomenal growth as a result of focused strategy building by the vendors. FY11 being declared as the year of going digital also helped. Flash drives even though didn’t grew much technologically, witnessed a 30% growth, the Japan crisis acted as the damp squib affecting supplies. Flash cards meanwhile struck gold in the booming smartphones and digicams market resulting in a 50% growth, a quarter of sales came from the upgrades. Falling prices coupled with increase in the number of users of pen drives upgrading to external hard drives meant that the hard disk drive market grew by 30%. With the personal computing market making a comeback of sorts with an uptake in the commercial segment followed by education vertical in FY11, the market was abuzz with news of market giant HP deciding to quit the PC business. While its exit is sure to create a void for some time, Lenovo and Acer will be all too happy to lap up the market. Dell continued its dominance owing to its expanding base in the consumer and SMB besides its traditional strength in the large-enterprise segment. Looking to grow in the SMB market, it even chalked out a comprehensive SMB strategy including expanding on its SMB-dedicated PC range. But it was Lenovo that managed to steal the limelight billed as the fastest growing vendor. Coming back from the brink, it gave a solid performance in the enterprise relational business by re-working on its strategy addressing the mid and lower segments as well. In fact, it too like Dell devised speciﬁc tactics to tackle the 3 sub-segments within SMB with a customized approach and solutions for each. Notwithstanding its announcement to exit the PC business, business went on as usual at HP as it re-worked on its go-to-market perspective, by forming a strategic account team and a direct sales team apart from the channel approach. With economy showing an uptake in FY11, competition got tougher resulting in enterprises showing increasing inclination toward streamlining processes to shorten the business cycle, save costs, utilize time, and take timely decisions thereby giving an impetus to the enterprise apps 32 | August 31 - September 15, 2011

market, which had a growth trajectory of 22% overall. This resulted in not only good sales ﬁgures for vendors like SAP, Oracle, and Microsoft, etc, but also helped them expand their product portfolios. The double-digit growth can be attributed to increased spending by the public sector, BFSI, infrastructure, energy, and automobile. Apps like enterprise resource planning (ERP), supply chain management (SCM), customer relationship management (CRM), and business intelligence (BI) were in demand, but the growth in CRM and BI looked exhilarating. One welcome change observed this year was that unlike previous years the enterprise apps market was able to capitalize on 2 major challenges—penetration into the tier-II markets and bringing the burgeoning SMBs into fold with vendors making apps available targeted at the SMBs. Interestingly, it was the onset of cloud and SaaS platforms that formed the basis of the entry of the bigger vendors in the SMB market and not surprisingly adoption of cloud based apps wasn’t just limited to the SMBs but also the large enterprises as well. The vertical apps market growth in FY11 was driven primarily by the core banking and PLM markets as both these markets grew by more than 20%. While the core banking market’s growth was obviously due to the government’s agenda of ﬁnancial inclusion, the arrival of private banks too seems to be contributing its bit. Moreover, the competitive spirit of the market forced banks irrespective of size to adopt CBS for growth. PLM market meanwhile is on an upswing as Indian enterprises go global forcing them to innovate. Also with changing perceptions of enterprises, PLM is being seen as a business hygiene tool. However it is the OSS/BSS market that is expecting to see some downslide in growth in FY12 as telecom providers up their investments in upgrading their network infrastructure especially on security and network solutions.

Onto FY12 While the current year started with a lot of optimism and hope—both globally and in the Indian market—there have been fears of a second recession since the credit rating of US was downgraded. Global stock markets—a barometer of sentiments—have not done that well. While we keep our ﬁngers crossed, the Indian market is likely to withstand the pressure and move on. n

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GIANTS Rank

Groups

Page No

Tata Group

HP Group

Wipro Group

HCL Group

Mahindra Group

SEGMENTS Personal Computers ............................................................60

Vertical Apps.....................................................................156

Monitors .............................................................................68

Domestic Services ............................................................164

Printers ...............................................................................74

IT Services Exports ...........................................................174

Consumables ......................................................................82

BPO Services ....................................................................187

Storage Peripherals .............................................................84

Engineering Services.........................................................190

UPS.....................................................................................90

Semiconductor Design......................................................194

Smartphones and Tablets..................................................102

Racks and Enclosures .......................................................197

Processors ........................................................................106

Structured Cabling ............................................................207

Networking Products ........................................................108

ATMs ................................................................................213

Servers..............................................................................114

Distribution .......................................................................217

Security.............................................................................118

IT Training .........................................................................223

Storage .............................................................................132

E-commerce......................................................................232

System Software ..............................................................141

E-waste ............................................................................236

Enterprise Apps.................................................................143

UniďŹ ed Communications ...................................................240

Infrastructure Software .....................................................150

The Giants: The Top IT Groups Rank

Groups

Total Revenues (`crore)

Tata Group

39,872

HP Group

28,342

Wipro Group

27,176

HCL Group

27,114

Mahindra Group

10,608

The Share 8

Mahindra Group

Tata Group

HCL Group

HP Group

Wipro Group

Total: `127,997 crore

GIANTS

Differential or Integral We are not talking about going back to the school calculus, but on the future roadmap of Tata’s IT companies

self that is only differentiated, and not integrated may attain great individual accomplishments, but risks being mired in self centered egotism. Yet a person whose self is based exclusively on integration will be well connected and secure, but will lack autonomous individuality —Mihaly Csikszentmihalyi, thinker and psychologist

TATA GROUP

RANK RATAN N TATA chairman

Revenue by Businesses (%) TCS (including subsidiary/JVs)

95 18 Tata Technologies 1 Tata Elxsi 8 Tata Interactive Total Revenues: 39,872 crore Source: DQ estimates

Group Revenue Growth

7% 21%

31,753 9%

Source: DQ estimates

29,688

26% 39,872

2008-09

2009-10

38 | August 31 - September 15, 2011

2010-11

Every year when Dataquest deliberates on the future roadmap for the Tata group IT entities, it concludes about the Catch 22 situation the group, or more particularly TCS, must feel itself in this respect. Differentiate, or integrate, you can lose either way. Well, not always, but the right balance is tough. TCS continues to think long and hard about this. For long, many have asked why the various Tata IT entities don’t merge into TCS and come under a common umbrella. And they have a strong logic behind their thinking too. TCS enjoys more than a lion’s share of the group’s IT entities; others appear positively Lilliputian in front of TCS’ 88% share of the overall group’s IT revenues. In fact, the more ardent believers of this school of thought feel there would neither be any absorption impact for TCS nor anything might change for the smaller companies. In fact, it might be better for them to become part of a bigger brand. Yet there is a smaller group of analysts (and some of their thinkings might be a bit romanticized) who have the apprehension that niche players like Tata Technologies, Tata Elxsi or Tata Interactive Systems might get thoroughly assimilated, and lose their unique identities completely, if all get consumed by TCS. Many skeptics scoff that the only synergy between Tata’s IT entities was well encapsulated in Tata Motors’ launching a special promotional scheme for its Nano small car aimed specifically at Tata Group employees. It had offered a `25,000 discount to the top-end variant of the Nano to employees of TCS. This offer was open for a period of 10 days and the auto maker has said it received an overwhelming response from TCS. TCS employees were sold a special edition version of the Nano called the TCS Nano. The unique feature of this Nano is that it has a signature of Tata Group chairman Ratan Tata near the instrument panel in the interior. But what is the official take the Tatas have on this? Do they prefer an amalgamation into TCS or do they look to visit www.dqindia.com

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build up each entity individually. While senior of- is also making progress with the company setting ficials have been tight-lipped on this, ex-TCS CEO up a studio in the US. What this effectively meant S Ramadorai offered a look into the official line of was operational and tactical link-up between Tata thinking in an interview during FY11. The key ar- Elxsi, Tata Technologies and TCS on a project-bychitect in scaling up India’s largest software firm project basis. is now mentoring four mid-sized IT firms in the Even for CRL, after the launch of the supercTata group—CMC, Tata Elxsi, Tata Technologies computer Eka, the focus has now been on building and Computational Research Laboratories (CRL). software applications for it. TCS has incidentally Ramadorai has taken on the role of mentor with been helping on developing commercial applicaaplomb, both at TCS, where he is the vice-chair- tions in areas of weather modeling, molecular biolman and at the 4 fledgling Tata group firms, where ogy, space, security among others. he is the chairman. Each of the 4 companies has While Ramadorai does not rule out tactical synthe potential to be a TCS in its ergies where these companies RATAN N TATA respective sector, feels Ramadojoin hands for a common pitch or chairman rai. for specific contracts, the focus “This indeed is one of the will firmly be on scaling up opS Ramadorai, vice chairman, TCS most exciting assignments I’ve portunities for the smaller comundertaken. When you work with panies. True, they may mutually Natarajan Chandrasekaran, CEO, TCS smaller companies, new standleverage each other’s expertise ards are set. That’s how we built for delivery purposes, but the Patrick McGoldrick, MD, Tata Technologies TCS. Now there is another oponus as of now remains not in portunity to coach and mentor subsuming them into TCS, but Madhukar Dev, MD, Tata Elxsi younger people, help them to attempting to build more TCSthink big and help them to enes. Sanjaya Sharma, CEO, Tata Interactive Systems gage with all employees. In fact, for a group like Tata, Show them leadership and which is into various busineses P Bhaskar Rao, CEO, Nelito Systems help them to grow into leadership such as steel, automotive, manupositions in their organizations. facturing, retail, beverages, conIf they are nurturing big dreams struction, agro-industries and for their businesses, we can show many others, in both B2B and them to build an institution. The fact that they are B2C space, the company has tried intra-group unique and they are another TCS in the making in cooperation from time to time; but by and large, sectors they specialize in is important, whether it they have been tactical, go to market, levearing is animation, embedded systems, etc. Personally relationships or brand familiarity, more than a cospeaking, for me, there is a lot of excitement and herent long-term strategy. Tata Technologies, the learning to be done,” says Ramadorai. second largest Tata group company in our list, has Tata Elxsi has been one of the companies with gone to market with TAL; TCS and Tata Technolothe closest to what could be called synergies with gies have tapped opportunities together; and now, the other Tata IT companies. It was a business ini- JLR (a Tata group company) is a major client for tiated by Tata Industries ages back when Ratan Tata Technologies as well. Tata planned to enter new-age businesses. It is One of the model that has been proposed is a a company which is into 3 areas—design & de- big back-end services delivery firm (TCS is the velopment, industrial designing, and animation best fit) with strong but small specialized services & special effects. They have done some cutting- arms that tap various segments and opportunities edge work for onboard electronics, design of wa- while handing over the delivery to TCS or the conter filters. Visual computing is slightly different. tract manufacturing/sourcing firms in the group. It touches on aspects like special effects, which That model requires constant engagements that plays a part in launches of cars like Tata Motors’ go beyond responding to specific RFPs. Mahindra Manza, Tata Motors’ Aria, where the entire special Group, much smaller and less diverisified, has effects were created purely from the engineering tried this in specific segments such as aerospace data. So there was no actual car used for creat- and automotive. Tatas have a much bigger canvass ing those special effects. The animation business to play. n 40 | August 31 - September 15, 2011

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Converging on Cloud The converged infrastructure (CI) approach is clearly the way to go for HP India; it perfectly synergizes various business functions, encourages cross-selling and crossmarketing and leads to harmonious functioning between various group entities

HP GROUP

RANK NEELAM DHAWAN MD

p Business-wise Break-up (%)

Personal Systems (Notebook, desktops)

32 13 33

Enterprise Services

22 Imaging & Printing Server, Storage +Enterprise Software

Total Revenue : 19,022 crore

Group Revenue 27% 27,725

Growth

14%

Source: DQ estimates

19,059

21,751

2008-09

2009-10

44 | August 31 - September 15, 2011

2010-11

hough, technically, there is little rationale to consider HP as a group in India, the way the 3 business units PSG, IPG and EB work independently of each other, it virtually functions as a group entity encompassing 3 separate organizations. Dataquest has been harping on the homogeneity HP has been able to achieve within this heterogenous environment and FY11 saw a perfect culmination when HP grew not just as an overall entity, but even the 3 separate constituents recorded their own shares of growth. The achievement could not have come at a more opportune time as its newly appointed CEO, Leo Apotheker, made his first India visit (barely 3 months after being appointed). In line with Apotheker’s new strategy to bring innovation to the market faster, HP’s focus this year was on innovation in not just products and services but its go-to-market strategy and channel partner model too. For instance PSG, after having experimented with the telecom partner model, went back to its old national IT distributor model, terming it as ‘tweaking’ to suit market conditions and to build upon its share beyond top 35 cities; or IPG launching new breakthrough technology like e-Print putting printers on cloud or the hybrid delivery approach of assisting customers in data center transformation, application transformation and network transformation. In his first India visit as HP CEO, Apotheker who is the first HP CEO to visit India, exactly a decade after Carly’s visit, outlined HP India’s go-to-market strategy focusing on converged infrastructure (CI) as the backbone of cloud computing. Apotheker outlined a 4-point strategy for HP’s expanded market leadership by extending its leadership in managing and optimizing today’s traditional environments; leveraging HP’s core strength in cloud to build and manage next-generation cloud-based architectures; being the trusted partner to customers by enabling the seamless transition to hybrid computing models; and by defining and delivering the connected world from the consumer to the enterprise. A key element of a client’s Instant-On Enterprise journey, CI brings together data center, application and network transformation as part of its hybrid delivery approach. In fact for the last 2 years, HP has been working on the cloud and CI; however it was in 2010 that CI

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gained momentum and India, with 50 deals, stood der to adapt to the dynamic market conditions. The out as a leading country in the APAC with segments company intends to build upon its share beyond like IT/ITeS, manufacturing, banks and telcos now the top 35 cities primarily in the consumer and adopting CI. Some of the major deals included Es- SMB segments. sar, Mahindra & Mahindra, Sify (it launched InfraIn another interesting angle, on the traditional structure-as-a-Service through Blade System Ma- computing platform, the company is focusing on clitrix), Axis Bank, Indus Ind Bank and Aditya Birla ent virtualization, therefore, there is a clear indicaFinancial. tion of CI now moving into the consumer segment Even as each business unit under the enterprise as well. arm (ESSN) continued with its direct sales, the inThere were some minor management changes as tegrated CI approach boosted the enterprise busi- well—with Sunil Dutt moving on, Rajiv Srivastava ness by means of cross selling. This implied that took over the charge as head of PSG; Neeraj Sharma for any large customer, under the took over from Ravi Aggarwal NEELAM DHAWAN CI strategy, it offered the complete who retired as head, IPG. MD solution (application management, HP recently generated a network connectivity, data center shockwave across the indusRajiv Srivastava, design and build) and depending try with the announcement of COO & president, PSG on the complexity of the deal, ES shedding off the PC unit. After Neeraj Sharma, president, IPG & TS teams worked together to adthe storage, server, and enterdress the customer. prise software division that toMarshal Correia, director, enterprise services Thanks to the converged apgether contribute around 33% proach, its services business grew to the total revenues, HP India Biswanath Bhattacharya, director, technology services twice; and in FY12 HP is looking fetches around `7,432.64 cr (32%) from its PC unit, which to address the C&D class cities. Subhodeep Bhattacharya, director, networking includes notebooks and deskIPG also took the cloud route tops. The industry analysts are with its ePrint strategy (web-enabled yet to map the consequence on printers) complete with an email adthe largest technology company dress allowing you to print from anytime, anywhere as part of its Hit Print campaign. Focus- (in revenues) in the coming years, but it definitely ing beyond the metros, the company is hopeful of ﬁnding indicated the increasing focus on enterprise servtakers in the education segment particularly in the tier-2 ices. In India, the company witnessed a significant and -3 cities. Incidentally, much of the innovation of the web-enabled printers was done by HP India’s R&D labs. growth in its enterprises business, benefiting from Claiming to occupy a market share of 55% in a 3 mn unit the new strategy of converged infrastructure. The market, IPG leads in the large format category with a division, which was formed post the acquisition of EDS, grew by more than 30% contributing around 90% share. The PSG found something to cheer about as it 13% to the overall revenues. The company bagged managed to reclaim the #1 position from Dell. around 5 banking deals, including a Bank of BaroEven though it tasted minor success with the tele- da’s IT modernization deal and Bank of India’s RRB com partner model (introduced by its erstwhile PSG deal. It recently had announced to invest around president Sunil Dutt), his exit unintentionally coin- $1 bn for further nurturing the enterprise services cided with HP doing away with the model and going business. Interestingly, amidst the boosted budget, back to its old national IT distributor model (In- MphasiS, that fell in its lap post the alliance with gram Micro, Redington, Compuage and Savex were EDS, is readying to stand up on its own. Since quite a long time, MphasiS has been trying back). A few telecom-based regional partners like Unicom Telecom in Punjab and Chandigarh; Shali- to bring down its HP business and focus towards mar Enterprise in Haryana and HP were ditched, the non-HP channel to become more independent. however, some like Spectra (Delhi NCR), Shivalik In the past couple of years, however, this proportion (UP and Uttarakhand) and Linkworld Distribution came down slightly to 70% of the company’s business. Currently, MphasiS derives around 10% of its (WB and North East) remained. However HP justified the change in its distribu- revenues from HP as a service provider and remaintion model and termed it as ‘mere tweaking’ in or- ing 60% as a technology partner. n 46 | August 31 - September 15, 2011

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The Failed Experiment The joint CEO strategy failed, Wipro was overtaken by Cognizant, low BFSI exposure is hurting...what does the future hold for Wipro?

WIPRO GROUP

RANK TK KURIEN CEO

Revenue %

21 Domestic

Exports Source: DQ estimates

Group Revenue Growth

24,055

Source: DQ estimates

22,788

13% 27,148

2008-09

2009-10

2010-11

48 | August 31 - September 15, 2011

zim Premji has banked on management guru Peter Drucker’s assesment that “90% of the trouble we have with the chief executive’s job is rooted in our superstition of the one-man chief ” when he embarked on Wipro’s ‘Power of Two’ strategy whereby Girish Paranjpe and Suresh Vaswani were appointed joint CEOs; many rejoiced over Premji’s unconditional endorsement of Drucker’s philosophy, as opposed to Napoleon’s totalitarian views that ‘it’s better to have one mediocre general than than two brilliant ones.” Nevertheless there were several naysayers even when Premji decided to toe the Drucker line (and the list kept on increasing even as Wipro kept on harping about the success of the joint CEO strategy). Finally in FY11, the naysayers were proved right and the doubts whether Wipro’s joint CEO strategy would work in the long run turned out to be accurate. Though Azim Premji had strongly propounded the ‘power of two’ giving Wipro twice the leverage in growth opportunities, the company was quick to sacriﬁce the strategy at the alter of its faltering performance in FY11. Both Girish Paranjpe (who joined Silcon Valley start-up Bloom Energy) and Suresh Vaswani (now heading Dell India) left, while Wipro veteran TK Kurien was promoted to the hot seat with the mandate to restore the company’s fortunes. While the other members of the WITCH club have shown robust recovery from the recession in recent quarters, Wipro has been a relative underperformer, both in revenue and in operating margins during FY11. In Q1 FY12, Cognizant overtook Wipro in quarterly revenues; even in the DQ Top20 club, it has been upstaged by Infosys to the #2 spot after several years. The failure of the dual CEO model can not be attributed to individual capability. After all both Paranjpe and Vaswani have been very capable managers and successfully steered Wipro through various business challenges over quite a long time. It’s more about lack of communication, which is inevitable even in a group when there are 2 captains. These are 2 people who will work in different ways, and there are bound to be conﬂicting directions. Australian cricket coach John Buchanan’s infamous multiple captain theory with Kolkata Knight Riders in IPL is another well-known failure example of this model. Dual CEOs also means a lengthy decision-making process and contradictory viewpoints. It also means a lack of nimbleness in an organization. Some global examples where the

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joint CEO model has been brought to an unceremoniWipro also lacked a credible enterprise application ous end include John Reed and Traveler’s Sandy Weill service (EAS) strategy to deal with the commoditization at Citicorp. Unilever is another example. Within the of ADM, which accounted for 40% of its revenues. With IT industry, there have been such experiments, but the IT sector undergoing a structural shift in spending, hardly any have been successful. Sapient was one such away from ADM towards SI and consulting around EAS instance. HR experts also say that creating strategic (HCLT has gained in EAS consulting after Axon acquibusiness unit heads is much more efficient. When you sition), Wipro with its weaker consulting capabilities create an SBU, you give an individual responsibility for obviously struggled more than some of its peers. its growth and failure. But when you have a cross-vertiAnother reason why Wipro could not leverage the cal system, you end up with a metric style of working, turnaround was its supply-side constraints. During the which consumes time. slowdown, Wipro froze new hiring in a few quarters; Many though feel that the dual CEO strategy was it also lost people in a few quarters. This resulted in a stop-gap arrangement for Rishad higher churn among employees when TK KURIEN Premji to make his mark on the busithe market situation improved. AttriCEO ness. He is very involved in all the tion at Wipro was at 21.7% for the important decisions. And many anathird quarter, whereas at TCS it was Jatin Dalal, CFO lysts will not be surprised if in the 14.4%. Manish Dugar, head, BPO next few years he takes over as CEO. It would be unfair though to asRishad Premji, Anyway top management shuffle at sume that nothing went right for Inhead, strategy and M&A the peak of their careers is not new dia’s #3 IT company. In fact, prodSaurabh Govil, head, HR in Wipro. Ashok Soota or Vivek Paul, uct engineering was carved out from Jagadish Ramaswamy, perhaps better known than Premji as a vertical to a new service area, with head, mission quality faces of Wipro, left at their peaks excellent traction witnessed in autoRamesh Nagarajan, CIO and so had senior managers like motive, energy and utilities (smart Hari Hegde, Sudip Banerjee and Sudip Nandy in meters) and retail (analytics). Thanks head, global operations more recent times. to the Infocrossing acquisition made Anand Sankaran, While TCS and Infosys had gone earlier, infrastructure management head, Wipro Infotech ahead, it is now Cognizant which is flourished particularly with wins in on the verge of overtaking Wipro in retail, healthcare and telecom. Not the pecking order. Already in Q1 of to forget, Wipro also had the biggest FY12, Cognizant recorded higher revenues than Wipro. domestic concentration (22%) among all its peers. What is interesting is that the change in the manageOne example of Wipro’s success on achieving group ment at both Cognizant and Wipro took place within a synergy was visible in Wipro Infotech’s performance gap of around 15 months. Franciso D’Souza took the and its success in leveraging India for global reference. helm at Cognizant in January 2007, while Wipro intro- Historically, it was the expertise gained from handling duced its dual CEO model in April 2008. At the end of large and complex deals globally by Wipro TechnoloJune 2008, the quarterly revenue difference between gies that inspired the domestic subsidiary to look out for Cognizant and Wipro was around $380 mn. And con- something on similar lines in India. And while domestic trast this with AMJ of FY12, where Cognizant has gone deals that time were not attractive in terms of margins or ahead. complexities, persistence had paid off for the group. So what all went wrong...as it would be naive to In FY11 Wipro was miles ahead of most of its comblame it all on the joint CEOs? Wipro has not bro- petitors in the domestic services market and seriously ken new ground in creating a distinctive offering with challenging IBM for the top slot. It just earned $1.2 bn promising market potential or adopting a differentiated in Indian revenues, but Wipro Infotech now seems to client engagement approach. Wipro’s sales and mar- specialize in complex transformational deals like those keting expenses in IT services declined in FY10 versus with Delhi International Airport, Lavasa, LIC, EmployFY09. In essence, Wipro has tended to look relatively ee State Insurance (ESIC), Punjab & Sind Bank or a inward in the quest to improve profitability and for that turnkey project of the Finance Ministry. And in a comit ultimately had to pay a price. Wipro’s low exposure plete reversal of positions (but what is a welcome and to BFSI (27% as compared to TCS 44% and Cogni- total endorsement of Wipro’s intra-group synergies), zant 42%) was another major reason why its growth was now these deals are becoming references for Wipro’s slower than its peers. global market. n 50 | August 31 - September 15, 2011

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Big Momentum The 2 HCL group companies—HCL Infosystems and HCL Technologies—have finally decided to compete

HCL GROUP

RANK SHIV NADAR chairman, HCL Technologies

Revenue by Businesses (%)

45 52

HCL Infosystems

HCL BPO HCL Technologies

Total Revenues: 27,114 crore Source: DQ estimates

Group Revenue Growth

13%

13% 27,114

Sibling Rivalry

23,983

Source: DQ estimates

22,286

2008-09

2009-10

52 | August 31 - September 15, 2011

2010-11

or the ﬁrst time since Dataquest started ranking groups, the HCL Group—HCL Infosystems and HCL Technologies—overtook Wipro to be India’s second largest IT group with a combined revenue of more than $6 bn. This was possible primarily because of the industry leading growth by HCL Technologies and despite a ﬂat year by HCL Infosystems. But in its 35th year since inception, HCL as a group witnessed momentum overall. While momentum came to HCL Technologies in the form of impressive revenue growth, for HCL Infosystems, which largely operates in the Indian market, the momentum was seen mostly through changes in the organization. While the founder chairman Shiv Nadar had handed over the HCL Technologies CEO’s mantle to a much younger Vineet Nayar a few years back, in one of the best examples of succession planning in Indian IT industry, last year saw HCL Infosystems taking the cue as co-founder and chairman Ajai Chowdhry passed over the reins to Harsh Chitale, 21 years his junior. This was accompanied by a transformation within the company to make it a more IP-led, product-oriented company. The succession saw acceleration of growth in HCL Technologies but analysts believe that the kind of growth may take a little time to come to HCL Infosystems, as the new man at the helm is an outsider, unlike HCL T. Last year saw the culmination of the employee-friendly face that the latter has tried to project in the last few years, when the book written by CEO Vineet Nayar, Employees First, Customers Second became a business bestseller. HCL Technologies may have hit the headlines because of the book and dramatic statement but on the ground, HCL Infosystems has been a preferred employer within Indian IT for more than half a decade. It has occupied one of the top 3 slots in the Dataquest annual Best Employer Survey for the last 5 years.

The most notable decision taken by the 2 HCL companies last year was to end the unwritten understanding of not competing with each other. So far, while HCL Technologies concentrated on the market outside India, HCL Infosystems played in the home market. Though part of the Comnet business (division of HCL Technologies) was in India, that was because of historical reasons and not a strategic positioning. visit www.dqindia.com

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But last year saw HCL Technologies exploring the model or looking at products at price points no one opportunities in the home market as well while HCL has dared to touch or now creating an IP-led strategy Infosystems ventured abroad. Initially though, HCL for emerging markets, it has also treaded on new paths Infosystems focused on those markets where it could but without those disruptive, visible changes. export the Indian model—emerging geographies such Last 2 years have seen HCL Infosystems creating as Middle-East, Africa, and South East Asia. It started its impact in 2 of the emerging segments—governance businesses in South Africa and Nigeria and is look- and education. While both these have been traditional ing at inorganic growth with 2 acquisitions in Dubai. strong areas for HCL as a PC supplier, keeping in with Though part of it is distribution business which is not its change in positioning to more of a services comin direct competition with HCL Technologies, HCL pany, HCL I is trying to build newer models to service Infosystem is also exploring the services opportunity delivery in those segments such as bundled services in those markets. HCL Technologies draws 16% of its and solutions. revenues from the APAC market inOne big reason has been that SHIV NADAR cluding Japan. the top leadership at HCL had not chairman, HCL Technologies While Wipro has a similar divichanged too much in the last few sion in geographies with 1 division years. In fact, HCLIites quipped Ajai Chowdhry, chairman, HCL looking at India, South East Asia that the industry takes people from Infosystems and Middle East, while the other HCL I, and not the other way. But Vineet Nayar, CEO, HCL targets other markets, they are part in FY10 and FY11, the company Technologies of one company, responsible to the dropped that stance and hired Rahul Singh, CEO, HCL BSERV same set of shareholders. In case quite a few new faces to drive its of HCL, as both the companies are transformation and growth in the Harsh Chitale, CEO, HCL Infosystems listed separately, it could be real next few years. But there too, it competition. has taken a very mature approach Roshni Nadar, executive director, HCL Corporation While it could eventually go for of not shunning the old in favor of a rationalization of geographies the new. In areas that are mature with HCL I focusing on India, Afrisuch as internal functions, delivca, Midde East and Asia, and HCL ery, government vertical, the peoTechnologies focusing on the other, a senior executive ple in charge continue while in newer market facing does not rule out competition. What supports his as- roles, it has hired some of the best people from the sertion is the fact that while HCL Infosystem has gone industry. In fact, it undertook some reshufﬂing within to the Middle East with an aggressive plan in place, the company with veteran George Paul moving to head HCL Technologies signed a large deal with Dubai’s Al R&D from sales and marketing, while a relative— Majdouie Group last year. though not absolute—newcomer Rothin Bhattacharya In its earlier positioning as a hardware led com- coming in as the EVP marketing. With a CEO from pany with services around that, HCL I’s foray into the outside and an EVP marketing who is new, HCL I is same markets would not have been seen as a direct trying to send a strong message that it is driving some competition to HCL Technologies. But with the former change. transforming itself to a services led company, the comThe momentum of HCL was not restricted to only petition is more direct. the companies. The HCL brand too saw momentum as While HCL as a brand has always tried to do newer it was recognized as the 29th most trusted brand in things, whether trying to build a PC in early 80s or India by the Brand Trust Report 2011, where it feadoing R&D outsourcing out of India in the 80s over tured ahead of Infosys, Wipro, IBM, Apple and even the years, HCL Technologies has created a rebel im- Microsoft. In a separate brand survey, HCL ranked as age for itself, going for disruptive strategies such as the only Indian brand among top 5 technology brands targeting new areas such as BPO and infrastructure in India. management before anyone else did or even challengHCL Infosystems chairman Ajai Chowdhry was ing Infosys successfully to bag the Axon deal. conferred with the Padma Bhushan, India’s third highHCL Infosystem under the leadership of Ajai est civilian honor. He was also conferred an honorary Chowdhry, has still tried to do newer things but its po- doctorate by IIT Roorkee. Founder Shiv Nadar was sitioning has been less rebellious. In fact, be it build- conferred Dataquest award for ‘Lifetime Contribution’ ing Nokia’s distribution network on a completely new to the IT industry. n 54 | August 31 - September 15, 2011

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GIANTS

Tech Rise Though the big merger did not happen, Mahindra Group moved a step closer to leveraging synergies within the group even as it went for a new tagline

MAHINDRA GROUP

RANK ANAND G MAHINDRA vice Chairman & MD

Revenue by Businesses (%) Tech Mahindra (IT)

4 BPO (Tech Mahindra + Mahindra Satyam) 1 Mahindra Engineering

1 Bristlecone Mahindra Satyam (IT)

Total Revenues: 10,608 crore Source: DQ estimates

Group Revenue

More Cohesive

Growth

116%

10,020

6% 10,608

19%

Source: DQ estimates

4,640

2008-09

hough the much-awaited merger of Mahindra Satyam with Tech Mahindra did not materialize last year—some small legal bottlenecks coming in the way—Information Technology has now become one of the largest sectors for the Mahindra Group. Two companies of the group—Mahindra Satyam and Tech Mahindra—featured among the Top20 companies in Dataquest ranking, while one, Mahindra Engineering Services, featured among the Top250. The other IT company that is smallest among all—and does not feature in our ranking—Bristlecone, is a niche player in the ERP implementation and enterprrise consulting space. When the merger happens— going by the intent and ground realities, it may well happen in the current year—this will be the first time in DQ Top20’s history that 2 of the top 20 companies will merge. Needless to say, the merged entity will move up by a few positions in our ranking. This year, the combined revenue would have placed them at the #9 position, as compared to the current positions—17 and 18—held by Mahindra Satyam and Tech Mahindra, respectively. The group plans to start the merge process in October this year and expects to complete it in 6 months. Last year saw Mahindra Group introduce a new brand positioning, with the tagline Rise. The prime reason behind the change was that its earlier core belief—Indians are second to none—was becoming irrelevant with the company growing beyond the geographic boundaries of India. More than 10% of its employees were already non-Indian. The change was necessary to reflect that reality. This new positioning, launched in January this year, was the first major positioning change by the company in its 65-year-old history. This was also meant to keep the ground bound by a common goal, especially since in the last few years, it has acquired a lot of companies, many of them overseas.

2009-10

56 | August 31 - September 15, 2011

2010-11

Last year saw the Group companies leveraging each other in a more meaningful way. While the Tech Mahindra-Mahindra Satyam merger did not happen, the 2 ﬁrms have started working closely. In FY10, when Satyam was acquired by Mahindra Group, 2 of the key executives—CP Gurnani and Atul Kunwar—were shifted to Mahindra Satyam. Gurnani continues to be the CEO while Kunwar is based in the US and is spearheading its interest there. Last year saw closer cooperation even on the ground level. Traditionally, Tech Mahindra has never looked beyond telecom. But while working on telecom, the company and its JV with Movisit www.dqindia.com

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2011

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GIANTS

torola, CanvasM, have developed significant capability Increasingly, many of the customers in the engineering that would also help enterprise customers wanting to add services space (see analysis of Engineering Services segmobility to their enterprise IT systems. And Mahindra ment in this issue) are expecting their service providers to Satyam has plenty of those customers. Last year saw Ma- not just do the design but get it manufactured and sourced. hindra Satyam leveraging this strength to provide more Companies such as Tata Technologies and Mahindra Engivalue to its customer. neering Services, who have manufacturing/sourcing units However, the closest cooperation was in BPO. While in-house are cashing in on this trend and are providing the rest of the 2 companies still operate fairly independ- more value to the customers in what is known as design-toently, in BPO, the company decided to better leverage print or art-to-part leveraging group capabilities. the experience and capability of one of its seniormost exMahindra Engineering has also served the Systech ecutives—Sujit Baksi, a BPO industry veteran—and de- group in 2 more ways—by providing marketing support cided to operationally make the BPO and staff augmentation. It provides ANAND G MAHINDRA units of both companies work together. marketing support to group companies vice chairman & MD As a result, the BPO head of Mahinas well as helps them with design endra Satyam now reports to Baksi, and gineers when required. Ulhas N Yargop, CTO & even though the legal merger is yet to Another important decision was president (information happen, Baksi heads what the compataken last year in relation to going to technology sector) ny calls the Business Services Group, market as an end-to-end company. MaHemant Luthra, president with Mahindra Satyam BPO part of it. hindra Engineering Services, which (systems & technologies Last year also saw the company has started pursuing aerospace as a sector-Systech) appointing Ulhas N Yargop, who prevertical from scratch, decided not to SP Shukla, special group sides over the IT sector as Group CTO pursue it on a standalone basis. Now projects, member, group to coordinate investments in cutting the group has decided that Mahindra executive board edge technology, with a special focus Engineering and Mahindra Aerospace Vineet Nayyar, vice chairman on the medium to long term. In the new will jointly go to market to tap oppor& managing director, Tech role, he works with sector presidents, tunities and will only take projects Mahindra & chairman, Mahindra Satyam CEOs of group companies, and R&D that have a scope to do significant valheads to determine what contribution ue add through the end-to-end offerSujit Baksi, president, corporate affairs, Tech Mahindra technology can make to their strateing. In automotive though, Mahindra gic plans, liaise with universities and Engineering Services will continue CP Gurnani, CEO, Mahindra Satyam global R&D centers, and invest in key to pursue standalone opportunities, technologies. In fact, if this succeeds, though there too the Mahindra name Atul Kunwar, president, Mahindra Satyam this will be a first-of-its-kind across a has helped. It was one of the first enlarge business group in India. Intergineering services firm in India to do Prashant Kamat, CEO, Mahindra Engineering Services estingly, he also heads Mahindra Straa complete vehicle design program for tegic Innovation and Research Fund, Navistar last year. Ashok Santhanam, president & the Corporate Venture Capital activity Of late, Mahindra Aerospace has CEO, Bristlecone of the Group and works to ensure that started leveraging Mahindra Satyam’s the investments made are part of a engineering design capability. Aerobigger plan. space is the biggest vertical for Mahindra Satyam, acOne of the large sectors for the group is Systech, that is counting for more than 40% of the revenue. The first suctargeted at providing products and services to the manu- cess for this combined effort came in form of a deal from facturers in aerospace, automotive, and farm equipment. Eurocopter, an EADS venture, that is the largest helicopMahindra Engineering, one of the companies in our rank- ter manufacture in the civil/parapublic space. Mahindra ing, that provides engineering services, is leveraged by will work on manufacturing of subassemblies, engineerthe group in various ways. ing and customization of civil helicopters, and developBeing a services firm, Mahindra Engineering is more ment of specific market segments. global in its sales spread, whereas most manufacturing inWhile it is still not known how the engineering servtensive units have deeper presence in selective geographies. ices of Mahindra Satyam and Mahindra Engineering will Often, other companies in the Systech sector make use of be combined—Mahindra Satyam draws little more than the sales presence of the engineering services firm, some- one-fourth of its revenue from automotive—that is almost times in cross-selling and sometime in sales support. of the same size as Mahindra Engineering. n 58 | August 31 - September 15, 2011

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DATAQUEST | A CyberMedia Publication

Fighting it Out With news trickling in of HP deciding to do away with its PSG business, the Indian PC market is poised to see changes in market dynamics as competition will get tougher between Dell, Acer and Lenovo for the # 1 position

PERSONAL COMPUTERS

Personal Computers Market in India Growth

22% 26,442

Source: DQ estimates

21,601

2009-10

2010-11

(in crore ) With the ecomomy on its way to recovery, the Indian PC market too grew as the commercial notebook business is bouncing back to normalcy; consumer business too is picking up especially in the AIOs

60 | August 31 - September 15, 2011

STUTI DAS stutid@cybermedia.co.in

fter a rather dull 2 years of business, Indian PC vendors ﬁnally have something to cheer as the Indian personal computing (PC) market is all set for a re-bound. Almost all major vendors have geared up to meet the growing demand by introducing new products—HP has introduced the high-end AIOs; Lenovo is trying to address the SMB market, and has introduced its premium ThinkPad series for the segment and IdeaCentre, while market leader Dell launched the Inspiron series. This is not to say that the smaller vendors are not eyeing a bigger share of the pie—Sony intends to double its share this year while Toshiba unveiled a series of India-targeted notebook range. Gartner too echoes similar ﬁndings. The Indian PC market, says Gartner, totaled nearly 2.5 mn units in the Q2 2011, a marginal increase of 2.5% visà-vis the same period in 2010. Barring HP, all MNC PC vendors experienced double-digit growth in PC shipments in Q2 2011, says Gartner. In fact, MNC brands contributed more than half of the total PC shipments with shipments from Acer, Dell, HP, and Lenovo, the top 4 vendors, representing 50.4% of the market while the sole Indian PC player HCL accounted for only 6.6% of the shipments. Even as Dell continued its #1 stint with a 17% share in (Q2 2011),

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DATAQUEST | A CyberMedia Publication

Personal comPuters

Leading from the Front

Even though there has been a conscious shifting in Dell’s stance over the last 1 year or so—from a pure play hardware vendor, it’s now inching towards positioning itself as a complete services player—its success story continues in the personal computing market. The hardware segment continues to be a key part of its India success story. In fact, it’s already # 1 PC vendor with a market share of 17.8% (as per IDC Pulse Tracker, Q1CY11) owing to its expanding base in the consumer and SMB segments besides its traditional strength in the large enterprise seg-

DATAQUEST | A CyberMedia Publication

Desktop Market in India Desktop Market in India 9% 13,341

12,264

Growth 2010-11 2009-10

(%) 10

11 HP Others* 40

Assembled

9 Acer 9 Dell 9 HCL 6 Lenovo 6 RP Infosystems

Source: DQ estimates

Acer showed a surprising rise, as it pipped HP from the #2 position with a 12% share thanks to a good performance in the commercial segment. In the last 2-3 years, the Indian desktop market hasn’t seen much action owing to consumer’s preference to buy mobile computing devices. Add to it, a perceptible shift in the consumer mindset as aesthetics are gaining importance; no longer interested in buying an old-fashioned 2-piece desktop, vendors too are catering to this whim by launching new sleek All-in-Ones (AIOs). This year too it’s been no different. There has been a good traction of AIOs in segments wherein there is space shortage like airports and retail stores.

2009-10 *Includes Zenith, Apple, Sahara, Sony, LG, Wipro Fujitsu

2010-11

(in crore )

With consumers demanding good looking desktops, aIos are now seeing traction in home segment and in industries where space is a constraint

ment. With a 30.8% share in notebooks, Dell kept the market tempo high launching new notebook series one after the other like the Dell Latitude E5420, E5520, E6220, E6320, E6420, E6520, E6420 ATG laptops including more than 100 design improvements. To grow its base in the SMB segment, it even laid out a comprehensive SMB strategy including expanding on its SMB-dedicated PC range launching Vostro V130 laptop. However like previous years, this year too youth continued to drive its consumer business, no wonder Dell enjoyed 29.6% market share

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(Q1 2011). The market saw a series of interesting, first time launches including the new reinvigorated XPS line of products heralding the return of the XPS brand, industry’s first Skype-certified laptop range. The XPS brand joins the Inspiron and Alienware families in rounding out Dell’s comprehensive consumer portfolio. FY11 has indeed been a fantastic year for Acer India having played the third lead in the Indian systems market for long, it finally evolved into a force to reckon with thanks to pipping HP as the new # 2 in the Q2 of 2011 (in terms of unit shipments as per Gartner) owing to its

August 31 - September 15, 2011 | 61

Personal comPuters

64 | August 31 - September 15, 2011

Notebooks Market in India 40% 13,101

Growth 2010-11 2009-10

Vendor share in (%)

9,337

12 Acer

Lenovo

10 Others* 21 HP

HCL

Sony

Source: DQ estimates

single-minded focus on the commercial business that contributed the lion’s share (76%) to its revenues. For Acer, the consumer business was the dampener even though there were some spikes in the festive season. However, the company throughout the year announced a slew of product launches like the Aspire One Happy netbooks in 4 colors targeted at the young, fashion-conscious user powered by Intel Atom N455 processor, with the intention to re-invent the architecture without compromising the 8-hour battery life (a highlight for all Acer notebooks). Another significant launch was the new range of consumer notebooks and netbooks—the Aspire One 522 netbook and Aspire 5253 and Aspire 4253 notebooks powered by the much awaited AMD Fusion family of accelerated processing units. The highlight, however, was Acer’s outreach program launched to attract hinterland customers, introduced at the end of 2010. Apart from investing in Acer branding, it also opened up Acer Gallery outlets. Till date around more than 2,000 such outlets have been opened in 550 towns. Within the next 6-8 quarters, Acer intends to scale up apart from tripling the number of towns. The Indian personal computing market, however, was abuzz with one announcement that has the potential to change the market landscape. “HP’s board of direc-

Dell 2009-10 *Includes Apple, Panasonic, Samsung, LG, Zenith, Wipro, Asus, Fujitsu, Toshiba

2010-11

(in crore )

the commercial business aided ably by the education sector has been the key enabler of the notebook market doing so well. However with HP deciding to exit the Pc business, watch out for changes in the market dynamics in FY12. the arrival of tablets could see it eating into the share of the notebooks market

tors has authorized the evaluation of strategic alternatives for its Personal Systems Group (PSG), including the exploration of the separation of its PC business into a separate company through a spin-off or other transaction,” reads a statement on HP’s website shocking global investors. Analysts are reading HP’s decision to exit the PC business as part of its intention to focus on its software services division. This 1 announcement overshadowed all that PSG India has done in FY11. Leading the desktop market in consumer segment, with a 8.2% share (unit shipment-wise IDC), HP

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is betting big on its All-in-One (AIO) product range. With the launch of TouchSmart 610, the market is sure to see some action in the AIO segment as the TouchSmart 610 has a mechanism enabling it to slid down so that the display is lying almost face-up and at an almost-flat 60-degree angle, a position HP is dubbing as the recline mode. Claiming to have worked on bringing in a new look and a new configuration coupled with new features, in the commercial segment the company started the G Series notebook range, the G42, G62, that helped it to gain market share.

DATAQUEST | A CyberMedia Publication

PERSONAL COMPUTERS

After Chinese PC manufacturer, Lenovo, took over the IBM desktop business 6 years back, it never had it so good. It’s now coming up as a serious challenger thanks to its ‘protect and attack strategy’ with a special focus on consumer and SMBs. As the fastest growing vendor in FY11, its market share for the ﬁrst time touched 10% in Q1 2011 due to a solid performance in the enterprise relational business. As part of its strategy to attack SMBs, wherein its targeting double digit growth (currently its share is at 3.2%), FY11 saw Lenovo making the much-required changes in its market strategy for its premium brand, the ThinkPad. Always a strong player in the large enterprise segment, recession forced it to address the mid and lower segments as well, something which wasn’t done earlier. Meanwhile, the ThinkPad series continued to do well in large enterprises. It bagged the top 7 consulting companies as clients, 80% of the top telcos became Lenovo customers and out of the top 10 technology brands, 80% became ThinkPad customers. Product-wise, the company launched the ThinkPad L420 (greenest ThinkPad) and ThinkPad T420 and M91 ThinkCentre range of desktops with optional software, the hardware password manager enabling complete remote and central management of keys and passwords for self-encrypt-

DATAQUEST | A CyberMedia Publication

Desktop Market (vendor-wise comparison) All ﬁgures are in `crore

-8%

1,353 HP 1,472 1,141 Dell 858

46%

1,253 Acer 858 Lenovo

2010-11 2009-10

33%

62%

796 491

1,230 HCL 1,104

11%

Source: DQ Estimates

The Challengers

Lenovo with its ‘Protect & Attack’ strategy emerged as the fastest growing vendor in FY11; HP’s PC business meanwhile continued to see a decline, something which has forced the company to do a re-think on its PC business strategy

ing hard disk drives. Its SMB business grew more than 27% even as the company is devising speciﬁc tactics to tackle the 3 sub-segments within SMB with a customized approach and solutions for each. It also launched an entire range of laptops, desktops, and all-in-ones named Edge, part of the ‘Think’ family. In FY12, the company is trying to project itself as a PC giant boasting of the largest retail presence, this year it invested heavily in its retail network of LES Lites stores, close to 400 such stores have been opened. Incidentally LES Lites will also address both ends of the SMB market. Lenovo is also

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instituting an SMB focused tele-sales setup to ensure real-time support to the channel community. On the consumer front, Lenovo launched the Z Series making it one of the ﬁrst PC manufacturers in India to introduce PCs powered by Intel’s powerful ‘Huron River’ platform. Targeting entry-level users to multimedia users, the company introduced PCs based on second generation Intel Core Processors including the IdeaPad Z570 (a multimedia, graphics notebook); the G570, (entry level, feature packed notebook). Lenovo has been fairly active in the desktop market too with the launch of one of India’s ﬁrst desktop

August 31 - September 15, 2011 | 65

PERSONAL COMPUTERS

66 | August 31 - September 15, 2011

Notebook Market (vendor-wise comparison) All ﬁgures are in `crore

HP Dell

2,729 2,614 3,723

60%

2,334 1,600 1,401

14%

1,642 Lenovo 1,214

35%

Acer

HCL

1,030 187

45%

2010-11 2009-10

Source: DQ Estimates

with the rupee symbol on its keyboard, ThinkCentreM60e, and an AIO desktop the C205. ‘Slow and steady wins the race’ proverb seems to be guiding Toshiba India which is looking to double its notebook unit sales to 3.15 lakh unit in order to capture 7% share in 2011; in fact, it has set itself a target of achieving 10% market share by 2013. The company re-worked on its product portfolio. Apart from Satellite L630 that has been designed to work in Indian conditions with a wipeable keyboard; it also expanded its laptop range with the introduction of a powerful entertainment laptop with 3D playback capabilities, the Satellite A660 laptop. Moreover, customers can also convert their 2D DVDs to 3D DVDs at no cost. The company also launched world’s ﬁrst glasses-free 3D Laptop PCs which is able to simultaneously display 3D and 2D Content on One Screen— Qosmio F750. Business-front, it integrated its PC and TV businesses for better synergies and creating a wider network of customer touch points and service centers. It also came out with its integrated digital product business strategy wherein it will set-up an R&D centre in Gurgaon to develop localized products; a one-stop call centre supporting all digital products; expansion of its network of Toshiba stores from 3500 to 6000 intending to tap prospective customers in tier 2 & 3 cities. Besides Toshiba also wants to set up 100 exclusive stores by March-end 2012 and increase the number of its service centers from 140 to 200. Taking cue from the success of celebrity brand endorsement working for companies like Lenovo and Acer, Toshiba too signed Sachin Tendulkar as its brand ambassador. Signaling the comeback of successful celebrity brand endorsement trend in FY11, Kareena Kapoor as

Even as Dell is positioning itself as a services player, it continued to lead from the front with youth driving its notebook sales

the Sony VAIO brand ambassador seem to be paying off handsomely as during the ‘Go Vivid’ campaign in July-Aug 2010, the VAIO sales doubled. With VAIO sales contributing 20% to Sony India’s revenue, no wonder the company has allocated `50 crore for its marketing blitzkrieg including `25 crore for Kapoor’s ‘More color, more style’ campaign. Having already become the fastest growing laptop brand in India (according to IDC report 2010) with more than 100% growth, Sony is dreaming big and is now looking to double VAIO sales in India by selling 5 lakh laptop units in FY11 up from 2.5 lakh in the previous fiscal. The company has therefore strengthened its portfolio by launching 62 models classified into 4 categories– the S, C, E & Y series. The S series is the business series laptop, the E series focused on students and professionals and the Y series for first-time user; in short Sony is offering a laptop for everyone. To ensure that the product line-up reaches the masses, Sony has an aggressive expansion plan in place. While the distribution network would see an increase of about 700 outlets, raising the count to 1500 in FY11 visit www.dqindia.com

from 800 in the previous year; it would also open 30 exclusive VAIO flagship stores in FY11 taking the total number to 50 as a dedicated VAIO channel. One of the few Indian players in the PC market, HCL laid low all through 2010, it was only in 2011 that the company made some noises by launching the new range of ME laptops and desktops. The laptop series, HCL ME 1014 and HCL ME 1015 and desktop series, HCL Infiniti M A365 Pro are amongst the first dual-core computers in India powered by the latest second-generation Intel Core processors. The products are also available on quad-core platform. In line with government’s vision to provide affordable computing and to target the growing demand for kids’ education computing devices, HCL entered the segment with 4 models of HCL ME topper and junior topper series. The devices are for children in the age-group between 3 to 12 years. However with the new developments at HP, it’ll be interesting to watch how the Indian personal computing market shapes up and who competes with Dell in order to become the new #1. n DATAQUEST | A CyberMedia Publication

MONITORS

A Larger Canvas Monitor market is rapidly shifting towards LED and demand for larger screens is scaling up, pushing small screens out of the league

The Overall Indian Monitor Market Growth

2,203

Standalone Monitor Market

19% 2,624

2,216

Bundled Monitor Market

5% 2,327

2009-10

Source: DQ estimates

12% 4,951

4,419

2010-11

While all leading vendors are busy introducing futuristic models for India market, the overall monitor market is rapidly shifting towards LED and the demand for larger screens is scaling up, pushing small screens out of the league.

68 | August 31 - September 15, 2011

DRISHTI D MANOAH drishtim@cybermedia.co.in

he highly selective Indian customers kept the monitor vendors busy with new offerings throughout FY11. Last year saw a lot of vendors introducing larger screens. While 18.5” remained the strongest range, monitors ranging from 22”, 23”, and 24” also became substantial. Entry level 15.6” monitors brought some business in the beginning of FY11, but witnessed downslope towards the end. As far as standalone monitor market is concerned, LG and AOC remained the market leaders, closely followed by Samsung and Acer. AOC widened its global reach with Russian IT and consumer electronics distributor MICS adding a range of displays from AOC to its line-up. Under the terms of the agreement, MICS will push AOC’s LCD and LED displays in the Russian market. ViewSonic grew by 76% which was the highest growth seen by a monitor vendor last year, while LG remained ﬂat with just 2% growth. In the last quarter of FY11, AOC stood ahead of all in LCD monitor brands in India with 20.5% market share and y-o-y growth over 26%. The standalone monitor market witnessed 19% growth in FY11 with total revenue of `2,624 crore. The revival of the desktop market did translate into 5% growth for bundled monitors in FY11, however this was a 2% decline compared to FY10. The overall market witnessed a growth of 12% with total revenue of `4,951 crore.

Industry Trends LED based monitors have seen a noticeable increase in market share, with every major manufacturer adopting new technology. None has taken it as far as ViewSonic, though FY11 onwards, ViewSonic is phasing out all non-LED displays and decided that all of its PC monitors would be manufactured with LED backlights as opposed to the traditional, Cold Cathode Fluorescent Tubes (CCFL) backlights used by most monitors. The good news is that we might visit www.dqindia.com

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Projectors for Home, Office and Edcuation

PRO 8200 Full HD 1080 P 4

For Sales n General Inquiries Contact : Viewsonic India (P) Ltd., Unit No. 2,3,& 4 (GF), Tribhuvan Complex, Ishwar Nagar, Mathura Road, New Delhi-110065. Phone No. 011- 42603195-97

1. 2.

Our Authorised Partner : Redington (India) Ltd. : Vinayak Shenoy Contact No.:+ 91- 9382999433. email : vinayak.as@redington.co.in Aveco Technologies Pvt.Ltd. : Kanchan Mishra Contact No.:+ 91 - 9866697601 email : kanchan@avecoindia.com

MONITORS

Tracking the Monitor Vendors How they Grew

Market Share (%)

27%

Acer

534 419

Samsung

554 485

AOC

578 441

31%

582 573

BenQ

95 88

Viewsonic

116 66

Others

165 131

Samsung

14%

76%

2010-11 2009-10 26%

Acer

Others

5 4

Viewsonic BenQ

AOC Total Revenues: 2,624 crore Source: DQ estimates

Source: DQ estimates

As far as standalone monitor market is concerned, LG and AOC remained the market leaders, closely followed by Samsung and Acer. AOC widened its global reach with Russian IT and consumer electronics distributor MICS adding a range of displays from AOC to its line-up. ViewSonic grew by 76% which was the highest growth seen by a monitor vendor last year, while LG remained flat with just 2% growth. In the last quarter of FY11, AOC stood ahead of all in LCD monitor brands in India with 20.5% market share and y-o-y growth over 26%

have monitors that not only have a lower carbon footprint, but higher performance as well. A few other vendors like Samsung and LG also released very high-performing LED based monitors. Samsung launched its latest 70 series PX2370 LED monitor and ASUS came up with the ML Series of LED monitors, similar to the MS range, with curved stand. As for LG, its focus was more on B2B products sales, with an agenda to phase out the LCD monitors and focus more on LEDs. As for Samsung, ultra-thin panels become a less important feature and since a huge range of monitors are priced as to be appealing to the lower end-user, the company found no real beneﬁt in continuing to push this particular envelope. It demonstrated some high-quality, aesthetically pleasing offerings with 3D monitors and central station—a standalone monitor with a number of connection inputs on its base. In FY11, it focused more on mid and high-end monitors, also helping create the market for large format display. Meanwhile, if you’re still using a CRT monitor, consider ﬁnally taking the LCD plunge, if not LED. The 70 | August 31 - September 15, 2011

news is, CRT is almost extinct! The upgrading of CRT monitor also holds a very promising growth for the monitor industry in India. LG is planning various kinds programs to attract the commercial and consumer customers in India. Even in government enterprises, LG replaced many CRTs to LEDs last year and the project continues. Growth potential of BSFI is very high and that’s another reason LG is mobilizing its resources to tap this vertical with its LED monitors. On the other hand, small and squareshaped monitors are losing hold. One can safely conclude that in just another year or so, 18.5” will be the starting range of monitors, even in tier-2 and -3 cities.

3D Saga With urban consumers becoming more and more speciﬁc about their needs, monitor vendors are showing no delay in adopting new technologies. LG Electronics India has broadened its monitor portfolio and the electronics giant has introduced a host of other innovations in the LED monitor segment like the 3D cinema monitor (built with FPR technology), IPS monitor, E60, E81, and E visit www.dqindia.com

90 monitor variants in FY11. With the launch of an all new range of monitors, LG expects 8-10% of additional revenue in IT division with a marketing investment of `6.5 crore. BenQ however launched its BenQ XL2410T 3D LED gaming monitor in association with ZOWIE. It is built on 23.6 inches TN panel with 1920 x 1080 pixels resolution (Full HD), 120Hz and smart scaling, 2ms GTG response. ASUS’ PG276 claims to be the largest 3D monitor so far, measuring 27-inches, also joined by a 23-inch version, the VG236H. Both require NVIDIA’s active glasses, the 3D being stereoscopic. While most current 3D monitors in the market are still using TN panels, LG has decided to break this mould with an IPS-based FPR 3D monitor that the company will unveil soon. It launched its professional IPS Monitors in India, targeted at medical, graphic and DSLR users as well as gamers. It strongly believes that the launch of LG IPS monitors will be one of the key drivers in positioning LG as #1 brand in the monitor market. With vendors keeping close track of rising demands and wish-list, DATAQUEST | A CyberMedia Publication

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MONITORS

consumers have started to enjoy 3D gaming performance and movie experience at very reasonable price in India.

Pricing Remains Stable With weak demand continuing to plague the market for large-sized LCD panels, pricing saw a slight dip. Because of below-cost pricing towards the end of FY11, panel manufacturers became reluctant to reduce prices any further. For their part, brands are unwilling to accept any price increases and are pressuring suppliers to lower prices even more during negotiations. The existing line-up of Samsung’s LCD monitor range comprises of 7 models across its Myst eco, Lavendar, and Konect Plus series in the screen sizes between 15.6-23 inch, priced between `5,600-16,000. AOC improved

its price position and stood only next to Samsung and LG. Acer stood 4th in line. LEDs are getting cheaper too and its cachet in the market is getting greater. LG’s LED monitor range in screen sizes between 18.5-23” is priced between `7,000-13,000. Nevertheless, prices remained stable throughout the year. As for 3D monitors, the big question remains whether anyone really cares about it. While 3D looks great in theaters, consumers don’t necessarily want to spend a lot of money on it at home. There is some support for 3D gaming though. ViewSonic and graphics company Nvidia teamed up to provide a new generation of 3D monitors. ViewSonic recognizes some of the cost concerns and that’s why it is selling its new monitor

version which can display images in 1080p, or full high-deﬁnition resolution for a sharper 3D image, for $499. That’s steep compared to $250 typical monitors, but it’s a lot cheaper than past versions. The companies are working on an ecosystem that could eventually be very appealing to consumers, particularly as prices for the 3D technology come down further. We can only hope that at some point the 3D imagery will come along for free with most TVs, monitors and other gear. Till then, 3D is not an easy buy. While all leading vendors are busy introducing futuristic models for India market, the overall monitor market is rapidly shifting towards LED and the demand for larger screens is scaling up, pushing small screens out of the league. n

Unisys Cloud 20 / 20 Version 3.0, India’s biggest technical paper contest is back. And, this year we are going international. Demonstrate your technical prowess. Compete against the best minds in India and China. Showcase your innovative and path-breaking technology ideas. For more information, visit: http://utﬁ.co.in/ or http://www.app3.unisys.com/common/about__unisys/Cloud20-20V3/index.html Send us an email at UTFI@unisys.com Don’t miss the important dates: Aug 22, 2011: Launch Oct 30, 2011: Last date for registration and submission of abstracts Nov 22, 2011: Announcement of shortlisted candidates Jan 01, 2012: Last date for ﬁnal paper submission Feb 01, 2012: Announcement of winners

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August 31 - September 15, 2011 | 73

PRINTERS

Printing a New Paradigm Reducing capex led to growing adoption of MPS and web printing, new vendors entered into the fray and established players looked to tap upcountry markets

he printer segment is a typical example of mixed survival of numerous companies while innovation is driving the scenario to new heights. Recession affected the printer segment during FY10, but till Q3 it gathered a slow pace, while the decline in Q4 is surely a cause of concern. Usually, Q4 of every ﬁscal witnesses a dip in sales as companies prefer to take a decision after the budget, and sales gathers pace during the remaining quarters. Owing to macroeconomic factors and need to adhere to RBI rules, the business has received a pinch. During FY11, on an overall basis the segment reﬂected a dip of 5% but there has been a strong drift towards purchase of multi-function devices, as there was an increased awareness that color printers are affordable. But the sales of printers is dependent on numerous factors. Even the Japan earthquake had a lukewarm impact on the segment as many companies like Canon, Xerox felt the heat. FY11 was also witness to a major trend of reduction in prices of printers by approximately 10% as a competitive measure while there was an increase in volume of units sold.

The Indian Printer Market Growth

-1%

2,137

-5%

2,033

Source: DQ estimates

2,166

2008-09

2009-10

2010-11

If recession affected the printer market during FY10, during FY11 the segment was on a revival mode but Q4 reflected a deep dive. The decline in the hardware segment was offset by the growth in the managed printer service segment

74 | August 31 - September 15, 2011

SHILPA SHANBHAG shilpas@cybermedia.co.in

A Quick Dossier The printer segment is reflective of trends, namely, relation with the sales of PCs and laptops (enables cross-selling); growth of larger enterprises causes consolidation while growth of SMEs signal fragmentation. With printer sales linked to PC sales and newer technologies like smartphones, tablets, etc, vying for attention, printers are falling in the danger zone highlighting the need for innovation as the saving grace. Even trends like e-payment of bills negating the need for printing bills, eco-friendly moves may affect sales. While, technological innovations have taken centerstage as energy efficiency, reduced expenditure, intelligent space usage, etc, have become the need for customers. One of the first to jump on the bandwagon of innovavisit www.dqindia.com

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PRINTERS

76 | August 31 - September 15, 2011

Single Function Inkjet Growth 2010-11

145

2009-10

-31%

Canon

Source: DQ estimates

100

Epson

3 Others

FY10

Total Revenue :

100 crore

FY11

(in crore )

Even as revenues witnessed a southward drive, HP maintained its grip over single function printer market

Multi-function Inkjet 341

Growth 2010-11

2009-10

-29% 242 Canon

15 14

Epson

Source: DQ estimates

3 Others HP FY10

Total Revenue :

242 crore

FY11

(in crore )

This market did not reflect any major change in the shares compared to FY10

Single Function Laser Growth 2010-11

% 642

2009-10

-14% 550

Canon

34 8

52 HP

Samsung

Source: DQ estimates

tion is HP with its cloud printing technology (ePrint) in the printer segment. But for these devices to witness traction, there is a need for security and increased penetration of computing devices, as only 8 mn PCs and laptops were sold in 2010 alone. As the market is witnessing a shift towards MFDs, demand for laser SFDs is on the decline. Apart from the competition being offered by new devices, even new entrants are expected to change the already competitive market dynamics. Last year, Dell entered the marketplace ruled by HP, Canon, Epson, and Samsung by launching an array of offerings for home ofﬁces, small and medium businesses, etc. Though Dell may not appear as a serious cause of concern, but in the long term owing to its strength in the PC business it might threaten the others. Meanwhile, Konica Minolta which opened an offshore development center in India in 2007 by partnering with HCL Technologies, has made its entry backed by its range of commercial printers. Its product line, ‘bizhub’ offers a range of solutions for SMEs and large ofﬁces, monochrome and color, printers and MFPs. Apart from new entrants, vendors are acquiring new channel partners to increase their penetration in tier2 and tier-3 cities in India. While HP has a strong presence, Canon is eyeing tier-2 cities like Ahmedabad, etc. Meanwhile, WeP Peripherals also intends to match footsteps by increasing presence in tier-2 and tier-3 cities like Nagpur, Latur, etc. Xerox made a few changes in its go-to-market strategy by consolidating its regions and also strengthened its channel strength (by introducing new partners, new schemes ensuring RoI, implementing a revenue share model, etc). Epson which completed 20 years of its presence in India, introduced channel partner programs like nDimension and nSolution, and

5 Xerox 1 Others FY10

Total Revenue :

550 crore

FY11

(in crore )

Both HP and Canon continued to enjoy a major share of the pie of the market that saw a dip

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DATAQUEST | A CyberMedia Publication

PRINTERS

78 | August 31 - September 15, 2011

Multi-function Laser %

Growth

Others

4 Xerox 1Epson

HP FY10

Total Revenue :

2009-10

509

Canon

2010-11

Source: DQ estimates

-18%

620

Samsung

FY11

(in crore )

509 crore

Canon, HP and Samsung continued to be market leaders owing to the increased demand for MFPs with both large and small organizations making investments

Dot Matrix Printers 389

Growth 2010-11

-35% TVSE

2009-10

251

23 22

WeP Source: DQ estimates

also launched E Cubed and Star outlets. For Epson tackling the consumer segment, is a challenge. During FY11, vendors are matching footsteps with this trend following ‘customer is king’ policy with the motive to grow closer to their customers. The focus of companies now is to adopt a holistic approach, with all services under the same roof, in order to increase its reach and real-time solutions being offered which will lead to vendor success in the future. Approximately 20-30% growth is estimated in the MPS segment owing to vendors’ shift in focus. It is expected that as MPS becomes a predominant trend, printing function will become increasingly centralized and networked, thereby leading to a larger adoption of MFPs. Xerox is offering XPPS for large enterprises taking into consideration the demand for MPS. The year 2010, saw the emergence of new technology solutions incorporated into MPS offerings such as cloud, analytics, and green solutions—a clear consolidation of dealers or distributors with vendors and acquisition of independent MPS providers; partnerships across the IT outsourcing, business process outsourcing industries, or acquisitions in this market. Channels are starting to play a more active role in the outreach to small and mediumsized businesses. In relation to MPS space, as the trend moves towards managing the infrastructure, providing better solutions, HP has been winning more projects that are annuity based. According to Photizo Group, a consulting and research ﬁrm, it is estimated that MPS will account for 35% of the total imaging market in 2012. Canon India, with clients like Maruti, MindTree, and others from the FMCG, pharmaceutical and banking sectors, intends to achieve the `100 crore mark from MPS by 2011.

53 2 Others Epson FY10

Total Revenue :

251 crore

FY11

(in crore )

Even though the market reflected a southward drive, Epson continued to gain from strength to strength

Boosting Growth According to Gartner, there has been a shift at a CAGR of about 24% in 2010 towards consolidated devices owing to increased buying by SMBs, a growth of 88% till Q3, which is expected to cross the mark of 100% in 2011. According to Gartner, all the major printer vendors recorded double-digit growth. BFSI, healthcare, education, government, retail, telecom, and manufacturing expected to be the growth engines leading to increased business spending in India. But for FY11, government projects, SMEs, education segvisit www.dqindia.com

ment, etc, were the segments that reﬂected major contracts. According to Gartner, vendors are increasingly targeting the defence and power segment which earlier reﬂected a penetration of 1-5% and is expected to increase to 5-10% in 2011. For HP, education and government segments were the focus and intends to continue it, while Indigo and WebPress are driving the business. Meanwhile for Canon, whose peripheral division recorded a growth of 66% in 2010, SMEs, government (hospital modernization project, education program, state DATAQUEST | A CyberMedia Publication

PRINTERS

Large Format Printer 28% %

Growth

131

2010-11

Epson

Source: DQ estimates

Others

16 52

2009-10

102

Canon

HP FY10

Total Revenue :

131 crore

FY11

(in crore )

Even though the market witnessed a northward drive, the share of the major players remained unchanged

PoS Printers 70%

Growth

250

2010-11 2009-10

TVSE

25 13 9

WeP Epson FY10

Total Revenue :

250 crore

The Road Ahead

Source: DQ estimates

147 Others

FY11

(in crore )

PoS printers witnessed a northward movement owing to greater implementation in the retail segment

government projects—Maharashtra, UID, Police department) marked FY11. For Xerox, BFSI, retail, government projects, SMBs were offering good deals while Gujarat state is reﬂecting good traction for textile printers. While for WeP Peripherals, new customers (SBI, Punjab National Bank) being empaneled with UIDAI for Aadhaar and tieups (Posiﬂex, Avision, Memjet) marked FY11. It intends to increase its reach through its current strength of branches. Growth in the inkjet printer segment was supported by SMEs while 80 | August 31 - September 15, 2011

printers are slowly bearing the impact of the preference of thermal printers. Emphasizing its focus towards the POS segment, Epson launched 2 new models. Banking and government enabled Epson to achieve its goal in the dot matrix printer segment, which reﬂected a growth of 22%. Even its penetration into the coffee shops and retail stores enabled Epson to maintain its forte. Even WeP Peripherals recorded a 50% business as retail stores adopted the automation formula while high-speed enterprise printers also reﬂected a good traction. According to Gartner, there is an increased demand for laser MFPs with both large and small organizations making investments. It has been noted that even though large organizations use both A3 and A4 devices, there is a tilt towards A4 MFPs among businesses of all sizes.

consumers supported growth for laser printers for Canon. The SMB segment is growing much faster than the enterprise segment, hence the demand for network printers is also on the rise. Inkjet printers are receiving a lukewarm response, and have been mainly riding on the back of the consumer segment. The SOHO and education sectors are reﬂecting higher acceptance of serial inkjet printers. According to IDC estimates, monolasers comprise more than 90% of the market while the remaining is color. Point of sale visit www.dqindia.com

Factors like content explosion, digitization, acceptance of cloud solutions, and awareness about the need for better connectivity, have the power to change the market dynamics. This is because the printer market is closely linked to the developments in the IT industry. With increase in the usage of devices like smartphones, tablets, etc, there will be need to integrate the devices with the printer in order to offer it a competitive advantage. Hence, it can be aptly said that integration moves will take the market to new horizons. With new entrants in the ﬁeld that has an unchanged market share of each vendor, ensuring customer loyalty is going to become of utmost importance to grab a bigger pie. Increased adoption of technology and importance of customer loyalty is expected to make the marketplace an exciting place full of new developments to look out for. n DATAQUEST | A CyberMedia Publication

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CONSUMABLES

Survival of the Fittest A burgeoning SME market, increasing internet usage in homes, and evolving methods in large enterprises, especially the government sector had a positive impact on the overall market

AKANKSHA PRASAD akankshap@cybermedia.co.in

n pursuit of gaining market share companies adopted various strategies that helped in building deeper client relationship. They invested in new strategies and geographical expansion.

Survival Strategies

Indian Consumable Market Growth

15% 55%

25% 4,339

3,467

Source: DQ estimates

3,015

2008-09

2009-10

2010-11

High demand from SMBs and home segment led to overall growth of consumables

82 | August 31 - September 15, 2011

While in FY10 the consumable vendors worked toward spreading awareness of original consumables, in FY11 they further evolved with their approach toward the supplies. They revisited the concept of calculating the cost per page (CPP) and introduced it for ink cartridges as well. This concept gained most popularity among all the original equipment manufacturer (OEM) vendors, who no longer talked about the pricing of the cartridges alone, but advocated the total cost of ownership (TCO) perspective. As a result, there was further fall in the prices of the cartridges that were sold as a bundle with the hardware, especially at the entry level. HP introduced `425 for a black cartridge and `610 for color cartridges that claimed to print up to 600 pages per cartridge. This offer started with 4 models, and the company is looking forward to extending this to 10-15 variants where average CPP would be around 0.72 paise per page. Following similar low-cost, low-yield strategy, Epson came up with a bundle of 1 black and 3 color inks that are as low as 0.10 paise per black page and 0.20 paise per color page. The starting offer is for `250 (black) for more than 100 pages. On the other hand, Canon believed in high yield. Its cartridges started with `905 (black) for more than 300 pages. However this pricing was challenged by market, claiming that in real terms, the discount in prices of the cartridge were not proportional to capacity of the cartridge, and made the customer, eventually, pay more. And this became the selling point for the other players. Also many of these third party vendors grabbed OEM market from on-demand reďŹ lling, where customers could reďŹ ll and pay for just 1 required color and not the entire pack. Another trend was Managed Print Services (MPS) that saw wide adoption in the market. Though instituted by printer vendors to look at the entire life cycle management of the hardware (from purchase to end of life), the OEMs/remanufacturers/reďŹ llers extended it further to cartridge management. Canon realized around 28% increase in sales of copier multifunction with the help of this program. Amidst the concern that lot of customers, especially SMBs, preferred buying OEM cartridges to abide by the warranty and repair conditions, MPS visit www.dqindia.com

DATAQUEST | A CyberMedia Publication

CONSUMABLES

was effective tool for the remanufacturers in securing a few SME and enterprise clients and increasing sale by at least 8-10%. An international report challenged this theory stating that warranty of the cartridges did not apply to malfunctioning of hardware caused due to third-party refilling. It was observed that customers got further smarter in defining the printing needs. They further consolidated the IT infrastructure in what they defined as work group printing. The opportunity was in increasing demand of photo-printing, high-yield printing solutions, ecofriendly paper usage. Government, BFSI, insurance were among the major buyers. Understanding it, the re-manufacturers took up the entire service and warranty responsibilities, and were successful in gaining share in large enterprises. But their bigger challenge was availability of doctored and degraded cartridges that was discouraging wide adoption of compatible cartridges. Indrayani Sales, a Mumbai based importer and distributor of remanufactured supplies aims to change this dynamics and customer perception by supplying better and performance oriented cartridges. The company has set up a facility that can manufacture upto 1lakh cartridges. The company has also received interest from internal re-manufacturers like US based Clover and Canada based Printfleet.

Consolidating Ecosystem Interestingly percentage-wise the numbers were in sync with the hardware sale, which reﬂected that OEM

Cartridge/Toner wise Break-up (%) 41 Laser

Inkjet

DMP

Source: DQ estimates

Dot Matrix printer is slowly reaching phase-out stage and is growing negatively

Vendor wise Break-up (%)

Compatible

25 40 OEM

20 10 5

Refill Grey Counterfeit

Source: DQ estimates

If re-manufacturers are projecting price as their USP, vendors have started talking of TCO for gaining market share

sales was uniform, a lot of growth happened in the other pie. Another evidence was the attachment ratios that remained stable. Inkjet printers were around 2.5 and that of laser cartridges were around 1.5. Majority growth came from SMEs and home users. But it looks that the players are now getting aggressive toward capturing the large enterprise and would see more traction in that segment in coming years. In the overall pie,

CPP Comparison Printer Brand

Black Ink (per INK)

Colour Ink

`425 up to 600 pgs

`610 up to 600 pgs

Epson

`485 up to 250 pgs

`485 up to 500 pgs (per ink)

Canon

`905 more than 300 pgs

`1,231 more than 300 pgs (per ink)

Vendors are coming up with various options to bring down CPP

DATAQUEST | A CyberMedia Publication

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Inkjet business (demanded by SOHO, HOME ) grew by 15-20% and toners by 20-30%, while DMP’s business declined by 28%. Compatible vendors that had entered the market a couple of years ago and slowly grew opening more than 100 stores could not change the dynamics drastically. OEMs still ruled the roost with majority of the market share. Re-feel, a Kolkata based cartridge re-manufacturer alone added some 5,000 customers largely home users and SMEs. It has expanded the network to about 120 exclusive and 12 franchise stores. Another player, Cartridge World, planned to have around 250 stores by end of this year. Currently, it has more than 100 franchised outlets. It also partnered with Croma (large format retail store) to set shop-in-shops. FY11 was also the year of getting the right start for right business opportunity. Many smaller players succumbed to competition and vanished from market, while a few like Cartridge Café and Print Studio are surviving on the edge. As per a rough estimate, the cartridges ecosystem today consists of around 10 OEM vendors, 100 re-manufacturers, and 2 lakh reﬁllers. Roughly, raw materials of `200-300 crore are imported in the country. Technology adoption too played a smaller, but signiﬁcant, part in this story of evolution. HP launched toner cartridge authentication (TCA) program for identifying the original cartridges. The new software is now working on building a bar code reader that could identify the real cartridge though a bar code tag. However this did not receive expected response from the customer. Epson launched a new printer that incorporates designed components like original ink tanks, integrated ink tubes and a special choke valve, While Samsung introduced the new concept for its laser printers, which is Toner Save mode. n August 31 - September 15, 2011 | 83

STORAGE PERIPHERALS

The Tech Consumerism The market started moving towards high-end products, as the products became more of fashion statements

Y11 was the year of going digital. Information was growing like never before and users continued accessing their data from more than one device, while a few had more than 3 devices, and hence building multiple storage points. Following the trend, storage peripheral witnessed a phenomenal growth across all categories namely, ﬂash drives, ﬂash cards, external hard drives, MP3/MP4, and digicams. A majority of this growth is a result of focused strategy building and aggressive branding by the vendors. As a result, a few Japan based vendors like Sony, Canon, Nikon, SanDisk, and many more could turn around the anticipated loss to gain and growth. While a few players Seagate, Apple, and Sony remained at the leading position in their respective categories, a few players like Kingston saw negative growth in numbers and share.

The Ever Growing Storage Peripherals 59% 4,265

Growth

AKANKSHA PRASAD akankshap@cybermedia.co.in

36%

2,676 Source: DQ estimates

1,966

2008-09

2009-10

2010-11

The storage peripheral market comprises of Flash Drive, Flash Cards, MP3/ MP4 players, External Hard Drives and Digital Cameras. Each of these sectors witnessed growth in FY11.

84 | August 31 - September 15, 2011

Not-a-Flashy Drive From a luxury to a need, in last few years, ﬂash drives not only changed their positioning in the market but also in everyday lives of customers. It was interesting to observe that the market continued with its growth momentum, even though it did not see a noteworthy advancement in the technology aspect. Furthermore, the vendors suffered losses from dip in supply due to Japan crisis and other market factors. The total market witnessed around 30% growth with number reaching to roughly 30 mn shipments last ﬁscal. visit www.dqindia.com

DATAQUEST | A CyberMedia Publication

STORAGE PERIPHERALS

86 | August 31 - September 15, 2011

Indian Flash Drive Market Growth

30% 749

(%)

2010-11 2009-10

16%

2008-09

Transcend

Kingston

Others

Source: DQ estimates

576 495

Sandisk

Total Revenue :

(in crore )

749 crore

Infrequent availability of Kingston products gave its rivals a golden opportunity to claim more market share

Indian Flash Card Market Growth

(%)

50% 720

2010-11 2009-10

Transcend

15 12 Kingston

10 Parallel Imports 30

Sandisk

Total Revenue :

360

Others

816 crore

2008-09

33% 480

Moser baer

Source: DQ estimates

Talking about technology, the new launches continued to expand in capacity and got more ergonomically slim. Advanced range like encrypted pen drives were in demand for security matters. Last ﬁscal, 8 GB and 16 GB capacity were the most demanded range accounting for 50% of the sales (together), while 4 GB and 2 GB were phasing out. They contributed around 40% to the overall, followed by 32 GB and 1TB capacity drives. Pen drives were now an inevitable accessory, bundled with the laptops. Unlike FY10, where Kingston dominated the market. The company was accused for getting almost invisible from the market. Its overall share came down to nearly 10% from the earlier market leading position of 35%. According to its business partners, lack of availability of the products and communication from the company were the major factors of the loss. Though the numbers saw a little improvement (5-6%) in the last quarter, OctoberDecember was the worst hit quarter for the vendor. Over last few years, Kingston had pumped up its activities around SSD. Last ﬁscal, it partnered with Neoteric for its products namely SSDNow and Secure pen drives products. This added to the existing speculation of the company’s changing focus to niche and highmargin products. Encashing on the opportunity rivals namely SanDisk and Transcend recorded much higher growth. Another major change was the rise of SanDisk. Traditionally, SanDisk, Toshiba, and Samsung had been the primary manufactures of the chip that goes to other players as a white brand. It is said that post-Japan tragedy, these manufactures were hit from supply side and were forced to increase the prices. While Toshiba and Samsung succumbed to it, SanDisk continued

(in crore )

Moser Baer made its presence felt this year. Everyone gained by virtue of bundling offers with smartphones and other mobile devices

with the prevailing price range. It was a strategic move to capture market, which helped it gain the leading position with around 37%. However, Transcend had a decent growth. The company was heavily banking on its brand recall and marketing. Moser Baer, Amkette, Sony, HP, PNY, and iBall were a few known names among the other players. Booming e-commerce (e-tailing), was another key factor for the growth, though the numbers are small, but visit www.dqindia.com

they are poised for huge growth with the total value to reach `46,000 crore by this year end. This also helped in further consolidating the market and taking the customers away from the gray market.

On the Cards Last ﬁscal was another good year for the ﬂash cards market that found umpteen opportunities in booming smartphone and digicams market. The market grew by 50% with annual sales reaching to around 480 DATAQUEST | A CyberMedia Publication

STORAGE PERIPHERALS

Indian External Hard Drive Market Growth

(%)

2010-11

50% 405 WD

Seagate

Total Revenue :

Iomega

Transcend

Others

2009-10 2008-09

73% 270 Source: DQ estimates

156

(in crore )

405 crore

Vendor leveraged on the increasing demand of External Hard Drives by further slashing down the prices of the product and ensuring its availability

Indian Digital Camera Market Growth

(%)

70% 1,802

2010-11 2009-10 2008-09

Sony

Total Revenue :

18 8 6 3

47%

Canon

1,060

Nikon Samsung

720

Others

1,802 crore

Source: DQ estimates

Kodak

(in crore )

The market saw a huge growth of Digicams. Apart from the mid-range and feature-rich cameras, that include the volume business, rise in demand for high-end DSLR cameras was a smiling surprise

lakh units. Though the first time sale were in sync with growth in the mobile phones, a quarter of sales came from the upgrades. Around 50% sales came from 4 GB category, followed by 8 GB (20%), 16 GB (10%), and remaining from 2 GB and higher range. Flash cards of 2 GB and 4 GB capacity are largely bundled with the mobile phones. Similar to the flash drive category, last year saw major reshuffle 88 | August 31 - September 15, 2011

insigniﬁcant number to third rank with 15% market share. Despite a consolidation, gray market continued with a substantial number.

in the vendor positioning. In FY10, Kingston was rubbing shoulders with Transcend with a market share of 25%; however, last ﬁscal the share dropped down to12%. Transcend continued its stronghold with around 25% share, while SanDisk was again the leader with around 30% share. Again, the market credits its low-pricing strategy behind the win. Interestingly, Moser Baer was new player that emerged from a very visit www.dqindia.com

Driving Away Hard Days The hard disk drive market that largely consists of internal/external and Enterprise Strategy Group (server storage) drives saw a phenomenal growth coming from external hard drives. While the overall growth was around 30% with a business of over 62 lakh units annually. Internal drives had a stable growth of 10-15%, and server storage grew by 25%, while external hard drives witnessed around 150% growth with a business of almost 18 lakh units. Traditionally, the end-users looked at external drives as a portable storage option to their information, and last year was no exception. Last couple of years a lot of pen-drive users, with high requirements were shifting to external drives, than upgrading their pen drives. Falling prices too played a signiﬁcant role as in just 1 year it depreciated by 50%. In FY10, a 250 GB hard drive that would typically cost around `2,500 had come down to `1,900 level, and a 500 GB hard drive came down to `2,500 from `5,000 in FY10. While the high-end range for the external drives now touches 3 TB, 500 GB was the largest selling range, followed by 1TB and 320 GB. A smaller part of the business also came from the e-commerce. Seagate became the undefeated market leader as it further gained market share from 40% in FY10 to 60% in FY11. According to its business partners, the vendor took the advantage of technology for gaining share. It introduced its range of FreeAgent drives with an interchangeable cable to convert it to eSATA or any category. While in other vendors, the customers had to upgrade the entire product to DATAQUEST | A CyberMedia Publication

STORAGE PERIPHERALS

Indian MP3/MP4 Player Market 70% 493

(%)

Growth 2010-11 2009-10 2008-09

23% 290

Apple

Total Revenue :

15 Transcend 15 Creative 5 Others

493 crore

235 Source: DQ estimates

Sony

(in crore )

The add-on features and capabilities in mobiles phones for music and video, could not take away the sheen of iPod. This benefited other players, that came up with more affordable versions.

convert them to another technology. Seagate realized around 30% increase in sales with this strategy. While Western Digital was stable with a market share of 15%, Iomega emerged very strong and giving a tough competition to Western Digital with 10% share. Now an EMC property, Iomega got stronger with its SOHO and SMB focus. The market saw activities from newer players like ADATA, Kingston, Dell, and many more.

Million Dollar Smile Against the backdrop of increasing use of mobile cameras, digital cameras witnessed further ﬁllip in sales with the maturing market. The overall revenues exceeded 1,000 crore mark and the numbers reached to 40 lakh units in the overall category. This time they competed over the technology and brand recall more than the price advantage. This was visible as the famous brands continued to grow in numbers and the overall market saw 40% growth, but the corresponding market share pie remained the same. DATAQUEST | A CyberMedia Publication

Post-tsunami it is interesting to notice that a lot of players like Sony, Canon, and Nikon faced with the issues of production and supply, and felt the heat from smaller players, but they were soon on track and started showing positive growth from the last 2 quarters. According to Canon, while digicams grew at 40-50%, digital single lens reﬂex (DSLR) category doubled its number. And while a majority of this growth came from tier-I cities, tier-II and tier-III cities brought a signiﬁcant business. From strategy point of view, vendors realized that apart from price and potential, penetration was anther key selling point. Canon opened around 25 direct touch points (Canon Image Square), and plans to operate more than 60 stores by the end of 2011 and around 600 stores by the end of 2015. The entire idea was to achieve a brand recall that Sony enjoys through their ‘Sony World’ centers. While Sony is said to have around 65 stores, Nikon has more than 72 direct stores. The vendors also invested in expanding partner network that included both visit www.dqindia.com

smaller resellers and large format retails. A CMR report indicated that in the point-and-shoot (P&S) category Sony stood as the leading brand with market share of 31% in terms of unit sales, followed by Nikon (24%); while in the DSLR category, Nikon ruled with market share of 51% followed by Canon (46%). Technology-wise Kodak introduced a new range of cameras with social networking capabilities, which enables customers to tag pictures and videos directly on the camera and upload them on the networking sites. While Sony introduced the newly developed ‘RGBW method’ to its digital cameras that adds white (‘W’) pixel to the conventional RGB pixels. Nikon introduced its range, which had 6 FPS continuous shooting for up to 100 shots and ability to record full 1080p HD movies with full-time AF. With twin SD card slots, a 100% viewﬁnder. Canon on the other hand boosted its new technology of 18.0 megapixel that was recommended as excellent resolution and low-noise performance. It is also capable of full HD video recording, with a wide dynamic range.

MP3 FY11 like FY10 was the year of iPod. The company gained further market share with the increasing brand value of Apple products. The market grew by 70 % with a business of 480,000 units. The other key players were Transcend, Sony, and Creative with 15% each. SanDisk lost its market by less than 5% this year. Amid the concern of the mobile phones becoming the new music players, the segment surprised market with its positive growth numbers. Thanks to Apple. In this segment, 8 GB and 4 GB was the largest selling categories together contributing around 50%, followed by 16 GB and 2 GB. n August 31 - September 15, 2011 | 89

UPS

Sustained Performance The UPS industry is slowly coming out of recessionary trends. Growth was not that impressive and in the end it was all about vendors retaining their market share

The India UPS Market

he UPS market in India has been through rough times in the past, particularly, in FY10 the segment saw a marginal degrowth of 1%. But this time around, FY11 saw the segment notching up 10% overall growth across capacitiesâ&#x20AC;&#x201D;low, mid, high-end. This was good news for the vendors who were struggling to maintain their market shares due to combination of factors like increasing component prices, market consolidation, and shirking the market in the lower capacities has hurt the sector.

The Market Dynamics

Growth

-1%

3,022

2,980

10%

3,278

Source: DQ estimates

22%

2008-09

SHRIKANTH G shrikanthg@cybermedia.co.in

2009-10

2010-11

Despite a modest growth, the UPS industry performance during FY11 indicates that it is slowly coming out of recession, and better times are ahead

90 | August 31 - September 15, 2011

If we look at the high-end of the UPS market, there are 4 key players in the Indian marketâ&#x20AC;&#x201D;Emerson, APC, Numeric, and Socomec. UPS market in India has remained an unorganized one with small players catering to the local needs. But with global players this trend has changed and the market is drastically getting altered. It is increasingly aligned towards the organized and branded ones. Clearly in the last 1 year, the mood among the UPS players was to hold on to their respective strength areas and try to maximize the value instead of volumes. Here the larger players certainly had an edge because for them entry-level basic KVA is just a small slice and they are able to sustain their performance and achieve parity in terms of overall deployed KVA and value. But for smaller players it was a tough ordeal as they are to a large extent dependent on the desktop PC market. Some of the players catering to lower end of the UPS space did adopt novel ways to capture more market share. If we look at the leading players, Emerson, despite the marginal visit www.dqindia.com

DATAQUEST | A CyberMedia Publication

UPS

growth, sustained its position and in FY11, Emerson concentrated on getting mandates from across 11 verticals. While verticals like IT/ITeS and telecom contributed for the bulk of revenues in other verticals, Emerson did deepen its presence. The biggest development for Emerson was its acquisition of DB power last year and that will help it tap the industrial segments for power backup during FY12. For Schneider Electric India, its APC brand targeted all capacities of the power back-up market ranging from the entry-level UPS to high-end enterprise capacities. On the higher side, it concentrated on delivering Data Center Physical Infrastructure (DCPI). At the end of the ﬁscal, APC broadened its home UPS range by launching products speciﬁcally suited for Indian homes and factoring in the unique power backup needs. On the high-end critical power management space, APC delivered the message that the slightest power shortage disturbance or voltage variation can have devastating consequences on the business. APC also highlighted the whole lot of cost implications of power outage and the multipronged impact it has on businesses. Putting this in the backdrop, APC’s mission critical power management revolved around 4 key deliverables—reliability, availability, agility, and lower TCO. Competing with both Emerson and APC was Numeric which also played the game of sustaining its position rather than excepting any boom in this sector. From a KVA growth perspective it was a good year for Numeric with 20% growth compared to the previous year. Numeric is also one company which has managed to achieve revenue parity across low-mid-high segments. For instance, for Numeric, the revenues are more evenly spread and hence it does not have 92 | August 31 - September 15, 2011

UPS Market Share (<5kVA)-Organized

UPS Market Share (<30kVA)-Organized

% APC

APC

22 20

Numeric

Emerson

4 WeP Others Total Revenue :

1,508 crore

Source: DQ estimates

Numeric

Others Emerson Total Revenue :

1,770 crore

Source: DQ estimates

While the fortunes of the lower end sub 2kVA is closely tied with the Desktops, on the other hand increasingly low-end UPS being used for other applications like Network Protection et al will help sustain the volumes for a while. Meanwhile on the higher capacities the game becomes very niche with each retaining their respective places

UNBRANDED UPSES CONTINUE TO GET CANNIBALIZED BY THE BRANDED ONES AND MANY UNORGANIZED PLAYERS HAVE EXITED OR BRANCHED INTO OTHER OPPORTUNITIES LIKE INVERTERS

the dependency issue either on low or mid or high-end. Numeric’s strong hold is BFSI and it has a lion’s share in the country’s ATM power back with almost all leading banks as its clients. Meanwhile education also acted as key growth driver for Numeric with wins like the `15 crore Karnataka School Project for 20,000 online UPS show, the company’s growing clout in the education space. Meanwhile companies like Eaton focused on the market with many products with an aim to provisit www.dqindia.com

vide customer-driven PowerChain Management Solutions and to serve the power system needs of the industrial, institutional, government, utility, commercial, residential, IT, mission-critical OEM markets worldwide. Eaton’s power quality portfolio encompasses a comprehensive offering of power management solutions from a single-source provider. This includes Uninterruptible Power Supplies (UPSs) and other related products. Even in organized UPS space in the last 2 years, the number of players offering different capacities is on the rise. Take the case of companies like Socomec, which is growing fast with a whole range of UPS offerings. Socomec has UPS offering cutting across 550 VA to 5,400 KVA. The company over the year had good win across verticals and took to market products such as Masterys IP+ and Modulys Green Power that expanded on to its already existing wide range of products available in India targeting the industrial and the IT data center modular expansion requirements. Clearly most large vendors DATAQUEST | A CyberMedia Publication

BSK 1- 10 KVA • Attractive prices for bulk orders. • All models ex- stock

BTO 650 VA

• Pan India sales and service network • 650 VA UPS with 12 V, 7.2 Ah battery (2.1 Kgs)

Inviting dealer and distributor inquiries across India

Call us at : 1800 1800 007 sms 'Battery' to 56767 www.basebatteries.com Branches : NORTH - Delhi: 98101 36524, Chandigarh: 98145 36524, Ghaziabad: 98719 95542, Gurgaon: 98719 95538, Agra: 98970 36524, Lucknow: 93058 36524, Dehradun:96341 31999, Ambala: 99962 52630, Jammu: 0191 2490476, CENTRAL - Jaipur: 98280 36524, Indore: 98930 36524, SOUTH - Bangalore: 98440 36524, Chennai: 98401 36524, Palakkad: 98473 36524, Secunderabad 98490 36524, Salem: 98401 36524, Hubli: 98863 21922, Madurai : 98401 36524, EAST - Kolkata: 94330 36524, Jamshedpur: 92346 36524, Guwahati: 90850 36524, WEST - Mumbai: 98206 36524, Pune: 98231 36524, Aurangabad: 98231 36524, Ahmedabad: 98250 36524, Nagpur: 98227 36524, Raipur: 93039 36524. And 48 service centers across India.

UPS

are concentrating majorly on the high-end power back-up capacities where bigger value lies in. Also high-end UPS is no longer a box solution space. Mid to large enterprises opt for highly customized solutions and the amount of backup and try to seamlessly mesh UPS with their requirements. Meanwhile other vendors like Microtek, WeP, and host of mid-size and small players dominate the lower end of the UPS space and most of them focus on the SOHO segments and upped their ante in the inverter segments which is a huge opportunity for both national as well as regional players.

Way Forward The Indian UPS market has ample growth opportunities, but has become highly competitive due to the presence of several Indian and multinational suppliers. The Indian UPS market, which was affected by the global economic downturn is recovering slowly and is expected to witness moderate growth over the next 2-3 years. The market is undergoing consolidation globally, a development which the Indian market is also witnessing. Quality products, prompt after-sales service, and product availability across multiple channels across the country are the key differentiating factors among the market participants. The biggest growth driver for UPS and the related power management market is the inherent challenges India face in terms of power distribution. With many states reeling under power deﬁcit and scheduled load shedding augurs good for the market. The huge growth in data center business and the reliance on 24/7 power supply has become mandatory than ever. As we look at the current market dynamics, the road ahead for the UPS market is one of consolidation. Given the complexities of UPS 94 | August 31 - September 15, 2011

POWER BACKUP IS NO LONGER A BOX SOLUTION, RATHER IT IS AN ECOSYSTEM CONSISTING OF UPS, RACKS, COOLING ET AL

business many foresee that there is a possibility of bigger players merging, despite being competitors to garner more market share. But much depends on the market momentum and IT spending patterns in FY12 and despite revival, things will continue to remain ﬂat and will prompt many players to explore the M&A route. On the unbranded UPS space, it continues to get cannibalized by the branded ones and many unorganized players have exited or branched into other opportunities like inverters. Meanwhile one of the biggest trends over the last year relating to larger players is the solutions approach in the high-end space. Power back up is no longer a box solution rather it is an ecosystem consisting of UPS, racks, cooling et al. Many vendors given this market reality pitched their offering as ‘mission critical enablers’. From a market share perspective, the lower end of the UPS space will see many players even exiting, if they are unable to achieve volume-value parity. Interestingly, all big players do have entry-level offerings and with the likely exit of some of the regional players only catering to low-end will augur well for them to push more low-end offerings in the market. For large players like Emerson who aggressively took on to data center opportunities indulged in visit www.dqindia.com

lot of awareness exercises on the criticality of power backup. For instance players like Emerson with its Data Center Infrastructure Management (DCIM) solution oriented its selling point on challenges data center managers face and the solutions it has on this space. For instance, data center managers have been challenged to maintain or increase IT availability, server utilization, and efficiency in the face of rising costs and demands. One strategy to help address these challenges is virtualization, which increases server utilization and enables greater energy efficiency. But virtualization also makes it more difficult to predict the demand on physical systems at any given time. As a result of the uncertainty in physical system demand, the data center manager is compelled to reserve a resource buffer against overload at peak capacity. A holistic DCIM approach provides new insights into the relationships between facilities and IT infrastructure components, enabling data center managers to better optimize their data center resource consumption. The point companies like Emerson drove that DCIM solution should monitor all space, power, and cooling attributes within the data center environment. To avoid an environmental based operational failure, the DCIM solution should provide reports that enable the data center manager to take proactive action. The ability to report these data center conditions should be available on-demand to the data center manager. Looking ahead at FY12, the UPS market is expected to sustain the current momentum and going with trend low-end capacity volumes will slowly go south. On the higher capacity, verticals like BFSI, manufacturing, retail, and telecom will be the biggest growth drivers. n DATAQUEST | A CyberMedia Publication

The spirit of innovation

Our innovations are driven by our desire to be ahead of the competition as well as satisfying our customer’s needs. We are recognised for having the most advanced and complete range of UPS systems on the market, due to our commitment to reinvest 10% of our annual turnover into R&D.

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UPS from 550 VA to 5400 kVA Static Transfer Systems (STS) DC and AC power systems Communication software Power management solution Battery management solution

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UPS

Ups the Ante With the need to bridge the gap between demand and supply of electricity still remaining unbridged, demand for UPS is expected to witness a jump

SHILPA SHANBHAG shilpas@cybermedia.co.in

efore the economic winds swept the UPS market, it witnessed increased traction supported by higher implementation of data centers. But as the global economy limps to mode, this trend is expected to see new light again. Taking this into consideration even the manufacturers are leaving no stone unturned to put their best foot forward with innovative products with low maintenance costs.

Market Watch The power back-up market in India can be described as a macroscopic effect, which is lined by national, regional and local players, both in the branded and unbranded seg96 | August 31 - September 15, 2011

visit www.dqindia.com

DATAQUEST | A CyberMedia Publication

UPS

ments. But the UPS market enjoys a majority share in the power solutions market, while the inverter segment is fragmented and other components like cooling are sold with power back-up and management solutions. According to a Frost & Sullivan report, the organized players enjoy a 60% market share, while 40% of the pie can be attributed to unorganized players. UPS system refers to a power back-up system that are finding increased applications in data centers, hospitals, telecom exchanges, mission critical operations, etc. In the UPS segment, there has been a shift towards energy efficiency, ensure monitoring of UPS through LCDs, remote manageability and controls, etc. In the perspective of configuration, there is a shift towards acceptance of a centralized UPS compared to a distributed one. Even there has been a preference for customized solutions rather than standard UPS products which the vendors cannot afford to ignore. Mission critical applications and demanding business processes deploying UPS highlight the need for clean and continuous power supply, flexibility for growth, local/remote manageability, low total cost of ownership (TCO), etc. Along with its speedy growth even its power requirements are set to increase especially in the manufacturing, textile, banking, IT, etc.

Region-wise Contribution South

28-30%

North

30-34%

West

24-28%

East

12-14%

*Estimates by Frost & Sullivan

98 | August 31 - September 15, 2011

EVEN THOUGH SEVERAL POWER GENERATION PROJECTS, MAINLY COAL-FIRED PLANTS, ARE SEEING DAYLIGHT ALONG WITH EFFORTS TO TAP RENEWABLE ENERGY RESOURCES LIKE SOLAR POWER, THERE STILL ARE CASES OF POWER OUTAGE AS THE GAP BETWEEN DEMAND AND SUPPLY STILL EXISTS As the power requirements increase, there will be a gap between the demand and supply ratio as the sector will not be able to fulﬁll 100% power requirements of the country. This brings to the limelight the UPS segment. UPS, inverters, etc, mark the landscape of power electronics and equipment and it forms a large portion of the power electronics segment. Even though several power generation projects, mainly coal-ﬁred plants, are seeing daylight along with efforts to tap renewable energy resources like solar power, there still are visit www.dqindia.com

cases of power outage as the gap between demand and supply still exists. This also highlights the need to focus on R&D for UPS systems and invertors.

Growth Drivers According to market estimates, the UPS industry in India is expected to grow at a CAGR of 14-16% in the next 2 years to touch the mark of `6,000 crore by March 2013. This figure is on the higher side considering that the market indicate figure that the Indian IT spending is expected to increase by 22% during the corresponding period. The growth figures for the Indian market are higher than the Chinese market (21%) at a time when the American and European markets are reflecting slow growth. The future of the UPS market appears bright owing to the traction in the telecom, automation, IT, electronics & electrical, banking, SMBs, etc. Even rural towns in India offer huge potential for growth along with the hospitality industry and educational institutions. According to market estimates, the northern market that had grown by 12% is expected to witness a growth of 5-7%. According to market estimates, the share of the southern region is expected to witness a growth of 7% from the current mark of 28-30%. With the state of Gujarat witnessing a lot of buzz, a lot of buying is expected to be witnessed while SMBs from MadDATAQUEST | A CyberMedia Publication

UPS

At a Glance With India assuming huge importance in the Asian map, businesses have realized the importance for the need of a robust infrastructure to attract and retain investors. But the sad part of the story is that as India is assuming increased importance, on the other hand, increasing power deficit and approximately 17% shortfall in power generated is the key that will prove crucial for business corporations. In order to boost India’s growth story power, continuity and quality are of great importance. Apart from that even with the government of India signing a nuclear deal with the US, and India getting a NSG waiver, a lot of nuclear power plants are set to see daylight. This a clearly highlights the fact that the UPS industry is expected to assume great heights. Power accounts for 40% of the operating expenses of a data center and the cost attributed to this has increased manifold in the last couple of years. The power back-up sector has also grown at a good pace and also witnessed considerable diversion into alternative energy solutions such as solar power. The offerings by tapping solar energy is expected to be the key focus in the future. According to market estimates, with the power back-up market witnessing traction all the major companies have reaped good rewards and the UPS industry is expected touch the mark of `50 bn by 2012-13. With the growth of individual players is indicative of the business potential that this segment holds. Along with the increased potential for UPS players in the market, manufacturers are also trying to pull up their socks and are mushrooming in tier-II and tier-III cities, and UPS penetration is taking place beyond the perview of the top 20 metros. A great growth story indeed.

hya Pradesh are expected to follow similar lines. A high number of UPS implementations were made in government projects like Indian Air Force, e-court project, Rajya Shiksha Yojna and Sarva Shiksha Abhiyan educational infra projects in states like Madhya Pradesh, Gujarat, Haryana, Rajasthan, Maharashtra, Assam, Himachal Pradesh, Punjab, Karnataka, etc. The telecom sector can be adjudged as the fastest growing sector, which according to market estimates is growing at an annual average of 22% as a jump of 100% has been noticed in the ﬁgure of mobile phone connections. Even Gartner’s reports echo similar sentiments, estimating that the telecom subscriber base is expected to grow at a CAGR of 14.3% from 452 mn in 2009 to cross the mark of 770 mn connections by 2013.

A Quick Preview There is a shift in demand for energy efﬁcient products, high power density and compact size, modular 100 | August 31 - September 15, 2011

Vertical-wise Contribution IT/ITeS

18-20%

Government & Infrastructure

15-17%

BFSI

11-13%

Manufacturing

9-10%

Telecom

6-7%

Others*

34-40%

*Others include Household/Domestic, SOHO, SME, Retail, Hotels, Hospitals, etc. Estimates by Frost & Sullivan

construction, detailed monitoring of UPS through LCD displays, remote manageability and controls, combined form factor of rack/tower models, user configurability for application specific needs. In terms of configuration preference is being given to centralized UPS rather than distributed system. Also, the customers expect customized solutions rather than standard UPS visit www.dqindia.com

products being offered to meet the speciﬁc need of application which vary from customer to customer, industry to industry and vertical to vertical. Today, the preference is for vendors who can integrate UPS with batteries, alternate source like DG sets and static/automatic transfer switch to provide for complete power protection. Currently, the demand is for compact systems and rack based solutions that minimize space required. To cater to increased demand for UPS, the systems are now available with high capacity chargers, add-on chargers, and accessories that enable the user to manage, diagnose and optimize installations.

Road Ahead The country’s faster growth across verticals highlights the need for better power solutions. To bridge the gap between the demand and supply of electricity, UPS is expected to ﬁll in the gap. Hence, the prospects of vendors in the UPS segment remains bright. n DATAQUEST | A CyberMedia Publication

GREEN POWER CLEAN FUTURE Leaders in Power Protection brings Global Leaders in Power Protection brings to you to you Environmentally Advanced UPS Systems Environmentally Advanced UPS Systems When it comes to expertise in Uninterrupted Power Supplies Riello PCI India has it all. • IGBT Rectifier / IGBT Inverter with built in galvanic isolation transformer • Advanced Battery Management • Very Low Total Harmonic Distortion (THDi 3%) • High Input Power Factor > 0.99 • High Output 0.9 (High Watt) • Overall efficiency upto 95%

*As per IMS Research

Riello: Ist European manufacturer to rate its products for ECO Energy Level • Fourth Largest Manufacturer of UPS Systems* • Comprehensive range: from 1KVA to 6400 KVA • Riello PCI has delivered over 5000 successful installation in India & Indian Subcontinent in last 15 years. • Technical support team at your service 365 days 24x7 • PAN India presence with 32 offices across the country

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Phone: +91-124-6656700

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Email: ups@riello-ups.com

website: www.riellopci.com

SMARTPHONES AND TABLETS

Year of Innovation In a year in which innovation ruled supreme, vendors who offered the best of hardware, form, function and apps emerged as winners

SHRIKANTH G shrikanthg@cybermedia.co.in

Y11 can be labeled as the year of the Smartphones; for it was during the last 12 months in which smartphones witnessed a traction that was not seen before. It was also a year of innovation with the Mobile Operating System (OS) getting more deﬁned leading to the emergence of bi-polarity with Apple’s iOS and Google’s Android ﬁghting it out. While from an Indian perspective it was Symbian that still dominates but the coming year will see the rapid escalation of both iOS and Android calling the shots.

The App at the Epicenter

Units of Smartphones Sold 239% 7,218,730

Growth

3,304,090

-36%

2008

2009

Source: DQ estimates

2,126,140

2010

Growth was spectacular. Thanks to the aggressive pricing and buyers’ preference towards smartphones, it saw the numbers soaring

102 | August 31 - September 15, 2011

Both from a device—form as well as function—last year witnessed signiﬁcant changes. If we take innovation it was on the screen size, display, and access to apps. Clearly what made the smartphones really smart over FY11 rested on the vendor’s ability to foster a developer ecosystem and be able to offer a judicious mix of free and paid apps. For instance, today a smartphone’s success is determined by its ability to access a range of apps it can run. In many ways smartphones came out of their conventional mold of just being commercial phones. With the apps availability it became more consumer centric. In the last 2 years, mobile apps industry has got hugely spurred by the new generation smartphones, and what used to be a be a tri-polar with Symbian, Windows, and Apple and with fringe opportunities being taken by players like Palm has seen a sea change in the last couple of years. Experts say that application stores will be a core focus area during 2011 for the mobile industry and applications themselves will help determine the winner among mobile devices platforms. Analysts like Gartner say that consumers will have a wide choice of stores and will seek the ones that make it easy for them to discover applications they are interested in and make it easy to pay for them when they have to. Developers will have to consider carefully not only which platform to support, but also which store to promote their applications in. visit www.dqindia.com

DATAQUEST | A CyberMedia Publication

SMARTPHONES AND TABLETS

The apps market it has huge potential for big revenues. Once we take a closer look at the apps delivery market over the year the biggest traction was seen in the Android market globally and India is a growing Android market. Overall there are 3 kinds of app stores now. One, every OS vendor has his own app store like Apple Store, Android Market, Nokia’s OVI, RIMs Blackberry App World, and Windows Mobile. The second category is service providers’ portal based app stores and the third one is independent third party app stores like Mobango. While entities like Mobango only provide free apps, the former 2 have a mix of paid and free apps. During 2010, the mobile OS also saw the emergence of a new smartphone OS from Samsung called Bada. In a short span of time Samsung impressively ramped up its app store and has created a successful apps ecosystem on its own.

Vendors Up Close Despite changes globally, from an Indian context Nokia still has the biggest share. But FY12 would be challenging for Nokia as it will clearly feel the onslaught of Android. Nokia launched its much awaited N8 smartphone and looked at ways of optimizing the app experience leveraging on its powerful hardware. For instance Nokia’s ESPN widget saw good traction with 1 mn downloads in just about a month. Nokia, to combat competition, resorted to aggressive pricing and focused on offering a smartphone experience across price points that did the trick. Samsung was one of the biggest success stories last year. Samsung’s ﬁrst smartphone—Wave with its own Bada OS—created a new benchmark in display as it became the world’s ﬁrst phone with Amoled screen. And here too, an aggressive pricing worked out for Samsung. 104 | August 31 - September 15, 2011

Dissecting the Smartphone Market Vendor-wise (%)

RIM

14 Nokia

Samsung HTC 2 Apple 2 Others

Total Revenues: 8,796 crore While Nokia rules, the escalation of other vendors indicate a stiff battle is in place during FY 12

Giving very stiff competition to both Nokia and Samsung was HTC, which became a leading global force during FY11, emerged as the leading vendor offering one of the best Android phones in the market. HTC took innovation over the year by pushing the display envelope to 4.3” and thus opened up a new premise in large screen smartphones which traditionally ended with 3.8 to 4” displays. HTC also perfected its ‘Sense UI’ last year thus offering a seamless interface to users. If we look at Sony Ericsson by the end of the ﬁscal, its launch of Xperia Arc set the tone for things to come. With

a state-of-the-art display, it was one of the few phones that had a native HDMI slot making it easier for the phone to be connected with flat screen TVs. For other vendors like LG, it was not that impressive as mostly due to its phones being stuck with earlier generation Android, but with new slim form factor phones like its dual core Optimus 2x—one of the first dual core phones to hit the market brought LG closer to the likes of HTC and Samsung in the high-end smartphone space. Meanwhile for vendors like RIM too it was a good year. RIM, leveraging the distribution might of Redington, was able to successfully penetrate into the Indian market. The last fiscal year was a good year for RIM as it expanded its footprints in India with the launch of an entire range of smartphone for the consumers. Moreover newer phones like BlackBerry BOLD 9900 with the new OS 7, BlackBerry Torch 9800, BlackBerry Bold 9780, BlackBerry Curve 3G, and BlackBerry Pearl 3G. RIM also introduced a new category under BlackBerry with the launch of BlackBerry PlayBook which the company termed it as the world’s first professional grade tablet powered by QNX based OS.

Tablets: Coming Boom

IT WAS ALSO A YEAR OF INNOVATION WITH THE MOBILE OPERATING SYSTEM (OS) GETTING MORE DEFINED LEADING TO THE EMERGENCE OF BI-POLARITY WITH APPLE’S IOS AND GOOGLE’S ANDROID FIGHTING IT OUT visit www.dqindia.com

Pushing the smartphone envelope further is the tablet and last year clearly was the year of more understanding and awareness. Market estimates suggest that Google’s Android OS is forecasted to increase its worldwide share of the media tablet market from the current 20% to 39% by 2015. Industry analysts say that Google’s decision of not to open up the Honeycomb—its ﬁrst OS version dedicated to tablets—to third parties will prevent fragmentation, but it will also slow the price decline and ultimately tap market staking. Apple launched the iPad2 DATAQUEST | A CyberMedia Publication

SMARTPHONES AND TABLETS

DATAQUEST | A CyberMedia Publication

Indian Smartphone Market 97% 8,796

Growth

5,800

-23%

4,465 Source: DQ estimates

in March this year, taking innovation to a whole new level yet again breaking form factor and functionality barriers. But again the early movers like Apple followed by Google will make the deepest cut while the leftover slice of the pie will be battled out for by other vendors in the tablet space. But analysts are cautioning on the deluge of new tablets that enter the market and the challenges the new vendors need to face. For instance seeing the response from both consumers and enterprises to the iPad, many vendors are trying to compete by first delivering on hardware and then trying to leverage the platform ecosystem. Many are making the same mistake that was made in the first response wave to the iPhone, as they are prioritizing hardware features over applications, services and overall user experience. Tablets will be much more dependent on the latter than smartphones have been, and the sooner vendors realize that the better chance they have to compete head-on with Apple. The reason why tablets are garnering such heightened level of interest is that they are ultra-mobile PCs that are extremely portable and offer great functionality in terms of usage. Given this backdrop tablets are an extremely challenging market and a whole lot of factors contribute to its success. The launch of iPAd 2 at the end of the fiscal totally redefined the market as Apple elevated the form factor bar by launching the slimmest form factor ever with iPad 2. However from an Indian context many vendors feel that the market is on the cusp and it will take a while to mature. Indeed there are some early adopters for tablets in India like the education sector where it has seen some success and by and large it is consumer driven like the global trend. While the domination of Apple will continue in this space,

2008-09

2009-10

2010-11

The year brought back smartphones in the pink. New models coupled with the availability of range of apps, aggressive campaigns and deeper channel engagements did the trick

Google’s Android is becoming a major force. With the launch of Google’s dedicated tablet OS called Honeycomb; leading PC vendors are taking a plunge on android based tablets.

Tablet OS: A Closer Look Today as we look at the Tablet OS which is the critical piece that determines the success of the tablets. The latest one to hit the market is Google’s dedicated tablet

CLEARLY WHAT MADE THE SMARTPHONES REALLY SMART OVER FY11 RESTED ON THE VENDOR’S ABILITY TO FOSTER A DEVELOPER ECOSYSTEM AND BE ABLE TO OFFER A JUDICIOUS MIX OF FREE AND PAID APPS visit www.dqindia.com

OS Honeycomb. Honeycomb is the next version of the Android platform, designed from the ground up for devices with larger screen sizes, particularly tablets. Clearly Google has spent a lot of time refining the user experience in Honeycomb, and it has developed a brand new, truly virtual and holographic user interface. Google says that many of Android’s existing features will really shine on Honeycomb--refined multi-tasking, elegant notifications, access to over 100,000 apps on Android Market, home screen customization with a new 3D experience and redesigned widgets that are richer and more interactive. Google has also made some powerful upgrades to the web browser, including tabbed browsing, form auto-fill, syncing with your Google Chrome bookmarks, and incognito mode for private browsing. Companies like Acer have taken the lead and launched Honeycomb based tablets in its Iconia range of tablets. Meanwhile if we look at Apple, the iPad 2 comes with its latest iOS 4.3 which Apple calls it as the world’s most advanced mobile OS and Apple did innovations like faster Safari mobile browsing performance with the Nitro JavaScript engine and host of other features that has made iPad a instant hit. But the key for the success is apps availability for iPad. For instance iPad 2 runs almost all the over 350,000 apps available on the App Store and there are more than 65,000 native iPad apps available from an incredible range of apps in 20 categories, including games, business, news, sports, health, reference and travel. As we look ahead, FY12 yet again looks promising with 25% to 30% growth. However it would be interesting to watch the strategies of players like Nokia and RIM who need to fight the onslaught of competition mainly from Google and Apple. n August 31 - September 15, 2011 | 105

PROCESSORS

The Domination Even with AMD’s emergence later in the scene, Intel’s market position remained unshakable. In the smartphone segment, ARM captured the maximum market share

ONKAR SHARMA onkars@cybermedia.co.in

he CPU chip market is mainly driven by the trends in the PC market, which picked up pace in FY11. The chip makers, mainly Intel and AMD, were able to offer faster processing speeds to users, as they laid out a number of innovative offerings including Intel’s Sandy Bridge, AMD’s Accelerated Processing Unit (APU), Lisbon, Magny Cours, Interlagos, Fusion (Zacate and Ontario), etc. Despite all this, Intel controlled the market in all segments—desktops, laptops, netbooks, nettops and servers, with close to 90% of marketshare.

Upping the Ante

Growth

21% 6,959

Source: DQ estimates

5,750

2009-10

2010-11

The processor market growth is directly linked to the growth of the PC market. Both Intel and AMD upped the ante with their innovative offerings— Intel Sandy Bridge and AMD APUs

106 | August 31 - September 15, 2011

For Intel, the Core I series remained a big bet, which it strengthened with the launch of Sandy Bridge platform, a successor to its Nehalem platform. Sandy Bridge processors include dual-core, quad-core, 6-core, and 8-core chips for desktops and laptops and are all made with the 32-nanometer process. Another distinguishing feature for the Sandy Bridge chips is that they have been designed from the ground up to have integrated graphics. Industry sources reveal that Intel is also working on the 22nm die shrink of Sandy Bridge platform codenamed Ivy Bridge. But AMD’s latest class of hybrid CPU/GPU chips, officially dubbed the Fusion A-Series, which are 32-nm APUs designed with desktops and laptops in mind, are taking direct aim at Intel’s Core 2011 processors. The new chips boast of superior processing and discrete-level graphics and more than 10 hours of battery life. . Similarly AMD seems to have also realized the importance of being in the netbook and nettop segment, where Intel has near monopoly with Atom processor. It rolled out versions of Fusion and Athlon chips specifically designed for the netbook and nettops. What is significant is that its OEM partners like Acer and Toshiba are helping it to take it to the consumers. Furthermore, AMD’s upcoming Lisbon processors, which are claimed to empower all form-factors (from netbooks, laptops to servers), can give Intel tough times. visit www.dqindia.com

DATAQUEST | A CyberMedia Publication

PROCESSORS

Market Dynamics Fears of the previous year were unfounded, given the demand led by 3G rollout and enterprise and government spending. Intel found takers amongst more than 500 laptop and desktop designs from all leading OEMs, over 100 ISVs as well as 1,000+ GIDs, helped it have a leg up over its underdog competitor. But the competition from AMD was fueled mainly in the later part of the year with its APU range. Even then AMD’s reticence in the beginning cost it since it allowed Intel to eat up its marketshare. Intel clinched more than 90% of the market, having sold nearly 10 mn pieces in FY11. Core I processors yanked a significant number of consumers from all segments. Amongst on-the-go users who were inclined to buy laptops Core I remained the hot favorite. It does not mean that AMD was entirely pushed to the shell. If Intel grabbed the laptop and netbook market, AMD encroached upon desktop and server consumers. It intensified its reach in these 2 segments. In addition, the chip market was also influenced by the strategies that Intel and AMD adopted to deal with the channel fraternity. Intel’s channel strategy underwent a massive restructuring. It came up with new channel program. The new program called the technology provider program, included ODMs from non-computing space like PoS, security and surveillance, and digital signage and the scope of the program was also extended beyond pure system builders to resellers as well. Earlier this year, Intel had also discontinued its long-standing distribution arrangements with SES Technologies and eSys. Similarly to support its new launches, AMD rolled out the SMART channel program for its SI partners and system builders and added customer service centers in 65 cities (in addition to the existing 51) in partnership with Accel Frontline Services. Unlike the processor segment, DATAQUEST | A CyberMedia Publication

Tracking the Processor & Motherboard Market (%)

Intel

Total Revenue (2009-10):

(%) 10 4 3 1

AMD Asus

Intel

Total Revenue (2010-11):

6,959 crore

Gigabyte Others

5,750 crore

Source: DQ estimates

Asus AMD Gigabyte Others

9 6 4 1

Source: DQ estimates

Intel enjoys near monopoly in the processor market in the absence of a serious competition from AMD. But AMD’s pragmatic moves with the launch of APUs have given Intel sleepless nights

motherboard segment which is directly interlinked to the processor segment, underwent an intense competition. Besides Intel, Asus and Gigabyte vastly ruled the market with a variety of motherboards compatible with new age processors from Intel and AMD. Asus held larger chunk of the market mainly owing to the strong traction for its Maximus IV, P8P67 PRO, Rampage III, and Sabertooth motherboards. Similarly Gigabyte remained in the frame with a ﬂurry of innovative products aimed at Intel’s Core-I and AMD’s Fusion processors. Overall, the current popular model still remained the G31 and G41 chipset. The Intel G41 chipset had a sudden spurt owing to the improvement of DDR3 Module pricing. Mercury PIG41Z and PIG31Z have been the mainstream models from Kobian’s kitty which is another motherboard player. Like Kobian, other small time motherboard players, that addressed a small yet niche segment, include Smartlink, MSI and Biostar, etc.

Who’s the Smartest of All? Since the success of iPhone and iPad, almost every PC vendor jumped into this business. HTC, Dell, Samsung, and Acer among several homegrown players like Notion and Olive ﬂooded the market with their tablets and none of their products featured chips from visit www.dqindia.com

Intel or AMD. However Intel is working on a mobile processor codenamed Oak Trail, which is expected to make way in one of the tablets by Acer this year. Instead ARM rules the fast evolving tablet and smartphone market. Some of the known tablet and smartphone processors such as Nvidia Tegra, ST-Ericsson Nova and NovaThor, Qualcomm Snapdragon, the Texas Instrument’s OMAP product line, the Samsung Hummingbird and the Apple A4 and A5 are also based on ARM IP. ARM’s IP for the mobile based x86 platform has allowed mobile device manufacturers to build energy-efﬁcient productivity devices. Recent launch of the 3G services is further driving growth for these devices.

Outlook The emphasis by processor vendors is slightly shifting towards making processors further efﬁcient and small. Intel and AMD are working on adding more features to their processors which allows CIOs and CTOs to increase productivity and reduce costs. Intel’s 22nm die shrink (Ivy Bridge) and AMD’s upcoming Lisbon processors are steps in this side. Besides, the focus would also be around tablet processors that are fast making entry into enterprises and business. n August 31 - September 15, 2011 | 107

NETWORKING PRODUCTS

Infrastructure Drives the Market Cisco still leads the market, though other vendors have started giving stiff competition in certain sectors

R Growth

29% 8,844

Source: DQ estimates

6,845

2009-10

2010-11

Increasing upward investment in government infrastructure projects, especially in tier-2 and -3 cities as well as adoption of virtualization saw both global and local players vying for the growing networking market

108 | August 31 - September 15, 2011

SHILPA SHANBHAG shilpas@cybermedia.co.in

ecessionary clouds may have faded in the background as networking vendors battled it out in FY11 notwithstanding controversies raised by the CWG Tetra network. This battle between both global and local players received a shot in the arm from IT projects (banking, manufacturing and government) as telecom service providers, ďŹ nancial institutions, hospitality, education, SMBs, and the government sector pumped in the much needed revenues. The landscape is also painted by a plethora of e-governance projects, adoption of virtualization, tier-2 and tier-3 cities assuming importance, and connectivity requirements between the headquarters and regional ofďŹ ces. But a visible trend is that networking is attaining an existence of plug and play in the midsized markets leading to commoditization. With the space being dominated by technological advancement, R&D has also come into the limelight. As networking is attaining importance among enterprises, there is also the requirement of reliability, security and scalability that is in line. It is also marred by challenges like changing business processes and technologies, geographically dispersed users and sites, and multi-vendor requirements. With an increasing number of employees vouching for wireless connectivity, the demand quotient for Wi-Fi phones, VoIP products, green networks, and network virtualization is on the rise. The road ahead looks promising for the segment as government is putting together the blocks of its basic IT (for which network integration is a key enabler) and upgrading broadband penetration, even there are moves for upgrading telecom infrastructure, etc.

Vendor Drives Cisco entered the market with renewed energy backed by the innovative efforts of its Bengaluru R&D Lab, which is focusing on cable set-top boxes, visit www.dqindia.com

DATAQUEST | A CyberMedia Publication

NETWORKING PRODUCTS

DATAQUEST | A CyberMedia Publication

Modems Market in India Growth

11%

2010-11

378

(%)

2009-10

340 Beetel Teletech

14 8

D-Link

Source: DQ estimates

backhaul and radio technologies. Even though its services business grew owing to upward climb witnessed in the products business, it had to handhold its channel partners to combat the complexity of the market scenario. Cisco, with the introduction of the CPM model, now offered opportunity to tier-2 partners. With the market now ﬂooded with opportunities, tier-1 partners now had to compete with the new entrants. In an effort to make its presence felt, Cisco leveraged on the services of Ingram Micro, Redington, Comstor, and Compuage, and even the acquisition of Starent Networks put it on a growth trajectory in the mobile packet core space. Banking and the IT services supported by amibitious projects like Air Force (integration of data and voice), state data center projects, SWAN, UID, APDRP, defence projects, DIT (CSC), etc, marked FY11. It also won major projects from Vodafone, Reliance, Airtel and Tata. If CWG project brought it in the limelight in terms of the prestigious project, the controversy now surrounding it has a negative tinge. If it is infusing life in its market strategy by launching cloud experience centers in India with EMC, HP with its offerings, investments and go to market strategy is posing as a serious challenge for this undoubted market leader. HP Networking is slowly but surely becoming a strong force to reckon with, banking on its products, channel partners and investment power. HP is making its entry into a space that was marked by the dominance of a single player and the remaining pie being shared among other players. But with HP’s entry, there are expectations of the graph changing. With the entry of 3Com, H3C and Tipping Point, HP’s portfolio received a boost which culminated into a complete offering from core to the edge, wired to

Others Atrie Technology

Total Revenues: 378 crore

(in crore )

During FY11 though the telecom and government projects ruled the roost, the modems market was witness to slow growth owing to adoption of 3G

wireless, top of rack switching to enterprise class core switching. HP formed business units under the enterprise arm (ESSN) to oversee its sales and marketing, the integrated CI (converged infrastructure) provided the much needed support by means of cross-selling. It is formulating policies on expectations of good traction in tier-2 and tier-3 cities apart from large towns, owing to demand for connectivity and networking from entry-level switches to telecom routers. Its major client wins were Britannia, Rajasthani Sammelan, Symbiosis, and these speak volumes about its ability to leverage on its strengths. It became the first company to leverage on the Common Criteria (CC) certification process after receiving the EAL 2 CC certification for its routers from DIT. Juniper Networks India banked on its R&D skills, which explains its plans to spend 22% of its revenues on R&D activities (the highest) and also expand its India Excellence Center at Bengaluru. This decision has culminated in approximately 11% growth of revenues from the India market. Hence the array of introductions like Junos Pulse visit www.dqindia.com

App, Junos Pulse Mobile Security Suite, QFabric architecture, etc, fail to raise brows. Even its tie-up with Sophos (anti-virus protection) explained its focus leading to client wins like CNBC and one of India’s largest telcos for ethernet switches. To strengthen its vision further, the company appointed Ashish Dhawan and Dhananjay Ganjoo as country lead (enterprise business) and country lead (service provider business), respectively. The smaller players with their disadvantage of reach, lack of funds, etc, were also trying to place together the pieces of the jigsaw puzzle of its presence. Even after 2 years of its demerger, D-Link India still continues to chalk strategies to gain a strong foothold with only its wireless and switching business continuing to gather strength. Even the major decision to appoint Tushar Sighat as CEO is no different from its plans to strengthen its topline. In order to gain foothold, signiﬁcant investments have been made in infrastructure aspects, namely acquiring a new corporate ofﬁce in Mumbai, and new warehouse facility in Goa. In order to penetrate the country better, D-Link appointed Redington August 31 - September 15, 2011 | 109

NETWORKING PRODUCTS

110 | August 31 - September 15, 2011

Switches Market in India Growth

(%) Others

14 Cisco

43%

2010-11

4,421

2009-10

11 5D-Link

3,081

4 Juniper

Source: DQ estimates

and Ingram Micro as its national distributors. SOHO and home segment have been supporting growth while education, government, and SMB are showing good traction. All these efforts have culminated into 50% growth during Q4 of FY11. If D-Link was on a reorientation drive, Smartlink continued to remain in business headlines again in FY11 even 2 years after its demerger with D-Link. After its successful independent venture, riding on the back of verticals like government, PSU, BFSI, state data center deals, etc, Smartlink etched ambitious plans to enter foreign shores. Hence, in a landmark deal of the fiscal, Digilink brand, the major contributor of revenues (85%), was sold to Schneider Electric India for `503 crore in an all cash deal. Brocade made every attempt to ensure that it maintains its stake be it by a rejig of its channel strategy, or new appointments, etc. Appointments commenced with Ravi Saxena taking over the reins as the regional director for its service provider business in Asia-Pacific (APAC) and Rajesh Kaul as the regional sales director. Joining hands with McAfee, Brocade was able to deliver a broad set of fully interoperable, simplified network based security solutions through joint channel partner programs and also announced a financing program, Brocade Capital Solutions. To increase its reach, the company appointed Redington as its new national distributor. Avaya launched Avaya Flare Experience and reinforced its focus on enterprise telephony. At the same time to maintain its stay Avaya engaged in a multi-channel strategy to focus on the top 8-10 cities, and Bangladesh and Sri Lanka. Ethernet switching primarily Gig, and 10 Gig has shown significant increase in q-o-q and y-o-y business. Avaya has been focussing on growing its market share through strategic product

4 Allied Telesyn Total Revenues: 4,421 crore *Others include Enterasys, ZyEXEL, Huawei, etc

(in crore )

The switches market maintained its growth story backed by government, telecom, and financial services verticals and is showing good traction. There has been an increasing adoption of Ethernet switches in the last 2 years

introductions and concentration on its existing clientele. While for others like Dax, new avenues like IP surveillance held high promises as the company forayed into the market with a range of IT products comprising 4 broad categories—ﬁxed IP cameras, ﬁxed dome cameras, PTZ cameras, and high-speed dome cameras. Even the switching market, where it has continued to maintain its stay, is proving to be a promising deal as prices are witnessing a southward movement. If the vendors were vying for attention even the categories were also trying nonetheless.

Modems FY11 witnessed slow growth on account of emergence and increased adoption of 3G wireless modems. This movement did affect DSL modem market while the dial-up modem market is on a southward drive. Even though the market was facing its ups and downs, Atrie Technology, the leader, took all in its stride. It continued its dominance supported by client wins like Indian Air Force (AFNET), BSNL (3G and WiMax), SWAN (Mizoram, Haryana), CRIS, UTS, PRS Railway projects, West visit www.dqindia.com

Bengal (Municipality and co-located nodes project), United Bank of India and MTNL (expansion projects). With a jump of 21% in revenues to `97 crore in FY11, Beetel Teletech emerged as the runner up. Its major engagement was for supply of modems for broadband access (Airtel’s customers) and MTNL (subscribers of Mumbai and Delhi). While the third major player (D-Link) tried to retain its foothold by banking on the technology trend card, by introducing a complete range of 3G devices (D-Link DWM156) including 3G dongles and routers. Some of the other introductions were D-Link Le Petit, a mini USB router (DWR-510), D-Link DWR131 ethernet router and D-Link myPocket DIR-456U 3.75G HSUPA router. With the ISDN modem market expected to witness traction from small and medium enterprises and SOHOs, India’s broadband and modem segment is set to see bullish movement. Even other variants of modems will be able to offer Ipv6 compliant services. New technologies such as WiMax, popularity of internet devices, have created an urgency in need for service among DATAQUEST | A CyberMedia Publication

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NETWORKING PRODUCTS

Routers Market in India

Switches The switch market was a story as told by the government, telecom and financial services verticals. With increasing adoption of IT by Indian enterprises, there has been an increase in the total number of endpoints connected to local area networks. There has been an increase in the diversity of data traffic flowing through LANs on account of new types of content sharing such as videos over increasingly converged networks. Due to this, there was a marked increase in the adoption of ethernet switches in the last 1-2 years, while security also assumed importance. But intense pressure played a big role in the revenue, and growth rate declined in the overall market due to pricing competition between Cisco, HP, and Juniper. Juniper was successful in selling all categories of switches in verticals but its EX series witnessed major traction. Another promising player was Digisol, which proved its presence by bagging deals with CIP, SBI Life Insurance, Sandeep Foundation, UPDESCO, GIL, SBI, TS Bank, United Telecom, Sriram Finance, etc. But the industry’s major concern remains interoperability with legacy network infrastructure, where customers have deployed proprietary technologies. However, it is being witnessed that if awareness is spread even the end customer would be willing to switch towards standard based network implementation. With 3G and BWA promising to boost SMEs and uptake of cloud based solutions, there will be a demand for all-in-one devices that can handle 3G connectivity, UTM, switching, and routing.

Routers With the market balance tilting to112 | August 31 - September 15, 2011

12%

(%)

2,966

2009-10

Juniper

12 64

2010-11

2,648

Others

Cisco

Growth

5Ericsson

4 Huawei 3 HP 3 Dax

Source: DQ estimates

the consumers which will take the segment to new horizons.

Total Revenues: 2,966 crore *Others include D-Link, ZyXEL, BA Sytems, Enerasys, etc

(in crore )

Alignment of an organization’s connectivity needs with its business objective is expected to take the market to new horizons. The relatively newer Chinese players are likely to gain further market share

wards devices with built-in multiple capabilities (content processing, VPNs, ﬁrewalls and load balancing, etc), routers market is laden with potential. Service providers are focusing on reducing capex and opex, while looking at seamless capability to upgrade existing infrastructures. Cisco remained the undisputed market leader, marked by deals like NSE for deployment of core technology products. Even its routing solution for home segment through Linksys recorded good momentum owing to demand for multimedia services. The company was looking forward to strengthen its presence in tier-2 and tier 3 cities with the aid of Neoteric Informatique. Meanwhile, Linksys has also tied up with over 2,000 stores across India, including large format retailers like Reliance Digital, Croma, Staples, and Hypercity. Juniper Networks’ MX series of routers came out as a clear favorite in this segment. Though the second player had a considerable market share the pie shared between Huawei, Ericsson, Dax and HP;was a battle among themselves. The prime growth driver gaining momentum today is aligning an organization’s connectivity objective visit www.dqindia.com

with the business objective. With the recent growth in cloud computing, enterprises are beginning to consolidate their IT requirements into a single pool where they have the ﬂexibility to scale up. In addition, new networking technologies and applications are driving organizations to deploy networks of scale and complexity never seen before. The router market in India is expected to grow supported by telcos, government and ﬁnance verticals. In this clash of titans, one game changing move has the potential to change the scenario entirely, which makes this segment a sector to watch out for.

WLAN This was a fragmented market without a clear leader with each vendor ready to gobble the other’s share. Cisco unrufﬂed feathers with new architectures like MOVE architecture for the service provider segment. But FY11 was witness to United Bank of India choosing to deploy Cisco’s wide area network optimization solution across its 1,600 plus branches. Netgear took a bigger share as its focus on solutions for smart IT DATAQUEST | A CyberMedia Publication

NETWORKING PRODUCTS

DATAQUEST | A CyberMedia Publication

WLAN Market in India (%)

Growth

Ruckus Wireless Cisco

13 23

Others

2010-11

1,079

2009-10

Aruba

776

Netgear

39%

8 6

Belkin D-Link Source: DQ estimates

sectors reached new dimensions after it made right moves (increased product range of access points, wireless controller switches, etc). Ruckus, Aruba and Belkin remained neck-to-neck in ďŹ gures. With APAC markets recovering (where Ruckus enjoys 31% share) and ambitious projects (setting up 50,000 Wi-Fi hotspots with Tikona), Ruckus was in good health. Aruba with projects like installation of 6,000 wireless solution controllers in academic section and workshops at IIT Delhi was not far behind. Apart from enterprise and consumer segments, D-Link has witnessed demand in the education and government vertical. The WLAN market is expected to grow supported by consumer, retail, government and education verticals. Pre N/MIMO is one of the fastest growing technologies in the WLAN segment which witnessed

Motorola/Cymbal

Total Revenues: 1,079 crore *Others include HP, Enterasys, ZyXEL, etc

(in crore )

As each player made aggressive moves to gain a bigger market share, the consumer stands to benefit from the wide array of innovative offerings

traction. With increasing deployment of WLAN, vendors have been forced to relook at their offerings with a new range in the last 1-2 years. These vendors have further

visit www.dqindia.com

extended their channel partner networks to tier-2, tier-3 and tier-4 locations covering large, mid-size and small cities in order to reach a larger audience of users. n

August 31 - September 15, 2011 | 113

SERVERS

Mixed Bag FY11 can be termed as far more benign compared to FY10. While x86 witnessed modest growth, the non-86 servers saw significant degrowth SHRIKANTH G shrikanthg@cybermedia.co.in

India Server Landscape Growth

3,244

% -17%

2,699

2,709

Source: DQ estimates

2008-09

2009-10

2010-11

non-x86

x86 Source: DQ estimates

Compared to FY10, x86 grew and became growth positive. All vendors had good traction on x86. But on non-x86 UNIX market, the market registered a de-growth indicating itâ&#x20AC;&#x2122;s getting niche by the day and that pulled down the overall server value

114 | August 31 - September 15, 2011

visit www.dqindia.com

fter a very bad FY10 servers demonstrated a marginal positive traction. While big time hardware refresh cycles are yet to happen, but there is clearly a trend indicating some amount of IT spending going on server purchases over FY11 that acted as the growth driver. Vendors term FY11 as a year of virtualization and took on to aggressive campaigns promoting consolidation and virtualization. While virtualization was a big trend in the last 5 years, but what happened in FY11 relates to the maturity levels and more enterprises rationalizing on their server sprawl. DATAQUEST | A CyberMedia Publication

SERVERS

x86: Ramping up Slowly While growth from an overall industry perspective might not be spectacular, but both IBM as well as HP had a very good year and attribute the growing demand for x86 servers to 3 key drivers First, the SMBs started buying more x86 servers; second, large enterprise that have kept on hold their server buying decisions started refreshing their hardware; and third, both SMBs and large enterprises are augmenting their server infrastructure for future growth. If we look at HP, the leading vendor in the x86 market as per estimates for FY11 had a good year. It grew in all x86 categories with good uptake from verticals like BFSI, IT/ ITeS. Overall it had a well-rounded growth across key enterprise segments. HP also saw good demand for server as well as network virtualization and says that many enterprises adopted these concepts aggressively during FY11. Meanwhile, battling HP all the way was IBM, which too had a great year on the x86 front. During FY11 IBM made the eX5 launch and pitched it as the breakthrough innovation for smarter computing. The X5 systems feature exclusive IBM X-Architecture innovations that the company said delivers unparalleled capabilities at the same time leveraging open, standards based components for affordability, ﬂexibility, and choice. It is designed and optimized for mission-critical, enterprise-class workloads; eX5 systems provide leadership performance, scalability, and reliability. If we factor in the Q3FY10 IBM sources say that it moved to the #1 spot. If we look at IBM’s signiﬁcant wins for its x86 offerings, it included names like Gulf Oil, L&T, Esther Industries, TVH, and GET Power. Meanwhile, Sun-Oracle had a rather diminutive performance mainly due to the delay in the DATAQUEST | A CyberMedia Publication

Tracking the x86 Story (FY10) %

(FY11) %

Others

Others IBM

IBM

22 23 20

Dell

32 HP Total Units (FY10): 126,556 *Other include: Sun Oracle, HCL, Wipro, Acer and Fujitsu Source: DQ estimates

Dell

32 HP Total Units (FY11): 130,000 *Other include: Sun Oracle, HCL, Wipro, Acer and Fujitsu Source: DQ estimates

While the first half of the fiscal was slow, by H2 FY11 the market opened up. The good uptake augured well for the x 86 market thanks to verticals like government, manufacturing, and SMB that drove the demand

integration process with Oracle. Despite the fact that Sun had a good portfolio on x86, the new client wins were more tilted towards HP, IBM, and Dell. Dell too had a good year and Dell’s expertise in building different user configurable server specs has garnered a wide appeal. In addition to mainline x86 servers, Dell also upped its ante in the microserver space where it targeted the IT hosting and Web 2.0 companies. Interestingly, Dell used both Intel as well as AMD configurations on its micro-servers. For instance, its PowerEdge C5125 and C5220 come with up to 12 server nodes in 3U chassis supporting both AMD and Intel architectures, respectively. Sources say that Intel is aggressively working on the micro-chips that will redefine power consumption part as its new range of microchips in the pipeline will consume just about 10 W as against 30 W in a Xeon environment. Micro-servers are a new class of servers designed for those who use cases where multicore CPU architecture and extensive virtualization are overkill. What these systems provide are multiple low-cost dedicated servers where visit www.dqindia.com

one CPU is perfect for running single apps. Dell claims that the latest generation of PowerEdge C5000 micro-servers offers one of world’s most dense and energy-efﬁcient systems featuring between 8 and 12 individual server nodes in one 3U chassis.

Non-x86: Getting Niche Non-x86 in the last 2 years was going through an unpredictable route. Overall the growth was going south and the market saw considerable decline. The overall market decline can be attributed to realignments in the industry relating to Sun/Oracle and other vendors like HP facing some challenges in their overall systems business. If we look at FY11, it was IBM that emerged as a leader. For instance, IBM emerged as #1 in the Indian non-x86 UNIX server market in revenue terms in the JFM quarter of 2011 according to IDC’s Asia/Paciﬁc Quarterly Enterprise Server Tracker, JFM 2011. IBM’s success in the non-x86 UNIX market segment in India was driven by the strong uptake for Power7 servers. According to the IDC’s quarterly market tracker, IBM maintained August 31 - September 15, 2011 | 115

SERVERS

116 | August 31 - September 15, 2011

The non-x86 Story Growth

5,925

2010-11 2009-10

4,600

Source: DQ estimates

its leadership in the India non-x86 UNIX server market capturing 42.1% revenue market share in Q1FY11, which is 11.7 points lead over its nearest competitor. In addition, IBM’s non-x86 UNIX server factory revenues grew 6.5% yearon-year in Q1FY11 over Q1FY10, while revenues of all other vendors in the said segment declined during the same period. IBM’s revenue growth in the non-x86 UNIX server segment in India was driven by strong performance in the ﬁnancial services, communication, and manufacturing verticals. Globally 2010 was a turnaround year for IBM’s Systems and Technology Group (STG), and going by JFM 2011 data it shows that IBM saw the fastest growth in server business in that quarter. Power 7 was clearly behind that momentum with a solid 19% year-on-year growth in JFM 2011. With that impressive growth no wonder IBM had some signiﬁcant client wins for UNIX over FY11 in India. The names included ones like Canara Bank, Titan, Gulf Oil, Cosmos Bank (Cosmos Bank has consolidated its sprawling server infrastructure of over 8 Power 5+ servers onto 3 IBM POWER 7 servers (POWER 750) to run its core banking application. With the new system, the bank expects to increase performance by 50%; with 100% additional headroom for growth within each server while reducing operating costs by 40%. Power consumption is also expected to be reduced by 65%), Caparo (Caparo chose to host the data center on IBM’s Power Systems in a cloud model over competitor HP systems because the IBM solution will lower its upfront investments up to `1 crore), and Fedbank (chose IBM Power servers to run its business critical loan origination application. Fedbank has selected IBM Power Systems over

2009-10

2010-11

Total Units The overall non-x86 volumes going down indicates that only select verticals like BFSI will drive the UNIX space and clearly it has become the domain of enterprises that want a high-end, extremely reliable IT backbone for mission-critical apps

Oracle and HP because of the IBM platform’s ease of management, cost-effectiveness, and price-performance ratio). What had secured a good year for IBM relates to its 4-pronged UNIX strategy during FY11 cutting across: competitive migrations (IBM saw good deal of client migration from competition. Programs like Sun Set saw good migrations from Oracle/Sun), increase new workload footprints, leverage geo-expansion, and building ecosystem with ISVs, partners, and inﬂuencers. If we look at the competitive landscape, experts say that what has impacted HP over the year relates to drastic cuts made to R&D that might hurt its long-term competitiveness, and clearly HP systems business is going through challenging times. If we look at available data, HP’s Business Critical based on Itanium will also go through challenges with experts terming Intel’s Itanium architecture has reached its dead-end for enterprises planning to upgrade their systems in preparation for cloud computing and big data handling does not augur visit www.dqindia.com

well for companies like HP. As we look at HP’s UX roadmap, the company says it extends longer into the future than any other UNIX in the market. HP-UX 11i v3 is designed to deliver the always-on resiliency, dynamic optimization of resources, and investment protection and stability demanded in mission-critical computing. It integrates proven UNIX functionality with advances in high availability, security, partitioning, workload management, and instant capacity on-demand and delivers it within the industry’s first mission-critical Converged Infrastructure to drive up flexibility while reducing risk and delivering compelling value. So it would be interesting how IBM and HP are going to fight it out in the non-X market, given all these changes and the unique expertise each one has under their sleeves.

Road Ahead If we look at x86 servers, the market is increasingly getting plural with newer vendors like Fujitsu and Acer seeing good deal of traction. For instance, Fujitsu’s x86 server shipments in India grew by 184% and revenues grew 227% against overall server market 23% unit and 37% as per Gartner, which says the company showcased the highest growth among the top 5 global server vendors in Q4FY10. In terms of IBM’s leadership expected to continue in the coming quarters on the non-x86 front, and it is to be seen how HP and Sun/ Oracle are going to counter IBM’s impressive escalation in the UNIX market. Despite that UNIX is clearly becoming very niche by the day at the same time it also proves that it’s the #1 OS for mission-critical apps. This niche nature and continued demand for UNIX also deﬁes some analysts calling UNIX is on its way out. That possibility remains unlikely. n DATAQUEST | A CyberMedia Publication

Cyber Security Becomes Top Priority With growing online threats, both the network and content security market in India grew; UTMs is poised to become the single biggest market by the end of CY2011

SECURITY

Cyber Security Becomes Top Priority With growing online threats, both the network and content security market in India grew; UTMs is poised to become the single biggest market by the end of CY2011 STUTI DAS stutid@cybermedia.co.in

n Eighty-three percent of threats faced by Indian companies are due to internal security breach, says a Frost & Sullivan CIO survey n Internal security breaches by employees constituted 43% n Of the surveyed companies, 42% suffered ﬁnancial losses, while 35% suffered intellectual property losses

Indian Security Market Growth

1,994

Source: DQ estimates

1,750

2009-10

2010-11

With threats of cyber attacks mounting, enterprises are taking the security threats quite seriously; in FY12 the market is expected to see traction as mobile enterprises become the norm

118 | August 31 - September 15, 2011

t’s a grim scenario worldwide as enterprises are being threatened by cyber security related issues and growing online attacks. The elimination of Osama Bin Laden by US forced CIA to suspect that al-Qaeda could take to the online world for launching cyber attacks; the British Home Office too had said that al-Qaeda would wage a ‘cyber jihad’. The Indian security market clocked `1,994 crore in revenues growing 14% up from `1,750 crore in the previous fiscal. The growing cyber attacks have meant that enterprises can no longer bill security as an unnecessary expenditure. The Frost & Sullivan CIO survey too reveals similar trend—while the spending on security is relatively low in India compared to other economies even though 90% of the CIOs surveyed agreed that IT security is a vital component. Moreover a significant number of CIOs in India didn’t have any fixed budget for IT security. Not just external threats, internal attacks too are mounting and are just as serious considering their implications like data loss, market credibility, and compliance-related issues. Says a Symantec BFSI survey—23% of organizations surveyed faced external attacks, including phishing, theft of proprietary data & DDoS while internal theft of information experienced an average of 5.8 times. The Frost survey too said—85% respondents believed that viruses, worms, and Trojan horses were the major disquiet in today’s IT environment. As per Gartner, Indian security market is expected to see a CAGR of 16.4% until 2013, after clocking a projected growth of more than 20%. visit www.dqindia.com

DATAQUEST | A CyberMedia Publication

SECURITY

The arrival of newer players means that the market is overcrowded resulting in commoditization of the market. “Besides, inspite of it being a price-sensitive market, customers are also demanding support on appliances,” says Ekta Aggarwal, program manager, ICT Practice, Frost & Sullivan, South Asia & Middle East. She further points out that there has been a shift from single point to converged solutions and adoption of converged security platform. The Indian network security market touched `880 crore growing by 7% as Cisco garnered a market share of 37% with Check Point far behind at 19%. As per IDC, the Indian security appliances market is estimated to reach $180 mn by 2012 driven mainly by increased spending from verticals like IT/ITeS, government, and BFSI. In the network security market, UTM will be the single biggest market by 2011, says IDC, forecasted to have a CAGR of 26.2% with a total available market of $3.1 bn by 2011. As per IDC’s India Quarterly Security Appliance Tracker, Q3FY10, the Indian UTM appliance market was worth $11.52 mn. The UTM market is faring well due to the organizational focus on dealing with increased threat levels. The uptake of UTMs in education is growing. The UTM market at low price points catering to SMEs is getting very competitive. Vendors are offering scaled down versions of products as well as modular solutions to cater to requirements of SMBs. IPS is also gaining increased attention from organizations in BFSI, IT/ITeS, and government verticals. Vendors are increasingly focusing on adding channel partners with a regional focus to increase their reach. Market shares will be signiﬁcantly impacted by pricing and channel strategy. The trend is now toward integrated security solutions rather than stand120 | August 31 - September 15, 2011

Network Security Market in India 7%

% 880

Check Point

942

Growth 2010-11

Others

18 19

14 6 37

2009-10

Juniper Networks Source: DQ estimates

Network Security Market

Fortinet SonicWall

Cisco FY10

FY11

(in crore ) Total Revenues: 942 crore *Network Security includes Firewall, UT, IDS/IPS, VPN Gateway

The commoditization of the market has resulted in heightened price senstivity. Cisco continued to dominate the market with its FY10 launch: Borderless Networks, enhancing its portfolio by adding new security, management, and video solutions

alone apps. Going ahead enterprises will focus on securing increasing endpoints as well as the network. Security assessment of enterprises will be increasingly undertaken to prepare a roadmap for future security-related spending. The security solutions market will continue to be addressed by vendors from a consultative approach to enlighten clients on the new and emerging threats and steps need to be taken to tackle them. Fortinet has been ranked as the #1 in the UTM market in India for Q4FY10 and for calendar year (CY) 2010 (in both factory revenue and units shipped) with a 20.6% share in factory revenue for Q4FY10 and 20.3% for CY10. As part of its vertical sales strategy approach, it appointed 2 new sales directors both security market veterans in order to increase Fortinet’s share in highgrowth verticals like defense, telecommunications, and government. The growing pressure on the telcos to adhere to regulations and the arrival of 3G and WiMax technologies makes telecom an attractive vertical. In the last 1 year, there is a growing adoption of FortiGate’s network visit www.dqindia.com

security appliances in not just the enterprises segment but even by managed security services providers (MSSPs) and telecom carriers. Fortinet also entered into partnership with Sify to enable Sify to immediately roll out an on-demand security solution to their cloud computing customers and its Clean Connect service. However in FY11, it didn’t launch too many products. The 2 major releases included the FortiOS 4.0 OS for the FortiGate product family, including the FortiGate-3140B multi-threat security appliance; and the addition of a new consolidated security appliance to its award-winning FortiGate product family. FY11 brought in much cheer for Cyberoam, a division of Elitecore, as it bagged the Nasscom Innovation Award 2011 as the best innovator in the ‘new technology advancement’ category for its breakthrough Layer 8 innovation in Cyberoam UTM security appliances. Not just that, it also bagged the #1 UTM appliance vendor in the IDC Quarterly Security Appliance Tracker Q3FY10 based on factory revenue ﬁgures for Q3FY10. Cyberoam recorded factory revenues of $2.71 mn out of a total India UTM DATAQUEST | A CyberMedia Publication

SECURITY

122 | August 31 - September 15, 2011

Content Security Market in India 37%

12%

Trend Micro

2010-11

630

McAfee

29%

Growth

2009-10

460 Source: DQ estimates

appliance market size of $11.52 mn during Q3FY10, representing a 23.5% market share. On the client front, it sold 15,000 UTM apps. The company was even recognized by Gartner as a Visionary in the 2010 Gartner Magic Quadrant report for UTM. Expanding reach in more than 110 countries, the company entered into an agreement with SnapperNet, one of the largest specialist security distributors in New Zealand hopeful of filling in the gap created by McAfee’s exit from the UTM business offering a mid-high market feature set with a low market price tag. It will also pump in $10 mn into the European channel development activities over the next 2 years. Product-wise there was much happening as it launched the CCC500 and CCC1000 apps in its centralized security management offerings, scaling to meet the demands of MSSP and distributed enterprise networks having up to 1,000 Cyberoam UTM apps. This year, it intends to launch a cloud version of its central management console that partners can use for free. The launch of a hosted log solution allowing partners to help customers monitor traffic is slated for January 2012. The network security market also saw the entry of newer players like Quick Heal and Astaro. Already a popular brand name in the antivirus software market, Quick Heal is now entering the UTM market targeting its strong SMB customer base for positioning its UTM solutions (upto 350 nodes). In its first phase, 4 models of UTMs will be launched—small office (upto 50 nodes), 150 nodes, 250 nodes, and 350 nodes. Initially, it will be doing direct sales through its 25 branch offices but will, over a period, also form a network with a mix of direct and channel partners. Astaro, another newbie wants to capture around 5-7% of the market

51% 8% Others Symantec FY10

FY11

Total Revenues: `630 crore Continuing to occupy the lion’s share, Symantec focused in the BFSI, telecom and government verticals. It’ll be interesting to watch how McAfee will challenge Symantec with Intel’s backing

by the end of CY11, and therefore has chalked out an aggressive marketing strategy in place including spending around 8% of its quarterly revenues on partner training, new product launches, trade shows, etc. In order to address gaps in cloud based log management and endpoint security loopholes, Astaro acquired CoSoSys and InspektOnline. It also intends to launch integrated products that will add onto its new product portfolio (launched in 2010), including the Remote Ethernet Device (RED), the wireless security, and the Astaro Mail Archiving (AMA). The growth of internet coupled with the increase in mobility of end points has resulted in network security occupying top-of-the-mind space. Enterprises including the government too are feeling the need to install security checks for their networks keeping in mind the humongous volume of data on the public networks. The arrival of 3G and WiMax technologies too are pushing the boundaries. Cisco that has a 36.06% share (Q4, CY10) as per Frost & Sullivan in the network security market enhanced its prized Borderless Networks portfolio by adding new visit www.dqindia.com

security, management, and video solutions, including Cisco Identity Services Engine, a centralized policy engine for Cisco TrustSec solution, enables organizations to efﬁciently deﬁne and manage security policies across the organization. Named as the ‘Network Security Vendor of the Year’ by Frost & Sullivan, Juniper is betting big on the telecom market for its security software solution for smartphones after its acquisition of S Mobile. AGC Networks expanded its capabilities by adopting the highest tier of Juniper services program, Advanced Partner Service giving AGC’s customers in India, Australia, and New Zealand access to proactive and personalized services. The leading players in the content management space include Symantec, McAfee, Trend Micro, Websense, Check Point. Even though acquired by Intel, McAfee will continue developing and selling security products and services under its own brand. In fact Intel and McAfee plan to bring an integrated product to market later this year. Continuing to move beyond the traditional Network Intrusion Prevention Systems (IPS), by providing a greater level of network intelligence DATAQUEST | A CyberMedia Publication

SECURITY

Security on the Cloud A recent global cloud security survey conducted by Trend Micro provides a valid reason explaining why most enterprises in India face apprehension over adopting cloud computing. With the highest percentage among all surveyed countries, 55% of enterprise IT decision makers in India reported a security lapse or issue with their cloud provider within the last 12 months. For 4 technologies/services (server virtualization, VDI, public and private cloud services), market penetration numbers are significantly higher in India, US and UK. In fact, although about 10% of the respondents in India currently have private cloud in production and roughly 15% have hybrid apps or public cloud in production, about half are implementing or piloting one or more of these cloud services, according to the survey. Despite cloud computing’s growing popularity in India, confusion is still at play among enterprises, some of whom don’t recognize what cloud computing services are. When presented with a list of cloud computing services,96% of the respondents said they are currently working with at least one of them. And yet, 7% of the same respondents said that their company has no plans to deploy any cloud computing service—a contradiction. Security is a key reason for holding back adoption of cloud technologies as 60% of respondents pointed out that apprehension over security is a key reason for holding back their adoption of cloud computing. Generally speaking, Indian respondents expressed a higher level of concerns about adopting cloud computing services than respondents elsewhere. According to the survey, the top barriers respondents see in adopting cloud computing services in India are: Billing and tracking of services used (44%), lack of access to data (42%), availability of cloud services/uptime (42%) and lack of transparency (41%). Data in the cloud is vulnerable without encryption. When it comes to public cloud in production, 93% of respondents in India said they encrypt data stored in the cloud. And before taking the plunge into cloud adoption, 56% of survey respondents said they would be more likely to consider a cloud provider if an easy to administer cloud encryption service was provided. Nevertheless, most commonly used encryption key management techniques used in the cloud today are vulnerable. Policy-based key management for better control over cloud-stored data. Source: Trend Micro

124 | August 31 - September 15, 2011

Managed Security Services Market in India Growth

18%

2010-11

484

2009-10

410

Source: DQ estimates

across both physical and virtual environments, McAfee announced enhancements to its Network Security Platform, the latest release includes enhanced botnet control through reputation intelligence, virtual network inspection and a traffic analysis port for network monitoring, forensics, and other advanced analysis engines. It also announced enhancements to its Security Management solution that will allow integration between the ePolicy Orchestrator platform, McAfee Risk Advisor, and McAfee end-point products to enable organizations to gain complete visibility of security and risk events across any on-premise or hosted desktop, network, or server. In FY11, Check Point came out with its 3D Security vision complimented with security apps specifically for the Data Centers. With the 3D Security vision, the company is looking to redefine

2009-10

2010-11

(in crore )

The growing adoption of SaaS and cloud computing is resulting in reduced upfront capital expenditure thereby leading to higher adoption of MSS

security as a business process by combining policies, people, and enforcement for stronger protection across all layers of security. The new launches include R75.20, based on visit www.dqindia.com

the Software Blade Architecture, Check Point 21400, a new data center appliance, and Check Point 61000 security system, industry’s fastest security gateway. Growing more than 40%, the company managed to bag 3 large projects—Allahabad Bank, SBI, and a life insurance company. Virtualization that has been incorporated in the UTM devices allowing organizations to assign virtual UTM devices to network segments or user groups. For instance, Trend Micro came out with virtualization-aware end-point security solution—the Trend Micro OfﬁceScan 10.5 for medium businesses and enterprises; and the Titanium 2011-Maximum Security product for consumers and Worry Free Business Security 7 for SMBs. After a ﬂat FY10, Trend Micro seems to be getting its act together bagging 7-8 customers in AMJ quarter alone in the virtual security segment. DATAQUEST | A CyberMedia Publication

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SECURITY

BFSI Security Threats Symantec Corp’s findings of its Symantec Security Check—Indian Financial Services Industry 2011 (Banking, Financial Services and Insurance industries) report reveal regulatory and governance mandates as a key driver of IT security for 50% of financial services enterprises. Increasing ecommerce and mobile transactions were identified by 1 in 5 enterprises as another reason for increased adoption of security. During the last financial year, 23% of respondents experienced an external attack ranging from phishing attempts, theft of proprietary information and denial of service attacks. External theft of confidential information was faced an average of 1.5 times and internal theft of information an average of 5.8 times. Financial services enterprises face significant financial losses due to security breaches, with the average loss being `6.86 crore. This figure was nearly double for Indian banks, at `12.6 crore. Also 67% of respondents that experienced a data breach lost man hours, and 61% stated that they had lost customers as a result. More than 80% of respondents have faced downtime due to online attacks, and took an average of 4 hours to resume normal operations. Compliance and governance is driving IT security adoption as 50% of respondents from financial services enterprises in India cited compliance as the primary driver for adopting IT security. In fact, 1 in 4 respondents that experienced a digital attack faced monetary penalization. Over the last year, RBI has mandated 2-factor authentication at banks for all delivery channels. In the past 12 months, 31% of respondent-banks invested in identity management, and state that investment in technologies to address such regulations is likely to continue. According to the survey, technology investments during the next financial year will be made towards stronger governance, business continuity planning, securing mobile and wireless transactions, data loss prevention and network security. Mobility and Consumerization of IT pose security risks as the risk of exposing confidential information is increasing as customers explore new channels for financial transactions through e-commerce and mobile banking. Besides increased mobile and online transactions (18%), growing internal threats (15%) are also significant factors driving security adoption. The survey revealed that 8 out of 10 employees at respondent organizations use endpoints, and that currently 81% of smart phone users in these organizations access corporate information, and 57% use instant messaging. Source: Symantec

In fact 15-20% of its India revenues came from its virtual security business. Operating in the end-point security market, the company also deployed 250K end point at the largest bank in India. Even though Trend wasn’t a big player in the consumer segment, this trend was done away with this year as consumer business contributed 5% to its revenues. The company is also betting big on the government vertical this year especially for virtual security. Out of the 3 lines of business 126 | August 31 - September 15, 2011

(LOBs)—enterprise, commercial, and SMBs—in FY11 in the enterprise business the Symantec story revolved around the BFSI, telecom, and government verticals. Some of the key high-proﬁle client wins included Reliance, HDFC, TVS Group, Aircel, Genpact, ICICI bank, Wipro, TCS, and NCDEX. In FY12, the company intends to penetrate deeper in these 3 verticals. Ditto for the SMB business wherein the strategy will be to scale to tier II and III cities deeper. Establishing India as visit www.dqindia.com

DATAQUEST | A CyberMedia Publication

SECURITY

a security R&D hub, the company launched the Security Operations Center in Chennai for providing real-time threat monitoring, analysis, and remediation guidance to customers to help them minimize the impact of security incidents on their business operations and reduce their overall IT risk. Managed Security Services With Forrester estimating that the size of the global managed security services (MSS) market is about $4.5 bn, including outsourced and SaaS security services and a predicted 15% growth rate for the next years, this market will only see a boom. The market is seeing the hacker proﬁle undergoing a sea change; from launching attacks for fame, he is now doing it for money. Enterprises therefore are turning to MSSPs for assistance. The growing popularity of the next generation services like SaaS and cloud computing are reducing the upfront capital expenditure and the operating costs thereby leading to higher adoption of MSS. The signiﬁcant cost reductions in the MSS sector due to the use of hosted security systems is seeing an increase in adoption of MSS by the SMBs. Organizations are adopting the MSS model that is helping in improving the security and reducing the operational costs. With infrastructure growth, focusing on managed security is becoming a

128 | August 31 - September 15, 2011

challenge especially as business is being conducted from offices located across various locations. Wipro Technologies was rated by Forrester Research as a strong performer in MSS providers in a recently released report The Forrester Wave: Managed Security Services, Q3FY10. On the business front, Trend Micro entered into partnership with Wipro to jointly develop virtualization security solutions for private and public cloud for jointly providing virtualized data center security and data center consolidation solutions. The initiative will align with current services from Wipro such as data security, managed security monitoring, managed network and host infrastructure security operations, and managed unified threat and vulnerability managed services. As a Trend Micro global reseller, Wipro will offer products that encompass threat management, web, messaging, server, and end point security. Paladion Networks too found a mention as a Positive player in Gartner’s ‘MarketScope for Managed Security Services in the Asia/Pacific Region’. In FY11, it was product launches galore as it launched a range of innovative products. For assisting law-enforcement agencies, it launched iCybermon for cybercafé monitoring capable of decoding and reconstructing WLAN Internet traffic in real time; and iWLAN interceptor, latest in its portfolio

visit www.dqindia.com

of interception devices; world’s smallest Wi-Fi interception handheld device with a 7’’ screen, fully built-in Wi-Fi interception software and accessories. The company also assisted Dubai Customs to become world’s first customs administration to be certified for ISO 27001. In its second largest market Europe, HCL Technologies found a mention in the Gartner’s ‘MarketScope for Managed Security Services in the Positive category’. It also launched AEROPASS, a future-proofed, flexible, and secure biometric Airport Security Solution for expediting the passage of pilots and flight attendants through security checkpoints and into sterile airport areas. The MSS market in FY11 saw the arrival of several new players—Allied Digital entered into a JV with Singapore-based e-Cops marking their entry in the MSS market holding the majority share. MIEL e-Security, meanwhile introduced its MSS—MIEL’s Endpoint Diagnostic Service (MEDS), over the cloud. The service is an agent-less architecture, scans end points based on best practices, and gives compliance reports. SunGard Availability Services meanwhile expanded its MSS portfolio adding enhanced Log and Threat Management Services. The new addition can defend networks and mission-critical data from security breaches and attacks. n

DATAQUEST | A CyberMedia Publication

Big Data on Cloud Nine Cloud computing and the big data concept were the primary catalysts behind the revival of the Indian storage market

STORAGE

Big Data on Cloud Nine Cloud computing and the big data concept were the primary catalysts behind the revival of the Indian storage market

Storage Market in India Growth

20% 1,978

Source: DQ estimates

1,646

2009-10

2010-11

In the aftermath of the slowdown, in FY11 the Indian storage market started moving to normalcy especially in H2 with technologies like virtualization, de-duplication, thin provisioning, compression, and automated tiering becoming buzzwords

132 | August 31 - September 15, 2011

STUTI DAS stutid@cybermedia.co.in

fter a relatively slow growth in FY10 owing to global recessionary conditions, FY11 saw the storage market going back to normalcy especially in H2. The overall market grew by 20% to clock `1,978 crore in overall revenues, up from `1,646 crore in the previous fiscal.This is not the complete picture though, the good news is that as per IDC, India was the 3rd biggest market in the APJ region. In FY10, budget cuts followed by no approvals despite storage requirements translated into enterprises analyzing their storage capacity. Big-ticket projects no longer were the norm, instead enterprises focused on completing smaller and more significant projects. Virtualization has therefore become a buzzword and every tech investment has been done looking at how to improve efficiency of operations and how to virtualize resources to ensure maximum utilization. The situation has been further compounded by data explosion which requires turning raw data into meaningful business data and at the same time ensuring storage efficiency while managing complexity and doing backup. Therefore backup and archival as a service have now started to make inroads this year. Moreover with enterprises, growing demand for computing devices too has grown, therefore, the trend is towards desktop virtualization. Technologies like virtualization, de-duplication, thin provisioning, compression, and automated tiering have now started to figure high on enterprise’s agenda in FY11. This effectively means that any virtualization related technology, be it standardization or converged infrastructure, will see heightened adoption. However it was cloud computing that garnered the maximum mindspace in FY11 simply because as a technology it is changing the way storage companies do business. On the enterprise front, monetary cuts have resulted in most organizations looking at cloud seriously. IDC says the revenue from cloud computing services in India will grow at a CAGR of 56% to $3.16 bn by 2015 from the $534 mn expected this year. A Gartner CIO survey has visit www.dqindia.com

DATAQUEST | A CyberMedia Publication

STORAGE

revealed cloud as the top technology priority for them in 2011, followed by mobile technologies and virtualization.

the company targeting all segments of the market by offering related products. For instance at the lowest level, it has the iOmega products; at the mid range—the uniﬁed products and at the high-end, there are VMAX products.

External Storage Market in India %

EMC India: Ruling Big Data Big data and cloud computing were the 2 underlying themes behind all its marketing and product related announcements in FY11. EMC is going all out to promote big data, a convergence of cloud, and enterprise data wherein it believes storage will have a central role to essay. For instance, the Greenplum acquisition which has essentially scaled out NAS can play a key role whenever the customer wants to play with big data. In fact, its historic product launch was a part of the company’s effort to position itself at the intersection of big data applications, cloud computing, and enterprise data that is driving data explosion. EMC India made history when it launched 41 new storage technologies and products in a single day including a new family (15) of unified storage— the VNXe focused on SMBs and the VNX series targeting the mid market. Both the VNX and VNXe are part of its Unisphere, a centralized interface. Other launches include the new unified systems for the high-end systems—the VMAX and a new disk backup and archival product allowing data deduplication, backup, and archival on a single disc in a bold move to phase out tapes. As part of its agenda to enable customers to migrate to cloud easily in 2010, EMC extended its collaboration with Cisco by launching its JV Cloud Experience centers in Bengaluru allowing customers to get a feel of the benefits and reliability of cloud based IT infrastructure. Not just satisfied with this, the company has also gone ahead and trained and certified partners to deploy VCE implementations. These 5 VCE 132 B | August 31 - September 15, 2011

NetApp

12 Others 11 HP

IBM

EMC

7 4

HDS Dell

Total Revenues: `1,063 crore

Source: DQ estimates

Coming back to the #1 position, EMC is betting big on Big Data and Cloud computing in FY12. This success is an outcome of it targeting all segments—at the lowest level, it offers iOmega; at the mid range the unified products; and at the high-end, VMAX products

partners include HCL, Wipro, TCS, and mid-tier partners. On the business front, the company continued to do well in its strongholds like IT/ITeS (contributed the major chunk of revenue at 25%) followed closely by telcos (at 23%). However it was the government story that catapulted EMC to the top of the chart. A traditional weak segment, the government until now contributed less than 10% to its revenue. All this changed in FY11 as the contribution zoomed to 15% making the segment the 3rd highest in terms of contribution followed closely at 14% by the BFSI. This has resulted in business becoming more evenly spread. EMC has done a roaring business in FY11. In JFM quarter, it acquired 100 storage and 100 EMC customers and in FY11, the company acquired 503 customers taking the total to 1,930 customers. This success has been a result of visit www.dqindia.com

NetApp India: Reaching for the Cloud The story here too was no different as NetApp India aggressively chased for a bigger pie of the cloud computing market. Globally, cloud helped the company to touch the magical 1 bn consumer mark. With enterprises shying away from investing in storage infrastructure like they did previously, the arrival of cloud has changed the way enterprise look at their IT set-up. The enterprises are now allowing service providers to host storage in 3rd party data centers, doing away with niggling maintenance issues. With co-hosting becoming a big trend globally, India too is toeing a similar line. This has given NetApp a huge opportunity by offering their storage technology to cloud service providers. On a global scale, the company is already working with service providers like Yahoo!, Verizon, and T-Systems and so the Indian story saw some action in FY11. The company has been signed as a storage technology provider across categories. In the Infrastructure as a Service (IaaS) category, it is working with Reliance Communications, Tata Communications, Onecloud of BSNL (managed by Dimension Data) and HCL; in Platform as a Service (PaaS) category, companies like Hexaware Technologies and Technicolor have signed it; in Software as a Service (SaaS) category, vendors like iON from TCS, HCL and even a cooperative bank like Shamrao Vithal Cooperative Bank (SVC) which is providing cloud infrastructure hosted on its data center to smaller cooperative DATAQUEST | A CyberMedia Publication

STORAGE

NAS Market in India 14% 34% (%)

186

163 EMC

NetApp

IBM

Source: DQ estimates

Others

3 HDS 3 Dell 2009-10

Total Revenues: 186 crore

2010-11

(in crore )

Having acquired Engenio globally, NetApp is a leading name in the NAS market. However FY12 will be a defining year as customers explore other options like Cloud and Big Data

in India SAN MarketSANinMarket India

11%

(%)

877 790

26 EMC

10 8

NetApp

Source: DQ estimates

IBM

Others

12 11

HDS

4Dell 2009-10 2010-11

Total Revenues: 877 crore

(in crore )

Big data and cloud computing were the 2 underlying themes for EMC in FY11; the Greenplum acquisition, which has essentially scaled out NAS, can play a key role whenever the customer wants to play with big data

banks are working with NetApp; and ďŹ nally in StaaS, companies like Reliance Communications and Onecloud from BSNL are using its storage technology. In order to build upon demand for this model, NetApp has also been doing events with these service providers. On the company front, cloud goto-market strategy saw some investments as it appointed a new cloud lead to centralize all cloud marketing efforts. It launched its service provider program and signed on TCS, Wipro, HCL Info, HCL Tech, Accenture, CSC India, and Tech Mahindra. DATAQUEST | A CyberMedia Publication

With the company emphasizing on its channel partner program, no wonder the regional system integrator program saw some new hires (total 4) for addressing the local market. The company also empowered its partners to deliver services by taking implementation support. For instance, vertical-speciďŹ c partners like TCS, Prithvi, and HCL were signed for addressing the telecom vertical. The result of NetApp forming a dedicated government vertical seemed to be yielding results as it bagged 5 state data center deals in states like Haryana, Mizoram, visit www.dqindia.com

August 31 - September 15, 2011 | 133

STORAGE

UP, MP, and Jharkhand. The telecom vertical too did well with the introduction of 3G VAS services and cloud services. In short the company added 127 new customers to its kitty. Pegged as the single biggest product launch globally, NetApp India introduced the FAS/V6200 series, FAS/V3200 series, Data Ontap 8 (the ﬁrst and only storage connectivity for all tools), OnCommand Management software (for managing storage and integrating with IT management), FlexPod for VMware pre-sized solutions, DS 2246 disk shelf, and SSD support in DS 424.3.

IBM India: Growing Faster than Pure-play Vendors Having long chased the #1 position, FY10 ﬁnally brought in lots of cheer for IBM. With a 28.2% revenue market share, IBM was the fastest growing top 5 external disk storage vendor in India in Q1 2011, gaining 6.9% share on a y-o-y basis. The lead has come on the back of acquisitions (like XIV) and R&D (Storwize V7000 SONAS). Touted to be a game changer product, the Storwize V7000 launched in October was a part of the midrange disk system. Packed

with high-end features, the product saw good success in the SMB and mid market space. With the objective to build on its leadership, IBM is now looking to build upon its offerings in technologies like virtualization, automated tiering, and thin provisioning targeting the large enterprise and mid-market segments. In fact for some time now there has been an upsurge in storage led deals. In fact, 35-40% deals were storage led deals in FY11. FY10 has ended on a good note as IBM managed to grow faster than the market, thanks to a solid sales performance especially the XIV (launched in 2009) of which around 31 units were sold (exceeding the target of 10x) and the refreshed DS8000 series with the 4th generation were used by the banks and telcos (apart from the top 3 names) and manufacturing segments. The top 3 traditional verticals—telcos, BFSI, and manufacturing continued to spend followed by media and entertainment and mid-market. However it was the government and SMB that managed to outperform expectations. While in government, majority of the opportu-

HP India: Leveraging Converged Infrastructure

Secondary Storage Market in India 12% 140 125

(%)

IBM

Source: DQ estimates

44 Others

2009-10 2010-11 Total Revenues: 140 crore

(in crore )

Even as analysts are counting their days to end, tapes saw a revival of sorts post the slowdown as customers bank on these as an affordable long-term archival solution; in fact IBM’s 10% of FY11 revenues came from their tapes business

134 | August 31 - September 15, 2011

nities were in greenﬁeld and infrastructure projects like the APDRP, state data centers and UID project. The SMBs started showing growth potential especially as they started buying intelligently and bought as per the utilization needs. Technologically there were lot of investments in virtualization and consolidation but none of them were large deals and traction was only seen in the SMB space. Customers were also looking at tiering for performance and IBM calls it easy tiering already available on their DS8000. As one of the 2 players in the tape market, IBM’s 10% of the revenue was contributed by this business with the growth in the discs market. Even after the slowdown which saw the re-emergence of tapes as the affordable long-term archival mode, companies are now using a combo of disk and tape for backup. Used primarily in banking, ﬁnance, manufacturing, oil and gas and SMBs, tapes are the last line of defense. On the technology front, there has been lot of innovation especially around LTO4 and LTO5 (launched in 2010).

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Every customer wants to know whether cloud is real and how difﬁcult/easy it is to migrate to cloud ready infrastructure. Even though there has been the maximum discussion around cloud yet not many organizations are moving to cloud. HP however is hopeful that the introduction of the cloud ready agile storage in the form of 3PAR which combines multi- tenancy through storage will change all this and more. The 3PAR utility storage has been integrated across its converged infrastructure portfolio thereby introducing storage for virtualization and data deduplicaDATAQUEST | A CyberMedia Publication

STORAGE

Demystifying the Storage Market Often it is a source of confusion amongst storage vendors and analysts as well as enterprise CIOs, so Dataquest decided to clarify how we track the overall Indian storage market and arrive at different segmentations. The overall network storage market is the biggest component where we include the revenues generated from both SAN and NAS deployments. Pure-play storage vendors like EMC, NetApp, HDS as well as IBM and HP compete here. Like the last 2 years, FY11 again saw a strong competition between EMC and IBM with the former pipping the latter to the post. NetApp is the undisputed leader in the NAS space. There is a still a market for DAS (albeit dwindling) where the storage box is directly attached to the servers. It’s only the large server vendors IBM and HP who play in this space. The overall external storage market is the total of network storage and DAS market. Despite predictions of doom for years now, the secondary storage market is still alive and kicking. This segment primarily involves tapes, drives, tape libraries, and other proprietary media required for large enterprise backups. We do not include external hard drives or the entrylevel storage devices from the likes of iOmega in this category. While in FY11, tapes market was shrinking, the drives segment continued to thrive. It is again a category dominated by IBM and HP. The last component in our overall storage segment is the software part, primarily those in archiving, provisioning, backup which are sold separately. It is a stiff competition between Symantec and EMC here while the large storage vendors like IBM and HP push most of their offerings bundled with the hardware.

is a scale out petabyte file system which does away with multiple copy creations of the same data and the high-definition data deduplication disk based back up to allow people to reduce costs. In terms of client acquisition, there has been significant progress in power reforms in the APDRP projects. It also worked with NIC for the India storage data center for the e-governance projects. In addition, it already has a strong presence in the financial services domain particularly the nationalized banks. The IT/ITeS domain companies in Pune and Bengaluru have already deployed and seen success with the P4000 series. However unlike the other players, HP didn’t see much of investment by the telecom companies and expectantly their storage vertical revenue too hasn’t been much to write home about.

Hitachi Data Systems India: Sunshine after ‘Sun’ Set tion. It also allow clients to experience features like automated storage layering, thin storage offerings to do away with over provisioning. With the company’s mandate clearly laying a focus on innovation, no wonder in the last 18 months, HP has innovated on its products and

has enriched its portfolio as per the trends. Four new products were launched in 1-year period including the X3000 which combined thin provisioning. Incidentally India’s most powerful VDI deployment was done under this. The X9000 series

SAN Switches Market in India SAN Switches Market in India

129% 304

(%) 6% Source: DQ estimates

Cisco

133

70 Brocade Total Revenues: 304 crore

2009-10 2010-11 (in crore )

The move to expand its Alliance partner program and launching the 10 GbE migration rebate program, all done with the view to expand its presence, seems to be working in Brocade’s favor as it dominated the market

138 | August 31 - September 15, 2011

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For Hitachi Data Systems (HDS), FY10 has been a record growth year and the India story is no different. As the Sun relationship ended in September 2010, HDS consciously changed its business model and implemented direct sales operation model collaborating in the market instead of signing reseller agreements. In line with the objective to build on the direct sales approach, the company also expanded its partner portfolio from 20 to 52 partners. As part of its SI strategy called Fusion, it signed on Accel Frontline, CMC, TCS, Infosys, Cognizant, and Patni. From the India perspective, the product revenues grew 70% while the software and service contributed 49%. In FY11, HDS positioned itself as enabling customers to realize more from their investments in data centers. On the product front, the company launched the 5th generation DATAQUEST | A CyberMedia Publication

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STORAGE

Client Win Roster of FY11 EMC- Acquired 503 new customers taking the tally to 1,930+ n 65+ competitive wins including Kotak Mahindra, Cairn Energy, Etisalat, GlobalLogic, L&T, Shriram Group, HSBC, Behr, DSP BlackRock, BPTP, EADS, Planet 41, Capgemini, Indian Hotels, Shapoorji Pallonji, Crompton Greaves n 5 Vblock wins at HCL Infinet, EXL (2), TCS and KPIT Cummins n Key Government Wins-UID, NICSI Data Center, SDC at AP and TN, MHA (CCTNS), CWG and Census Project and CBEC, Cabinet Secretariat, Election Commission—Karnataka, TN, Maharashtra, Gujarat n Key FSI Wins-SEBI, RBI, SBI-GIC, and BSE NetApp HCL, GlobalLogic, Infosys, SVC, Canara HSBC Life Insurance, ONGC Dehradun, IIT Delhi, IIT Kanpur, MIEL, MCA21 HDS HDFC, Infosys, Aircel, Unitech

virtualization platform in India, a culmination of its 5-year-old strategy of the Virtual Storage Platform (VSP) which is an enhancement of their overall technology platform. It’s neither a product nor a technology announcement, but a culmination of the vision set 5 years ago to help customers to build infrastructure cloud, content cloud, and then help them to make the transition to ‘information cloud’. In fact in just a few months since the launch, world’s

1st virtual storage platform was deployed in India at the HDFC bank. Looking to drive storage virtualization as a strategy, in FY10 alone the company noted that the number of virtual servers exceeded the number of physical servers. Apart from aggressively marketing its VSP to the enterprise resellers, HDS is also gung-ho about the hybrid storage model, which it is hopeful, will take off once organizations start opting for a combination

Storage Software Market in India 23% 325

(%) 264

HDS Others

7 6

EMC

27 Symantec

HP Source: DQ estimates

11 8

IBM

3 CA Technologies 2NetApp 2Commvault 2Bakbone software

Total Revenues: 325 crore

2009-10 2010-11 (in crore )

Giving a close fight to Symantec, EMC in 2010 garnered a 27% market share owing to adoption of its new software technologies like the EMC FAST (Fully Automated Storage Technology) and EMC Unisphere among others

140 | August 31 - September 15, 2011

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of physical storage and Storage as a Service (SaaS). Even though the company claims to have launched the ﬁrst Storage as a Service (SaaS) architecture way back in 2008 itself, now it has no concrete plans to enter the SaaS business directly. It is however zeroing in on potential players having already signed on Sify (which built the infrastructure cloud to drive storage as a service), Infosys (which is using SaaS for its cloud roll-out). This year, HDS will sign on some large SaaS companies. India holds a strategic importance for HDS globally as it is being used as an incubation hub for driving HDS revenue globally to build solutions and services jointly.

Dell India: Jumping into the Bandwagon From PCs to printers to services and now to storage offerings, Dell in the last 1 year is increasingly trying to diversify its portfolio and its foray into the storage segment is a relatively new development, however this is not to assume that the company hasn’t been preparing itself. Having acquired 3 companies in 2010 alone and Compellent Technologies in February this year, Dell has prepped for the storage foray. The acquisition of Compellent has been particularly signiﬁcant as it has added the ﬂuid data architecture to its storage portfolio, something which the company is aggressively pushing in India. It has already announced the availability of Compellent solutions in the Indian market. In the past year, Dell has executed a business strategy to automate technology infrastructure in 3 key areas—intelligent data management, next generation data center, and end-user computing. It’ll be interesting to watch how Dell’s storage strategy unfolds and changes the storage landscape. n DATAQUEST | A CyberMedia Publication

SYSTEM SOFTWARE

Interesting Times Ahead With mobiles and tablets becoming popular, the system software market is expected to undergo a complete transformation. Last year though was celebration time for Windows

ONKAR SHARMA onkars@cybermedia.co.in

he growth trend prevailed in the system software market in FY11 as the developments on the PC, server and the mobile space with new OS versions and apps—mainly in the mobile space—ignited the consumer sentiment. It was subordinated by a ﬂurry of faster processors by both Intel and AMD, which created benchmarks with their Sandy Bridge and APU line of processors, respectively. FY11 was the year when Microsoft’s Windows 7 sold 6 times as compared to earlier versions. Plus Microsoft also launched the Service Pack 1 for Windows 7 which triggered demand. Given this, Microsoft did have any competition on the desktop except the PC Linux like Ubuntu, etc.

Adoption Dynamics

The Indian System Software Mrket Growth

37% 2,320

Source: DQ estimates

1,691

2009-10

2010-11

Microsoft dominated the systems software pie, owning half of the market. Red Hat reigned in the enterprise Linux space. FY11 also saw market fast shifting towards the mobile platform

DATAQUEST | A CyberMedia Publication

FY11 was the year when Microsoft hogged on the revived PC market in India for its Windows 7 operating systems that became the leading Operating System (OS) in the PC installed base, running on estimated 42% of PCs in use. The companies have injected in IT budgets in FY11 which helped to accelerate the deployment of Windows 7 in enterprise markets in India. According to an estimate, Windows 7 crossed more than 10,000 businesses in India running on it. Out of this, more than 60% deployments seem to have been made alone in the enterprise segment. The rest constitutes SMBs. The OS giant has intensiﬁed its reach in the SMB market for the last couple of years because SMBs have helped the company maintain its growth momentum even during the recession. Amongst major Windows 7 users are Cognizant Technologies, Dentsu Communications, GMR, Greenply, Infosys, L&T ECC, Manipal University, Microland, NTPC, Wipro, and Tata Teleservices, to name a few. The trend is expected to continue in the wake of the fact that more and more companies are planning to move to Windows 7 by the end of this year. If at all there is competition to Windows, its Red Hat. On the enterprise side Red Hat’s Enterprise Linux had an overall good year with many client wins. But the traction was mainly fueled by the cost cutting drive of many enterprises. Further, Apple’s iMac and Mac OS does also have presence but it is not so signiﬁcant, since iMac users are mainly in the advertising, publishing industry. visit www.dqindia.com

August 31 - September 15, 2011 | 141

SYSTEM SOFTWARE

The server landscape was dominated by Microsoft. It held the largest market of the Indian server market as it saw positive trend continuing for its Windows Server 2008 R2. Windows Server 2008 R2 received a good response from customers since it enabled them to save costs, be more efﬁcient and more effective. In addition, innovative virtualization tools, management enhancements, web resources and Windows 7 integration worked well with the customers. The competition is bit higher than the desktop space and Red Hat, if not a close, is a prominent competitor which has takers in the large enterprises. The launch of Red Hat Enterprise Linux 6.0 was really a bang which helped it woo a number of new customers. The company particularly claims to grab a number of UNIX customers. Currently, Linux server shipments represent the fastest growing segment of the market. In the server market, IBM, HP and Oracle (Solaris) do also have a share, though not that signiﬁcant.

Open Source: Great Potential Red Hat, which reigns the open source arena, continued the growth run. It points out at the increased acceptance for open source software in India in FY11. As pointed earlier, Red Hat Enterprise Linux OS played a signiﬁcant role in furthering open source or Linux in a number of enterprises. Though Linux has been able to make inroads in the enterprise market, it still has not reached a point when it could be easily used on the consumer desktops. However with the likes of Ubuntu that have sought users in the consumer market, Linux has started gaining some sort of acceptance but it still has to go a long way. However analysts are pretty hopeful about Google’s Chrome OS and seeing it as a challenger to Windows in next 3-4 years. So in the near future, it does not seem that Microsoft has any threat 142 | August 31 - September 15, 2011

Dissecting the Tracking the System Indian System Software Growth Software Market (%)

Microsoft Windows

Linux

14 14

Others

3 IBM 3 HP

Microsoft Windows Total Revenue: `2,320 crore

Linux

330 257

IBM

65 81% 36

70 94% 36

Others

48%

1,530 1,035

325

28%

2009-10 2010-11 -1%

327

Source: DQ estimates

Windows continues to dominate in FY11. The Linux market was dominated by Red Hat along with Ubuntu and SuSe. Solaris’ reach diminished as most of the customers were poached by IBM and HP

from Linux or open source software. The problem that Linux market faces is that there are innumerable communities operating in silos. Overall Linux distro market soared `340 crore from `257 crore last year. While Red Hat drove the trend, there were hardly other noticeable players in this space. The growth in India is also being triggered by the change in the market place. Open source is always assumed to be free software. This may be true for people who develop software for a hobby. But for businesses, deployment, training, support and upgradation becomes critical to ensure smooth functioning. Customers have to pay for all these and that is where open source companies earn their revenue.

UNIX—Shrinking Peripheries The growth in x86 platform proved a dampener for non-x86 server sales mainly because of the superior priceperformance per watt that the former offers. Besides, the UNIX market has undergone major changes after Solaris went into Oracle’s fold. In FY11, IBM and HP poached a number of Solaris clients in the India market. IBM even claimed to have poached a visit www.dqindia.com

host of Sun clients in its ad campaigns. IBM’s success in the non-x86 Unix market segment in India was underpinned by strong uptake for Power7 servers. Even HP took advantage of Solaris loosing ground and introduced 2U Unix blade servers for the ﬁrst time in India.

Mobile OS: Expanding Faster In what has posed the biggest challenge to desktop OS vendors like Microsoft is the rapid growth of mobiles, smartphones and tablets. In any of these, it does not have a significant presence that could be weighed and bet. Andriod from Google, on the contrary, has grabbed the significant chunk and that too, in a very short time. In India, it is fast becoming the first choice amongst smartphone and tablet users, particularly those who do not wish to shell out hefty amount on iPhone or iPad. Plus Andriod has a backing from the handset manufacturers that have outnumbered Nokia’s symbian OS and even Apple iOS in India. But Mobile OS market can not summed up here. There are a lot of developments happening in this space. Prominent mobile OS includes symbian, andriod, iOS, Bada, BlackBerry, etc. n DATAQUEST | A CyberMedia Publication

ENTERPRISE APPS

The Widening Base CRM and BI were the star performers as the applications market witnessed solid growth with mid-tier enterprises adopting in a big way

Enterprise Applications Market in India 22% 4,778

Growth

Source: DQ estimates

3,901

2009-10

2010-11

* The market comprises ERP, SCM, CRM, BI, and accounting solutions (Tally), HCM and other specialized applications

The enterprise applications market continued to tread the high performance path. The growth was mainly contributed by the high demand for applications such as BI and vendor-push into SMBs

DATAQUEST | A CyberMedia Publication

ONKAR SHARMA onkars@cybermedia.co.in

he enterprises, large or small, showed enhanced inclination toward streamlining their processes in order to beef the business cycle, save costs, utilize time, and take timely decisions. This gave a push to the enterprise apps market, which had a growth trajectory of 22% overall. The trend not only boosted sales of the major software vendors like SAP, Oracle, and Microsoft, etc, but also helped them expand their product portfolios. All in all, the enterprise apps market in India soared to `4,778 crore in FY11 from `3,901 in FY10. Since the rupee has shown a steady trend, the growth percentages both in dollar and rupee terms look presentable. This shows a substantial positive shift in the enterprise apps market over the last year. Both the vendor and the buyer sentiment fared positively. Increased spending by the public sector, BFSI, infrastructure, energy, and automobile, among others was the primary reason behind the double-digit growth. Apps like enterprise resource planning (ERP), supply chain management (SCM), customer relationship management (CRM), and business intelligence (BI) were in demand, but the growth in CRM and BI looked exhilarating. Unlike previous years, the enterprise apps market was able to capitalize on the 2 major challengesâ&#x20AC;&#x201D;the penetration into the tier-II markets and bringing the vast small and mid-sized business (SMB) chunk into its fold. The vendors were successful in making the apps available for small customers with deďŹ ned processes, which paved way for their entry into the tier-II market. Although earlier small players like Ramco, TAKE, SAS, Sonata, and Infor, among others catered to the small business market, it drew fare visit www.dqindia.com

August 31 - September 15, 2011 | 143

ENTERPRISE APPS

ERP: The Crawling Growth The ERP solutions market steered forward, mainly because the midmarket companies showed a lot of interest in streamlining their processes in a bid to offer worldclass services to their customers. Of the overall enterprise apps market, the ERP accounts for 34%, which is `1,625 crore in FY11. Though a slight rise in revenues when compared to `1,495 crore in FY10, the ERP remained the largest used enterprise app. The vendors like SAP, Oracle, Microsoft, and Sage also targeted mid-tier customers with vertical speciﬁc apps. Notwithstanding forecasts that SAP is fast losing ground to the likes of Oracle and Microsoft seem to have fallen ﬂat because it continued to be the premier ERP vendor in India with close to 42% market share. Having clocked 60% of its revenues 144 | August 31 - September 15, 2011

Indian ERP Market Growth 2010-11

(%)

2009-10

Microsoft

12 42

SAP

1,495 3 1

Sage

Infor

JDA Software

IBM

Source: DQ estimates

24 16

Others Oracle

1,625

(in crore ) The ERP market growth has slowed, as companies were spending more on specialized and vertical specific applications. Top vendors such as SAP and Oracle also lost marketshare as a result

from ERP alone, the company remained focused on existing as well as new customers. Cloud computing was a big bet for the company as its Business ByDesign (ERP on cloud) found takers among mid-tier ﬁrms. Close on the heels, Oracle too embarked upon the mid-tier market yet while keeping its focus on the large customers. It was the runner-up with 16% market share. While the mid-tier propelled the

ERP adoption, how could Microsoft stay away in dipping its ﬁngers in the pie? The OS-giant boasts of about more than 400 customers in India in the mid-tier segment. In the ERP market, Microsoft holds close to 12% market, though there are also players like Sage, IBM, and others, including the open source ERP providers that cater to a signiﬁcant mass. One side of the story is that the

Indian SCM Market

Indian SCM Market 26% 717

(%)

Oracle

SAP

Others

2010-11 2009-10

571

Infor

Growth

1 Sage 1 Microsoft Source: DQ estimates

interest from vendors like SAP and Oracle, etc. However what formed the basis for the entry into this segment was the onset of the cloud and SaaS platforms. The cloud has drawn a fair amount of interest from enterprises to cut costs after the slowdown. Therefore, not only small business but also large enterprise customers showed interest in adopting cloud based apps. The vendors went on an innovation drive to boost adoption. They came up with many attractive revenue models, and many packaged solutions made entry into the market. Many of them invested in the localized versions of apps to make it easier for employees to use software in their own language. In this segment, we take into account the application-wise update of the segment. For all our calculations, the section considered the new license revenue, AMC, upgradation, and maintenance costs. In short, this is the overall apps market estimation.

1 JDS Software 1

IBM

(in crore ) SCM recorded a substantial growth but lacks the level of penetration found in developed markets. Perhaps the supply chain ecosystem of our manufacturing sector needs further maturity

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DATAQUEST | A CyberMedia Publication

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ENTERPRISE APPS

Indian CRM Market 30%

2009-10

Salesforce

Avaya

Oracle

Others

2010-11

956

(%)

Growth

10SAP

738 2 Microsoft 1 Infor

Source: DQ estimates

ERP market has gone up, though by few notches. The other is that the ERP adoption has slowed down. Many argue that it is the result of the growing demand for specialized apps and vertical speciﬁc applications. However, the segments like BFSI, government, defense, manufacturing, and automotive had come to the rescue in FY11. The government spending on e-gov drive is one reason of the adoption. Many states and ministries have poured funds in deploying ERP for better functioning of the departments.

1 IBM

(in crore )

SCM: The Run Continues The SCM software market continued the growth trend of FY10 as the overall SCM in India accounted for `717 crore. Despite a difﬁcult selling environment, the current market for SCM shows signs of renewed health. The market for supply chain apps was more resilient than ever. Pure-play and specialized (point solutions) vendors drove a majority of the overall market’s growth in FY11, outpacing ERP suite providers’ growth. SAP continued to lead the SCM software market, as it accounted for 36% of the overall market. Oracle followed closely with 31% share. Apart from these 2 vendors, the SCM market is largely scattered between a number of players like Infor, IBM, Microsoft, JDS, Sage, and others that continue to operate in niche and low-end markets. In FY11, SCM product development was generally focused more on solution integration, business process platforms, and mobility. Vendors showed signs of resilience and innovation, as some vendors transformed themselves to support changing user requirements and expanded their ‘reach’ into additional areas. The vendor movement was also determined by partnering, some new sales emphasis beyond traditional industries, and improved packaging 146 | August 31 - September 15, 2011

While the tier-1 cities have a significant share of the CRM market, tier-II cities are now emerging as the destinations for CRM providers, thanks to the growing retail boom everywhere

and delivery options, as well as by new product releases. In order to avoid leakages in the supply chains, a lot of organizations automated these functions and because of which the demand for SCM picked. The SCM market faces a number of challenges, one of the reason is its size in India is far smaller than other countries. The biggest reason is perhaps the kind of customization the SCM apps need. To stay away from the hassle of customizations, most organizations are often wary of using SCM software and instead opt for legacy systems. Thus, the heavy customization restricts the use and adoption of SCM apps to certain organizations. Vendors still have to address this challenge.

CRM: The Power Turnaround The demand for CRM solutions in India is largely driven by the large organizations and SMEs. In terms of demographic spread, while the tier-I cities has a signiﬁcant share of the CRM market, tier-II cities are now emerging as the destinations for CRM providers to sell their solutions. The tier-I enterprise software market was dominated by Oracle visit www.dqindia.com

Siebel, SAP CRM, and Amdocs. Oracle’s Siebel product and Amdocs are largely penetrated into the India software landscape along vertical markets, while SAP CRM has been more broadly adopted in largest part in organizations where SAP’s ERP software suite runs. The SMB market, where suppliers such as Pivotal CRM and Talisma used to be historically known names, has earned a lot more variety with competition from vendors such as Microsoft Dynamics CRM, Sage SalesLogix, Salesforce, Impel CRM, and SugarCRM. Their innovative pricing models and vertical specific approach exerted a great influence on the SMB market. Locally designed customer management systems like Impel CRM, Zoho, CRM24X7, Smiles, and TriVium had also noteworthy presence along with open source software solutions like SugarCRM and vtiger. In addition, several ERP software suppliers like Ramco, Focus Infosoft, and Wings ERP were also found to be domestic market share leaders in the back-office space offering integrated customer relationship management solutions. DATAQUEST | A CyberMedia Publication

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+91 80 67729600

ENTERPRISE APPS

Business Intelligence: On the Move The market for BI software has remained strong, since the dominant vendors continued to push BI, analytics, and performance management at the center of their messaging. Similarly end-user organizations largely remained intact to their BI projects, anticipating that resulting transparency and insight will enable them to cut costs and improve productivity down the line. In FY11, the BI market accounted for `1,147 crore up from `833 crore last year. The demand for BI solutions was mainly fueled by the sectors such as BFSI, government, manufacturing, telecom, life sciences, and healthcare. Government deployed intelligence solutions in its IT intensive projects. Government controlled public sector companies also began using data analysis for driving business prospects. Even government bodies like the municipalities in some states required data analysis services for fund allocation and consumption. Telecom sector, irked by mobile number portability (MNP), deployed BI solutions to retain their existing subscribers. Equally the 148 | August 31 - September 15, 2011

Indian BI Market 38% 1147

2010-11

(%) 10

Oracle

16 SAS

IBM

SAP

Growth

7 Microsoft 5 MicroStrategy 5 Others 3 Qlik Tech 3 Maia Intelligence 1 TIBCO 1 Open Text

2009-10

833

Source: DQ estimates

All said and done, the CRM market in India had a major turnaround in FY11. The overall CRM market accounted for `956 crore in FY11 from `738 crore last year. But the drastic change in market share remained the highlight. The biggest loser is none but SAP that lost a major part of market to its rivals. Oracle dominated the scene with close to 22% market share, whereas Avaya followed closely with 20% and, riding high on its on-demand CRM model, Salesforce clinched 13% market share. SAP was reduced to merely 10%. Besides, there were a number of small players in the CRM space to eat up its market.

(in crore ) The BI market gained further traction, recording the highest growth amongst all enterprise apps. It was a close race between SAP, Oracle, IBM and SAS

demand was strong in the healthcare and manufacturing sector. Since mergers and acquisitions were round the corner in every sector, the trend sparked demand for BI solutions. The verticalization continued to be the trend even this year, and organizations chose to have BI in place, if not for all, at least for key organizational functions such as HR, finance, administration, etc. They accrued possible benefits out of this as (according to Gartner) “BI promotes revenue growth and faster innovation through shorter product and service life cycles as these solutions have the ability to find where value is being created in the business.” While mobile devices are now becoming computers in their own right, organizations vouched for BI solutions allow decision makers to have access to reports on the move either on their tablets or smartphones. The vendor approach in increasing awareness in organizations, understanding partner ecosystem and focus on customers shaped the BI market. Vendor share in the BI visit www.dqindia.com

market was more or less the same. Ever since the acquisition of Business Objects in 2008, SAP had continued to rule the BI space. In FY11, it ruled the market with 26% market share, followed by IBM with 23% market share. SAS registered its strong presence in sectors such as government, healthcare, and telecom, and was the third leading vendor with 16% market share. Microsoft too had a fair presence with 7% market share. Indian market handled red-hot growth in enterprise application services with real business intelligence. The growth was the result of assiduity shown by both executives and government. Given the enterprise apps market, SAP remained positioned in the #1 spot. But stiff competition from Oracle, Microsoft, and other players have resulted into innovation both at pricing side as well as technology side. Although ERP, CRM, BI, and SCM form the enterprise apps landscape, of late the emergence of specialized apps and accounting software, among others, has also grabbed the attention. Dataquest estimates this market to be around `333 crore in FY11. n DATAQUEST | A CyberMedia Publication

INFRASTRUCTURE SOFTWARE

Signiﬁcant Run Indian enterprises showed increasing interest in infrastructure software

ONKAR SHARMA onkars@cybermedia.co.in

nfrastructure software market has moved up the ladder signiﬁcantly. As against the 5% growth observed last year, it grew more than 12%. The growth was propelled by the demand for relational database management system (RDBMS), middleware, and development tools. Whereas middleware and RDBMS had takers in the government sector, there was fairly good demand for development tools for both desktop and mobile based apps. The traditional spenders like manufacturing, retail, and SMBs invested into building capacity. Unlike other industry bodies, Dataquest takes a different view of infrastructure software, covering RDBMS, middleware, infrastructure management, development tools, and productivity suites among others. We have tried to divide the market revenue-wise and vendor-wise.

RDBMS: Restructuring

Indian Infrastructure Software Growth

5,965

Source: DQ estimates

5,671

12% 6,707

2008-09

2009-10

2010-11

RDBMS, middleware, and development tools drove the infrastructure market forward dispelling the myths that Indian infrastructure market has reached its maturity

150 | August 31 - September 15, 2011

Though RDBMS market in India was near static for last 2 years, in FY11 the market was again on the growth track with overall market being close to `1,629 crore. The vendors repositioned their RDBMS offerings in order to gain market share and increase their reach into new segments. The growth enablers for the database segment were customer relationship management (CRM) and business intelligence (BI) projects. It complemented Oracle, IBM, and Microsoft. The government being the biggest spender drove the database market. PSUs (Indian Railways, SBI, and PNB), BFSI, FMCG, telecom, and manufacturing deployed BI and analytics projects that catapulted demand for databases. In addition, the UID just being driven across India was another big database pie for vendors. Similarly, other big government projects like AP-DRP, MNREGA, and National Knowledge Network (NKN) further contributed to the growth story in this segment. Also the state-government projects such as e-District project in Rajasthan and eShakti project in Bihar turned out to be boosters. Oracle held the market leadership but also repositioned its offerings, given the ﬂat market for RDBMS in the previous year. It utilized its expertise gained through Sun acquisition to build Exadata, a new database product for data warehousing. In FY11, it grabbed around 62% of RDBMS market in India. Particularly, its business was bolstered by the launch of 11g R2 in India. Oracle’s growth trajectory was mainly formed by the demand from telecom, educavisit www.dqindia.com

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INFRASTRUCTURE SOFTWARE

RDBMS Market in India

154 | August 31 - September 15, 2011

2010-11

1,629

2009-10

1,434

62% Oracle

Source: DQ estimates

21% Microsoft 15% D-Link 2% Others

(in crore )

Total Revenues: 1,629 crore

As against the static growth of last year, RDBMS market was again on the growth track, thanks to a number of government projects, BFSI, FMCG and telecom verticals

Indian Middleware Market Growth

22% 1,421

2010-11 2009-10

1,162

Middleware: Duopoly Exists 32% 67%

IBM

Oracle

Others

(in crore )

Total Revenues: 1,421 crore

While middleware turf remained divided majorly between Oracle and IBM, Oracle possessed the largest pie

Infrastructure Management Software Market in India Growth

18% 1,365

2010-11 2009-10

1,160 36% CA

43% HP

16%

IBM

Source: DQ estimates

Middleware market was virtually a duopoly between Oracle and IBM, as both have more than 98% market in their fold. Both the players did well in FY11, which translated into growth of the overall market from `1,160 crore to `1,421 crore. Oracle and IBM strengthened their presence in the traditional verticals. Their market shares vary over the years depending on how they define middleware and their different approaches in selling middleware. Oracle remained committed to financial sector where its solutions—eg, Oracle Fusion Middleware 11 g—found significant takers. The vendor also claims to be the preferred vendor because of its capability to build engineered systems that optimize the application layer with the middleware and the hardware to provide a value proposition to the customers. In the overall market, Oracle clocked nearly `953 crore from this business alone. Though IBM closely tracked it, IBM was way behind with merely `453 crore. Nevertheless, IBM is a strong competitor in the middleware space, which of late claimed to have poached a number of Sun clients in its advertisements.

Growth

14%

Source: DQ estimates

tion, infrastructure, government, and banking sectors. The companies like BSNL, PNB, IDBI, Shoppers Stop, and DS Group also invested in database capacity building. In a significant move, the company was also able to find customers for its Exadata product line. The companies like Sun Pharma, Tech Mahindra, Religare, Reliance Consumer Finance and Stock Holding Corporation of India, etc, were among the first movers. While the projects from AFCONS, Manappuram Finance, Jet Airways, and Suzlon Energy helped IBM push its database offerings, its market share remained static. Microsoft also pushed its SQL Server business and entered into a few new areas.

Others

Total Revenues: 1,365 crore

(in crore )

Infrastructure management software market was dominated by HP. But IBM, CA, and BMC Software remained extremely competitive with a range of mid-tier and point solution vendors offering alternate solutions to enterprises

SOA governance technologies, application servers, portal products, and appliances were the hot segments around middleware story revolved in FY11. In addition, there are also visit www.dqindia.com

small players in this space but their share is minimal. Besides, opensource had also increasingly emerged as a part of deployment plans in many organizations with a focus on openDATAQUEST | A CyberMedia Publication

INFRASTRUCTURE SOFTWARE

Development Tools Market in India 10% 1,494

Growth 2010-11

1,361

2009-10

18% 10%

64%

Others

Microsoft

Source: DQ estimates

IBM

(in crore )

Total Revenues: 1,494 crore

Microsoft commanded the development tools market and experienced an upsurge as close to 8,000 apps were developed using its platform. HP and IBM also grabbed significant market pie

Productivity Suites Market in India 748

7% 800

Growth 2010-11 2009-10

98% Source: DQ estimates

Microsoft

Others

Total Revenues: 800 crore

(in crore )

Microsoft governs the productivity suites market in the absence of serious competition. But Google has really upped the ante in the cloud productivity suite space with Google Docs

source application servers, enterprise service bus, and a few other functionalities. But open-source middleware market is in a nascent stage, which has a long way to go. When it comes to deals and major contracts in this segment, Oracle’s Government of Orissa, BSNL, and TopsGroup, among others proved to be major middleware customers. IBM also bagged notable contracts from companies like ElectraCard Services, Delhi International Airport, HPCL, Fedral Bank, IFFCO, and AMW, to name a few.

Infrastructure Management When it comes to enterprise management and information management DATAQUEST | A CyberMedia Publication

software HP leads the market, although there are other active players like IBM and CA that exert inﬂuence on the market. The overall infrastructure market accounted for `1,365 crore in FY11 from `1,160 crore last year. As per Dataquest estimates, HP infrastructure management software business stood at `580 crore. The acquisition of Mercury, Opsware, and TRIM over the last few years has given HP the upperhand and also brought key customers into its fold. IBM and CA were also extremely competitive in the infrastructure management segment. CA remained the close competitor, clocking `498 crore in FY11. CA’s Unicenter is a major part of company’s strategy. It visit www.dqindia.com

organized itself around 5 industry verticals—government, defense, IT/BPO, and BFSI—and remained focused in these verticals. CA’s 3 international acquisitions—Oblicore, 3tera, and Nimsoft—helped it expand its portfolio in India. IBM too occupied a major part of the market with solutions like Tivoli and Websphere.

Development and Productivity Tools: The Microsoft Story Microsoft’s big achievement in FY11 was, of course, its cloud success. It gained a first-mover advantage in the $100 mn cloud market. The 1,300 companies including Vijay Mallya’s Royal Challengers Bangalore, Adhunik Group, Godrej Industries, Modern School-Vasant Vihar, Delhi, Synapse, Dabur, and ACME, to name a few, used its B-POS cloud offering, whereas 600 ISVs developed more than 8,000 apps on its Azure platforms in FY11. The development tools market stood at `1,494 crore. While Microsoft dominated with `956 crore, whereas HP and IBM followed with `269 crore and `119 crore, respectively. Office 2010 was another area where Microsoft continues its dominance and grabbed close to 95% market. Although office tools like CorelDraw’s office suite existed, Microsoft remained the undisputed player. Besides, Oracle’s OpenOffice suite, an open-source free alternative, gained a few customers mainly in the SMB segment. All said and done, Microsoft’s market run was undeterred. In addition, in the cloud space, Google dominated the office suite space with its Google Docs. Although Microsoft sought to plug the hole in the cloud by unveiling its Office 2010, it is struggling to gain grounds. Its recent launch of Office 365 is another big launch to flex its cloud office offering for businesses, but it remains to be seen. n August 31 - September 15, 2011 | 155

VERTICAL APPS

Indicating a Healthy Market Solid growth in vertical apps is an indication of market maturity. Banking was the star performer with financial inclusion plans of banks driving adoption STUTI DAS stutid@cybermedia.co.in

The vertical applications market growth in FY11 was driven primarily by the Core Banking and PLM markets as both these markets grew by more than 20%. While the core banking market’s growth was obviously due to the government’s agenda of ﬁnancial inclusion, the arrival of private banks too seems to be contributing its bit. Moreover the competitive spirit of the market forced banks irrespective of size to adopt CBS to grow. PLM Market meanwhile is on an upswing as Indian enterprises are going global forcing them to innovate. Also with changing perceptions of enterprises, PLM is being seen as a business hygiene tool. However it is the OSS/BSS market that is expecting to see some downslide in growth in FY12 as telecom providers up their investments in upgrading their network infrastructure especially on security and network solutions.

rom a stagnant FY10, the PLM market in FY11 emerged from the recession mode and is back on the growth path clocking 22% growth. Even as vendors agree that the overall adoption of PLM continues to be dismal, in FY11 the CAD market saw good traction while in CAE virtual testing adoption is rising. In FY11, vendors observed an 156 | August 31 - September 15, 2011

interesting trend that is bound to change the PLM landscape. With perceptions changing, PLM of late seems to be ﬁguring big on the CIO’s agenda, a welcome change since initially it was only associated with the R&D department. However with the top management too seeing the value of enterprise PLM, it won’t be long before one sees PLM being used in all product related enterprises. Moreover, sometime back most visit www.dqindia.com

enterprises only concentrated on ERP but there seems to be a growing realization that ERP is only a housekeeping solution for business hygiene, while PLM provides the competitive edge as an innovation platform. With Indian enterprises going global, the concept of design anywhere, build anywhere is gaining momentum resulting in increased collaboration between design and manufacturing departments, thereDATAQUEST | A CyberMedia Publication

VERTICAL APPS

Vendor Talk On the vendors’ front, most went in for channel expansion like PTC added 3 major partners including Softcell, Abroite Tech, and Adityan. Siemens PLM added DesignTech (for enterprise products), TCS, and Tata Elxsi. Intending to double India revenues over the next 3-4 years, Dassault Systemes is aggressively pushing for a bigger share since India is its third largest and fastest growing market with a 50% y-o-y growth. Having seen a dramatic growth in the last 2 years, DS in FY11 added around 250 customers taking the tally to 2,000. Products like CATIA and SolidWorks (a professional design platform), which DS claims occupies 50% of the market, continued to see traction. While SIMULIA (a virtual testing activity) is increasingly being used by engineering services companies, ENOVIA platform too showed phenomenal growth—in the first half alone it grew 200%. However DS’s Delmia seems to be having trouble finding takers as Indian manufacturing companies are still figuring out how to use the solution. In FY12, DS is betting big on its new launch—Exalead, a search based application targeted at sectors like logistics, banking, manufacturing, financial services, etc. While its core sectors like energy, aerospace, manufacturing, and automation have done well, DS is also foraying into newer verticals like consumer goods, consumer packaged goods, and construction. Some major deals bagged included Ashok Leyland, Tata Motors, defense, and Jaguar Land Rover 158 | August 31 - September 15, 2011

PLM Market in India Growth

(%)

2009-10

684

Altair 10

8 8 7 4 2 2 22

Autodesk

Dassault Systemes

Total Revenue :

2010-11

22% Ansys PTC Others

561

MSC Source: DQ estimates

fore resulting in an increased adoption by the 2 departments. Pressure too is building up on suppliers to innovate as enterprises become part of the global supply chain.

Oracle Agile SAP PLM Siemens PLM

684 crore

(in crore )

Automotive, aerospace, heavy engineering, industrial machinery all are driving the PLM adoption as India gradually becomes a part of the global design hub

(linked V6 deal to India). In FY11, 2 major product launches kept PTC busy. The pathbreaking CREO, the biggest MCAD launch enabling product development companies to improve creativity in doing high-end CAD work, and Windchill 10, the biggest PLM launch wherein it’s expecting to rake in $100 bn worth of revenue globally. With India as the fastest growing market, no wonder PTC added close to 300 customers with verticals like automotive (contributing 40% of India revenue), industrial segment like pumps and special process machines, aerospace, and defense (grew fastest at 15%) showed momentum. However PTC is seeing growth momentum in verticals like retail, footwear, and apparel (it won Welspun and an Indian apparel company as clients), and Indian defense & aerospace wherein it works closely with DRDO labs and HAL. India is a signiﬁcant market for PTC as 50% of its global product development work happens out of India. Deciding to make its position clear in the market pertaining to its visit www.dqindia.com

nomenclature, Siemens PLM ﬁnally renamed itself as Siemens Industry Software for bringing together applications like PLM, manufacturing execution system, and plant lifecycle management under one umbrella. In addition to strengthening its presence in the automotive sector by expansion in existing accounts (Maruti, Bajaj), Siemens PLM also saw traction in customers shifting (Daimler shifted to NX) and adding new OEMs (Asia Motor Works, Tata Motors, and Hero Honda). Ditto was the case in the aerospace vertical too apart from seeing huge wins in segments like heavy engineering, engineering to order industrial machinery and ship building (Navy). No wonder it added 250+ customers to its kitty. In FY11, Altair Engineering kept itself busy by tying up with partners like Ranal Software, DesignTech, and Finite 2 Inﬁnite for training apart from adding 3-4 channel partners in developing states in Bihar, Jharkhand, and Chhattisgarh. Notwithstanding its placement as a specialized player in the CAE segment, in FY11 around 50% of DATAQUEST | A CyberMedia Publication

VERTICAL APPS

Core Banking Market in India (%)

-1% Oracle Flexcube

21 24 TCS Bancs

Total Revenue :

2009-10 2008-09

3i Infotech Kastle 5 Others 4 Infrasoft OMNI Enterprise 4 Nucleus FinnOne

1,084 crore

2010-11

Source: DQ estimates

Infosys Finacle

Growth

870 858

Polaris Intellect

17 15

26% 1,084

(in crore )

While most PSU banks have finished their first phase of core banking deployment, it was the turn of the RRBs; even larger banks were going for adoption of specialized modules

its business came from the automotive segment followed by aerospace (at 20%), followed by heavy engineering (at 15%), and the remaining from DRDO labs. The company is keen to spread its wings as it entered new verticals like heavy engineering, highway equipment industry (excavators), and ship building. In short it added around 100 new customers mainly DRDO labs, defense contractors, automotive tier-1 companies, aerospace, and wind energy. On the product front, adding Computational Fluid Dynamics (CFD) opened up the power train

INITIALLY ASSOCIATED WITH THE R&D DEPARTMENT, PLM NOW FIGURES ON THE CIO’S AGENDA; THE TOP MANAGEMENT TOO SEEING THE VALUE OF ENTERPRISE PLM DATAQUEST | A CyberMedia Publication

(engines, etc) segment. It integrated CFD into the HyperWorks 11 product which saw a new version launch offering desktop CAE data management.

Analyzing the Core The consistent y-o-y growth of the core banking market is a direct outcome of 2 factors—bigger banks aspiring to be as agile as smaller ones; while the smaller ones looking to compete with their bigger counterparts. The next wave of CBS, say analysts will come from the private banks looking to upgrade their legacy systems. There is a growing demand for a new improved CBS, one that’s ﬂexible to integrate with changing environments. In India, with CBS adoption going full steam, it seems that all is well on the RRBs front, as they race to meet the RBI deadline of September 2011 for deployment of CBS. Most vendors seemed to agree that RRBs would be able to meet the deadline comfortably. Coming to the vendor story, FY11 was a good year overall as the market clocked `1,084 crore growing by 26%. visit www.dqindia.com

Continuing to lead the market, Finacle in FY11 grew by 42% contributing $295.6 mn to the Infosys’s overall revenue or 5% (the highest among its peer group). The growth shouldn’t come as a surprise since it’s managed to bag the largest number of wins this year (41 in total and 48 projects went live), currently covering 148 banks in 72 countries serving 297 mn customers. In fact in India alone, out of the 82 RRBs, 45 have opted to leverage Finacle across 9,900 branches. A geography-wise revenue comparison reveals that close to 45% came from Asia-Paciﬁc, EMEA 45%, and the remaining (10%) from America. FY11 was a busy year marked by a series of product launches including the Finacle Live (Finacle on Cloud), a game changer allowing co-operative banks to compete with commercial banks (using Finacle features on cloud). The other offering that continued to do well was the rural CBS (launched 8 quarters back) as 46 out of 78 potential RRBs are using this product, a collective mandate of 10K branches. In FY11 alone, 7,000 RRB branches went live on Finacle; in all there are 28,000 branches using Finacle. Apart from going the mobile way by launching mobile banking 2.0, a device and bank agnostic solution focusing on customer relationship, newly launched Finacle Advizor too is seeing traction. It uses UC combining the convenience of human intervention with banking self-service channels through the interplay of video, audio, and data communication. Even though a relative new entrant in the market (it debuted in 2009 post Laser Soft acquisition), Polaris managed to bag the coveted RBI deal amidst competition from TCS and Infosys. The $55 mn deal spanning over decade is for impleAugust 31 - September 15, 2011 | 159

VERTICAL APPS

THWARTING COMPETITION FROM BIGGIES LIKE TCS AND INFOSYS, POLARIS MANAGED TO BAG THE COVETED RBI DEAL 160 | August 31 - September 15, 2011

OSS/BSS Market India Growth

1,213

2010-11

1,322

2009-10

Source: DQ estimates

menting core banking in RBI’s 22 regional offices. Its intellect suite is being used by 8 out of 10 top global banks, in FY11 its core banking lending and cards solution bagged 7 deals while it has in excess of 108 installed intellect products with 40 installed in IMEA. Apart from the RBI deal, it also closed Bangladesh’s Sonali Bank (for 1,200 branches), Andhra Pradesh State Co-operative Bank, Kalupur Co-operative Bank, Capital Local Area Bank (Jalandhar), Nilamber Co-operative Bank, Ottapalam Co-operative Bank, Citizen Development Bank (Sri Lanka), and Central Bank of Seychelles. The Quantum solution has gone live in 5 Indian banks across private, public, and co-operative sectors. Business-wise, a new unit was carved out—the IMEA covering India and subcontinent, Middle East, Africa, Jordan, Lebanon, and Syria markets focusing on the highgrowth markets. In the first year itself IMEA bagged 4 co-operative bank deals in India. It also set-up shop in Eastern Africa (Kenya, Tanzania, Ethiopia, Uganda, and Rwanda). The other biggie in the core banking market, the BaNCS brand was accredited with SWIFTReady 2010 certification for securities settlement, corporate actions, and payments for the 3rd consecutive year.

(in crore ) MNP coupled with the entry of new TSPs resulted in the OSS/BSS market continuing to see investments as TSPs are forced to differentiate in quality of service as focus shifts from customer acquisition to customer retention

Otherwise a quiet year on the product front, the only 2 major launches included launching of mobile trading application as TCS became one of the 1st IT solution providers to deploy its mobile trading solution in India, until now done by exchanges. Launched globally in FY10 itself, it’s a J2ME application supported on more than 220 mobile phone models and Treasury 5.0, an enriched version set to deﬁne standards of transaction processing systems, HDFC bank was one of its early adopters. Operational in about 80 countries, it increased its customer base by adding 36 new clients to its active client base of 271 clients apart from 20 clients going live. Some noticeable overseas client wins include Post Finance Switzerland (for overhauling operations), Shanghai Rural Commercial Bank (to reduce time-to-market for new products), Deutsche Bank (for global transaction banking business), and Nedbank Investor Services (NIS), a division of Nedbank (to replace existing securities and visit www.dqindia.com

custodial applications). It was a quiet year for Nucleus Software on product front as it continued to work on the beta sites of FinnOne Pro apart from working on Cash@Will next release which it plans to release in JFM 2012. For the FinnOne Pro, initially it will be offered to an Indian customer post which will be launched globally in OND. However this is not to assume that the business front too was quiet. Apart from taking its products to 8 new countries, it also bagged 48 product wins including a Latin American deployment.

OSS/BSS Market There was a lot of action on the telecom front in FY11—introduction of 3G services, launch of mobile number portability, the arrival of new Telecom Service Providers (TSPs). The MNP, a relatively new phenomenon in India and the entry of new TSPs resulted in the OSS/ BSS market continuing to see investments simply because competition has been increasing and TSPs are being forced to differentiate in terms of quality of their service, focus has shifted from customer acquisition to customer retention. The need for differentiation also forced the TSPs to roll out new services on converged platform as customers demand anytime, anywhere, any device services access. However having already invested in legacy systems, replacement hasn’t been easy therefore the TSPs are deploying adapted layer to re-energize their OSS/BSS as per Information and Communications Technology Practice, Frost & Sullivan,South Asia & Middle East. For new TSPs, however, setting-up a OSS/BSS set-up without the legacy system complications is easier. While the global markets see TSPs providing managed services, DATAQUEST | A CyberMedia Publication

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F o r c o l l a b o r a t i o n o p p o r t u n i t i e s p l e a s e g e t i n t o u c h w i t h R o s h a n K u m a r l r o s h a n m @ c y b e r m e d i a . c o . i n l + 9 1 9 8 4 5 9 5 0 3 7 7

VERTICAL APPS

Graphic Software Market in India Growth 2010-11

2009-10

(%)

610

655

Autodesk

Source: DQ estimates

Others

Adobe

Total Revenue :

655 crore

(in crore )

With piracy being the culprit in eroding revenues, Adobe as the market leader has taken upon itself to tackle the piracy issue head-on as it introduced its SaaS model of subscription allowing users to pay for monthly or yearly usage

there has been no such trend in India but moving ahead it’s expected to see high traction. In FY12, in OSS/BSS billing in customer management solution will see traction, apart from BI and customer analytics tools providing insights into customer behavior and usage. Vendor-wise, the market continues to be dominated by IBM (having more than 50% share) followed by

Wipro (at over 20%), Tech Mahindra (10-15%), and other players occupying 5% share. IBM’s lead is understandable as way back in 2004 it had a strategic partnership with Airtel and thereafter it replicated the same template for other TSPs. In FY11, Tech Mahindra (already a big player globally) shifted focus to India resulting in bagging deals with MTS, Etisalat, and S Tel. TCS meanwhile continues to focus in the government. Wipro, the only player to focus on the SME segment bagged deals with Aircel, Unitech Wireless, and Vodafone. Over the next few years, OSS/ BSS spending might take a beating with TSPs upping investments in upgrading their network infrastructure especially on security and network solutions. This will result in OSS/BSS growing between 8-10%.

IN FY12, IN OSS/ BSS BILLING IN CUSTOMER MANAGEMENT SOLUTION WILL SEE TRACTION, APART FROM BI AND CUSTOMER Graphic Software ANALYTICS TOOLS As the market leader, Adobe has PROVIDING INSIGHTS taken it upon itself to address the software piracy related issues rather INTO CUSTOMER seriously. Perhaps this is the reason BEHAVIOR AND it intends to launch the SoftwareUSAGE as-a-Service (SaaS) subscription model enabling users to pay for the 162 | August 31 - September 15, 2011

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usage monthly or yearly at prices lower than for unlimited use of the full suite. The new model has been implemented for its latest launch of the creative suite applications—the Creative Suite 5.5, a collection of Photoshop, Dreamweaver, InDesign, and other software. The launch also holds significance as it is targeting the high growth segments like tablets and smartphones since CS 5.5 can create content for tablets and smartphones too. With specific plans to drive sales of newly launched CS 5.5, the company is increasing its focus in the South India targeting emerging markets like the film industry, KPOs, and outsourcing companies. In fact a Telugu film, Dongala Mutta, was edited using the Adobe suite. Autodesk meanwhile in FY11 is hopeful about the emergence of design as a possible business advantage in segments like architecture, engineering, construction, and manufacturing. There is also a gradual change in the customer mindset as well as customers are now asking for solutions to create sustainable designs, meeting the growing demand for infrastructure, and operating in a productive and profitable manner. For the manufacturing sector and the SMEs too, a good design is all about connecting ideas and turning ideas into inventions. Besides Autodesk is also focusing on how the power of cloud computing, mobile access to data are shifting the design mindset, and increasing design impact. The company also announced the release of its digital entertainment creation software and middleware. The 2012 versions enable iterative workflows, help users manage complexity, and provide new creative tools. In the past Autodesk products have been used in movies like ‘Black Swan’ and video games like ‘Medal of Honor.’ n DATAQUEST | A CyberMedia Publication

Think Global, Act Local Government projects like SDC, UIDAI, CWG, and technology adoption on cloud and mobility showed signs of a healthy market

DOMESTIC SERVICES

Think Global, Act Local Government projects like SDC, UIDAI, CWG, and technology adoption on cloud and mobility showed signs of a healthy market

The Overall Growth Growth

23%

39,325 12%

32,070

Source: DQ estimates

30,050

2008-09

2009-10

2010-11

Indian domestic services market posted a decent growth with customers looking for IT as a business advantage

164 | August 31 - September 15, 2011

AKANKSHA PRASAD akankshap@cybermedia.co.in

he Indian domestic services had been a story of consistent growth and last year it was also the story of growing into a matured market. A healthy and stable market by nature that bore the brunt of recession, became a ‘must do business’ location for all players. From the Big B (Sam Palmisano) of the Big Blue (IBM) to Pierre Nanterme of Accenture, Paul Maritz of VMware, HP’s chief executive Leo Apotheker, and Cisco’s John Chambers, it saw most of the CEO global IT ﬁrm visit India, reason being the same promise of business as a healthy and matured market. More than a year back, Gartner report stated, “Domestic IT services sector at $6.1 bn, accounted for more than 10% of the overall domestic ICT market in India in 2009 and is expected to witness the strongest growth at 17.6% among the 4 sectors through 2013.” Interestingly, last ﬁscal according to Dataquest, it grew even faster by 23% to reach to over `39,000 crore. In this journey of transformation toward becoming a matured market, the new rule of engagement was enabling the customer with IT for business advantage, by providing a solution that was customized to the local business need. A few such examples were an Indian Air Force deal to HCL Infosystems to deploy the Wideband CDMA based Portable Wireless Network covering many Air Force Stations across India, and a Wipro deal

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DATAQUEST | A CyberMedia Publication

DOMESTIC SERVICES

The Deal Dossier Tier-2 Deals Company

Spanco

Amount (`crore) Total around 650 Total around 98 12

Spanco

Spanco Spanco

Prithvi Information Solutions Tulip Telecom Gemini Communication

Vakrangee Software Geodesic Information Systems

Geodesic Information Systems

of open-source project for LIC that involved upgrade of its Front End IT Application Program (FEAP). Another testimony of this ongoing transformation was how the IT usage demand moved on from the traditional maintenance and product support services for internal business improvement like SAP/Oracle

Duration 5

Maharashtra, Punjab, Bihar, Goa

SDC

Rajasthan and Orissa

AAI

Execute security and surveillance project Development of 24 Border Check Posts Mizoram Punjab, Uttarakhand, Uttar Pradesh, and Gujarat

125 R-APDRP 300 Haryana PDS

12.5 5 5 6-8 months 5 5

1,500 Union Bank of India (UBI) NA UIDAI

Remarks

R-APDRP

Maharashtra border check-post 12.5 SDC Total around R-APDRP 308 11 Indian Navy

Infinite Computer Solutions Vakrangee Software

DATAQUEST | A CyberMedia Publication

Contractor

Bank of India

implementation, OSS/ISS services, and infrastructure integration to embracing more customer-facing projects like core banking and developing B2B platform. The market was opening up to new technologies like cloud, mobility, social engagements, open source, etc. The challenge for the IT service

visit www.dqindia.com

NA 1

Uttarakhand Power distribution Set-up smart card based public distribution system Enrolling for UBIâ&#x20AC;&#x2122;s 9 zones, covering 18 regions Geoamida handheld biometric terminals, for on field authentication BOI has launched NPCIâ&#x20AC;&#x2122;s RuPay card with Geoamida

providers was to provide the right solution for the country that was leapfrogging in technology adoption. Another challenge was while the organized market was building up more complex and advanced infrastructure, the majority of the market was still unorganized and lacking in infrastructure.

August 31 - September 15, 2011 | 167

DOMESTIC SERVICES

The Deal Dossier Tier-1 Deals Company

Amount (`crore)

Contractor

Duration 7

Remarks

HCL Infosystems

250

BSNL

Deploy a state-of-the-art facility for printing and managing customer bills and systems upgrade

HCL Infosystems

100

Delhi Government

during CWG

HCL Infosystems

Noida Police

Deployment of Dial 100 solutions

HCL Infosystems

300

Indian Air Force (IAF)

Deploy the Wideband CDMA based Portable Wireless Network covering many stations

HCL Infosystems

Dept of Higher Education, HP

Set up ICT labs and multimedia classrooms in 628 schools

HCL Infosystems

Total around 100

HCL Infosystems

1,000

HCL Infosystems HCL Infosystems

Roll out Government Radio Network

R-APDRP

Himachal, Jharkhand

Government of MP

Implementing food-coupon based Targeted Public Distribution Systems (TPDS)

Census of India

Digitize Information

Chandigarh

Smart card based PDS systems

Bank Of India

Implement and manage core banking solution across 750 branches

670

IBM

298

India Infoline

Managing 700 branches for IT

IBM

PepsiCo India

Provide F&A services, including support for payment, revenue, and reporting processes

TCS

Total 200

Wipro Infotech

2,000

Wipro Infotech

687

Wipro Infotech

Bank of Baroda

SDC

Support and upgrade server, storage, and networking,

UP, MP, Karnataka NA

Enrollment agency for Karnataka, Jharkhand, Maharashtra, and Himachal Pradesh.s

Ministry of Home Affairs

Crime and Criminal Tracking Network System (CCTNS) project

Vasan Eye Care

APDRP

J&K government

UCO Bank

Implement Core Banking Solution across 803 branches

Wipro Infotech

TVS

Re-engineer the current IT systems

Wipro Infotech

Total around 100

SDC

Maharashtra, West Bengal, Gujarat

Wipro Infotech

100

Punjab Sind

Wipro Infotech

Punjab gov

168 | August 31 - September 15, 2011

UIDAI

10 5

Provisioning and management of Finacle core banking solution and enterprise applications Deploy tax management system

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DATAQUEST | A CyberMedia Publication

DOMESTIC SERVICES

Tier-1 Market Share (Organized Market) (%)

Growth of Tier-1 vendors Company

Revenue FY11

Revenue FY10

Growth

3120

2550

22.4 s

2,440

2,050

19.0 s

1825

1650

10.6 s

1,709.0

1,400.0

22.1 s

HCL Infosystems

722

653

10.6 s

Dimension Data

566

512

10.5 s

10,382

8,815

17.8 s

IBM India IBM India

Wipro Infotech

10 8 7

HP India

TCS/CMC

3 HCL Infosystems 2 Dimension Data

Others

Total Organized Market:

Wipro Infotech

23,595 crore

Source: DQ estimates

Total

The Large firms retained their market share, which reflected uniform growth. However, it was less than the industry growth, indicating tier-2 players were growing faster.

Trends The good news was that the recovery from past was complete and that the market was looking forward to a speedy growth. Government/enterprises/SMB were back with IT budgets, the deal pipeline was healthy, but there was indeed a change. Clients were looking for short-term deals with more visibility, domain knowledge, accountability of business, outsourcing linked to number of customers. On the other hand, the service providers were investing in acquiring skill, strengthening the ﬁnancial muscle, and getting deep into the verticals. Looking at the market from verticals perspective, a large part of the business came from BFSI, education, healthcare, and utilities. However the lion’s share came from the government. Telecom got affected since many companies had the challenge in revenue and cost sides. There weren’t much large deals, also the equipment and supply vendors were getting cautious with all the vendors in the market engaging in the major 2G spectrum scam. BFSI was a growing and maturing market where large deals came from core banking, regional rural banks lookDATAQUEST | A CyberMedia Publication

ing at ﬁnancial inclusion, opening up new branches, and moving up the next level of banking solution deployment. Manufacturing, infrastructure, retail, healthcare utilities, education were the next level markets, with a lot discussion about cloud.

Government Last ﬁscal, the market received a major momentum from the government sector. Whether it was the Accelerated Power Development and Reform Program (APDRP) deals, state data center deals, unique identity, Commonwealth Games (CWG), deploying core banking solutions for the nationalized banks, or other stand-alone deals from various state authorities like Department of Higher Education in HP, deployment of dial 100 solutions for Noida Police, modernization of Maharashtra border check-post, etc. These deals were typically for 510 years and ranged from `20 crore to more than `1,000 crore. One of the major deal was Wipro’s `2,000 crore deal for setting network infrastructure for Indian police, HCLI’s `1,000 crore deal from MP Government. Some other marquee deals visit www.dqindia.com

were the IAF deal bagged by HCL Infosystem worth `300 crore, another a `100 crore deal from Delhi Government to roll out government radio network, a `1,000 crore PDS order from MP, another `100 crore deal implement a state-wide solution for Himachal Pradesh State Electricity Board (HPSEB). UIDAI (Aadhar) alone was at least `1,900 crore opportunity, with requirements of a dedicated data center, storage, data capture with biometrics, data duplication, applications, and many more. These SDCs, SWANs, APDRP, and various e-gov projects were centrally driven deal. In past few years, government had awaken to the importance of robust infrastructure and had been launching various e-gov projects under National eGovernance Programs (NeGP) or public welfare projects in publicprivate-partnership models. Looking at the state governments, while a few states like Maharashtra and Gujarat have been categorized (unofﬁcially) as advanced states for their legacy investments toward building the IT infrastructure throughout the state, last ﬁscal states like Bihar, Orissa, Punjab, and MP earned the title August 31 - September 15, 2011 | 169

DOMESTIC SERVICES

Growth of Tier-2 Vendors Company

Revenue FY11

Revenue FY 10

Growth

Tulip Telecom

2,351

1,966

19.6 s

Spanco

1,478

1,183

24.9 s

Sai Infosystems

1,378

792

43.7 s

CMS Infosystems

912

736

23.9 s

Allied Digital Services Limited

745

698

6.7 s

Sonata Software

597

497

20.1 s

3i Infotech

593

477

24.3 s

Accel Frontline

396

375

5.6 s

Tata Technologies

377

305

23.5 s

Omnitech Infosolutions

373

218

71.1 s

Value Point

270

153

76.5 s

Frontier Business Systems

224

204

9.8 s

Team Computers

211

175

20.6 s

Progressive Infotech

210

211

-0.5 t

Precision Informatic

202

180

12.2 s

PC Solutions

160

155

3.2 s

of progressive states for the recent commitments. These deals weren’t a windfall, but gained over long-term relationship and credentials. The thumb rule for operating in government segment is patience and partnership. For example, Spanco identiﬁed various regions and deputed a regional/zonal head to look after their bastions. The company invested around 2-3 years in building up a deﬁnite strategy. The result was winning a few large deals like SDC in Rajasthan and Orissa, R-APDRP deal from Maharashtra, Punjab, Bihar, Goa, and many more. Many other small/mid-size companies that sent IT biggies empty-handed were MindTree, Tulip Telecom, Sonata Software, Tata Technologies, Sai Infosystems, Glodyne Technoserve, etc. 170 | August 31 - September 15, 2011

While government spending was driving majority of the activities, enterprises and SME saw major cloud developments happening. An AMI report stated that SMB spending on Software-as-a-Service (SaaS) would be around 43% in 2011. For enterprises and SME, the recovery came with the challenge of setting the infrastructure that is aligned with business proﬁts. Two major factors here were managing the CAPEX and OPEX. Cloud was another major impetus for driving large implementations for companies looking for reduced CAPEX, scalability, and high availability. Many enterprises, educational institutions, retail establishments adopted cloud. The cricket team Royal Challengers Bengaluru, Godrej Industries, Dabur Group were known customers of Microsoft’s cloud platform Azure, visit www.dqindia.com

while Amazon saw traction in SMB for its platform solution. Some of its customers are redBus, Indiagames, NDTV, etc. All the IT service providers deﬁned their cloud strategies.

IBM The leading player in the domestic market with around 7.9 % share, IBM identiﬁed analytics, next generation data center, cloud services, and building a smart planet along with research and innovations as the core focus areas. It bagged a few big deals from various verticals like a contract from Delhi International Airport (DIAL), a KVTSDC deal to build a smarter employability platform, a deal from HPCL-Mittal Energy to design and implement MES. It won a 5-year deal to provide ﬁnance and administration service to PepsiCo’s Indian subsidiary. In DATAQUEST | A CyberMedia Publication

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DOMESTIC SERVICES

the government’s gold rush, while other players were ﬁlling their bags, IBM remained nonchalant. Interestingly, it also opted out of UIDAI bidding. The 22% growth in its domestic services offering comes largely from enterprises and SME.

TCS Last ﬁscal turned to be a fruitful year for TCS with the launch of its SMB-only service offering (IoN), which is a bundle offering of hardware, software, networking, and services. It acquired more than 220 customers for its offering and aims to reach to $1 bn revenues by 2015. It claimed further share in banking, manufacturing, government, and other verticals. On the enterprise side, the company followed a 3-pronged strategy namely business transformation, working on SLAs from a managed services mode, and looking at the enterprise solutions as an integrated operation, building solutions around latest technology like cloud and mobility. Interestingly, building domain knowledge became a requisite for these vertical solutions. One of the major areas for TCS, government continued gaining momentum with a deal for APDRP SDC, defense, and UID. TCS along with CMC, where it holds majority stake, together contributed around 4.3% to the overall market.

CLIENTS WERE LOOKING FOR SHORT-TERM DEALS WITH MORE VISIBILITY, DOMAIN KNOWLEDGE, ACCOUNTABILITY OF BUSINESS, OUTSOURCING LINKED TO NUMBER OF CUSTOMERS network tracking, and a few banking deals. It followed the strategy of building new tools, processes, and platforms for differentiation. It witnessed 19% growth in the overall services business. Today, it accounts for about 6.2% of the overall pie. It continued focus on large transformational deals, while it deﬁned its technology direction as cloud, security, mobility, open source, social media, etc. It bagged one of the largest deal under the National eGovernance Plan (NeGP) worth `2,000 crore for linking police records across the country. This involved Crime and Criminal Tracking Network & Systems (CCTNS).

HCL Infosystems Wipro Infotech For quiet a long time, Wipro Infotech was investing uniformly in all the segments. It was last fiscal when the consistent approach started reaping benefits, helping it bag mega deals from government, manufacturing, retail, oil and gas, and utilities. It recently completed a project for a steel plant to automate the shop floor (putting MIS and IT together) for providing real-time information. It won a few government deals for UID enrollment, state data centers, building crime and criminal 172 | August 31 - September 15, 2011

HCL Infosystems, that accounts for around 1.8% of the country’s domestic services market, claimed a stronghold in telecom, BFSI, utilities, and government sector with host of deals in last ﬁscal like a `250 crore project from BSNL, deal from Delhi government to roll out country’s ﬁrst Government Radio Network, a contract for building smart card based PDS systems in Chandigarh, a securities deal for the controversial CWG project, etc. Its growth was in sync with the industry growth of 22%. It had visit www.dqindia.com

developed a meticulous cloud based suite of offering. The company is targeting the enterprise and SME market with building applications suits, re-classifying regions into clusters and more. It is investing in building a dedicated team that would look at new product innovation process.

Tier-2 and -3 A lot of small/mid-size players emerged out with significant triumphs in government and SMB. MindTree pipped many biggies to bag a `20 crore deal UIDAI deal for application development. Infinite bagged a `125 crore deal from Uttarakhand Power. Sai Infosystems deployed data centers in various locations and Iris computers bagged deals from KIIT University. These companies, though could not make it very large, but had some interesting case studies to talk about their implementation. The core technologies were cloud, mobility, data analytics, and BI. A lot of these smaller companies were working as filler for the biggest and earning a considerable share of the deal. Bhubaneswar based Printlink, for example, was also of the Orissa State Wide Area Network (OSWAN) on Build-OwnOperate-Transfer (BOOT) model, in partnership with Spanco. Gurgaon based QuantM Net Technologies developed its own cloud platform and today has host of clients like ORIX Auto Infrastructure Services, Protiviti Consulting, Macawber Beekay, etc. These small but smart players were playing dual role of business partners and business rivals at various stages. But the bigger chunk feels that despite these great wins from the smaller players, there is no threat to business as the large transformational deals are rather complex deal to handle and need a wavelength that can only be provided by a large player. n DATAQUEST | A CyberMedia Publication

The Year of Change From leadership to strategic visions, from business restructuring to pricing models, from insipid growth to promising figures, FY11 was a watershed for Indian software exports

IT SERVICES EXPORTS

The Year of Change From leadership to strategic visions, from business restructuring to pricing models, from insipid growth to promising figures, FY11 was a watershed for Indian software exports RAJNEESH DE rajneeshd@cybermedia.co.in (With inputs from Akanksha Prasad)

“If change is the essence of existence one would have thought it only sensible to make it the premise of our philosophy”

—W Somerset Maugham

augham might have had greater existential thoughts on his mind when he wrote this quote in his 1943 novel The Razor’s Edge, but the Indian IT services exports sector had, to a large extent, imbibed this as their philosophy in FY11. There were changes everywhere—from strategic leaderships to visions from some of the founding pillars of this sector, a complete re-start from an established player whose earlier name and reputation had been besmirched, to companies—large and relatively smaller—taking on new approaches in terms of horizontals, verticals and geographies. The way changes happened quick and fast, it would not have been inappropriate for Maugham to have rewritten The Razor’s Edge keeping the Indian IT services exports sector as the protagonist. And most importantly for a change, even the currency ﬂuctuations that had brought in wildly differing results in rupee and dollar terms in the last few years, stabilized for the better this year. To repeat the age-old cliché, ‘change’ was the only constant that dominated Indian IT services exports in 2010-11. The prevailing sense of optimism feels that all this ‘change’ is for the better; while that only time will tell, there is little doubt that FY11 should be treated as a watershed year when some business historian in the future tries to analyze the advent of version 2.0 (or version 3.0) of Indian IT services.

The Tango was in Harmony this Time We have been harping about the dollar-rupee tango and how it has been impacting the IT exports segment for years now. Since numbers are sacrosanct for any business analysis, especially in Dataquest Top20, let’s ﬁrst analyze what was different for the sector in sheer number terms during this year and 174 | August 31 - September 15, 2011

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DATAQUEST | A CyberMedia Publication

IT SERVICES EXPORTS

The IT Services Exports Story 27% $bn

21% 5% 26% 40%

1,05,684

26%

1,67,533

2,13,760 40%

1,76,321 37%

1,32,878

32.89

10%

36.05

46.88

37.05

23.46

2005-06 2006-07 2007-08

Source: DQ estimates

2008-09 2009-10 2010-11

Source: DQ estimates

17.13 75,544

2005-06 2006-07 2007-08

2008-09 2009-10 2010-11

FY11 was the best year for Indian IT exports (in both dollar and rupee terms) since FY07. Relatively stable currencies had meant 40% and 37% growth in rupee and dollar terms then. Since then currency fluctuations meant either one currency growth, or uniform growth in insignificant terms. FY11 at 21% and 27% in rupee and dollar terms means uniform and credible growth again

whether the tango steps were in sync or not. The IT services exports market grew 21% in rupee terms to reach `2,13,760 crore in FY11; in dollar terms it grew 27% to reach $46.88 bn. A little detailed look into these numbers would suggest that FY11 was the best year for Indian IT exports (in both dollar and rupee terms) since FY07. Relatively stable currencies had meant 40% and 37% growth in rupee and dollar terms then. The wild swings in currency values in the next 2 years meant that while rupee growth remained stable at 26% in FY08 and FY09, dollar growth swung from 40% to 10%. In FY10, normalcy was restored in currency ﬂuctuations—so while the rupee and dollar growth were more or less uniform at 5% and 3% respectively, nothing much was there to write home about. In FY11, it was not just uniform again, but the numbers had gained credibility too. The departure from either the uncertainty or relatively low growth of the last few years has been one of the biggest positives of FY11. The tango has ﬁnally seen both steps in DATAQUEST | A CyberMedia Publication

perfec t harmony. The change was not just in terms of numbers. The changing demand outlook since recession, customer conversations and requirements acted as a driver to build in greater efﬁciencies and ﬂexibility within the service delivery and the business models—one which FY11 proved was here to stay. The year was also instrumental for more ways than one for the industry. While the industry displayed tenacity and resilience, it also commenced its journey to achieve its aspirations in view of the altered landscape. It commenced working on its agenda to diversify beyond core offerings and markets through new business and pricing models, specialize to provide endto-end service offerings with deeper penetration across verticals, transform the process delivery through reengineering and enabling technology as well as innovate through R&D. The advent of FY11 signaled the revival of outsourcing within core markets, along with the emerging markets increasingly adopting outsourcing for enhanced competitiveness. visit www.dqindia.com

‘Change’ Dissection—Leaders and Strategies It would be incomplete to talk about changes in FY11 without delving deeper into what was happening with some of the stalwarts of the industry. There were leadership changes across several companies, but more than just change in personnel, more important was the change in strategic visions for many of these companies. Analyzing Infosys, Wipro or Mahindra Satyam in FY11 merely as leadership changes would not be the right approach. Many of these changes were forced to bring the houses back on order. There were always question marks over whether Wipro’s joint CEO strategy would work in the long run. Though Azim Premji had strongly propounded the ‘power of two’ giving Wipro twice the leverage in growth opportunities, the company was quick to sacriﬁce the strategy at the alter of its faltering performance in FY11. Both Girish Paranjpe and Suresh Vaswani (now heading Dell India) left, while Wipro veteran TK Kurien was promoted to the hot seat August 31 - September 15, 2011 | 175

IT SERVICES EXPORTS

Unraveling the Geographical Paradigm (%) Top six companies

Europe

APAC (Including japan) 2 Africa and Middle East

APAC (Including japan)

1 Latin America

2 Africa and Middle East 1 Latin America

North America

Total Revenue (FY11):

114,153 crore

Total Revenue (FY10):

Source: DQ estimates

87,796 crore

Source: DQ estimates

The quantum of outsourcing from the US to India has reached such a magnitude that slowdown or not, threats of backlash and government anti-posturing notwithstanding, there is little chance of it getting impacted; even if some organizations stop or reduce their offshore outsourcing work to Indian firms, there are several more waiting in the wings to more than offset the losses.

Global Footprints for India’s IT Exports Contribution from Different Services (%)

Top six companies Infrastructure Management others Infrastructure Management

embedded SW Engineering services

12 10 7 6

13 11

testing

SI and Product development

consulting SI and Product development

Engineering services consulting

6 6

4 testing 1embedded SW

4 others ADM

ADM

Total Revenue (FY11):

114,153 crore

Source: DQ estimates

Total Revenue (FY10):

87,796 crore

Source: DQ estimates

The drop in ADM contribution and increase in infrastructure management meant more mature Indian IT services players focusing on newer technologies like cloud computing.

Contribution from Verticals (%)

Top six companies

manufacturing

13 8 15 33

manufacturing

telecom healthcare retail 7 6 utilities 5 media 4 technology 4 others 3 Travel & leisure 2 engineering

retail healthcare

13 11

BFSI

Total Revenue (FY11):

BFSI

114,153 crore

telecom

9 5 5

1 Travel & leisure 1 engineering

Total Revenue (FY10):

Source: DQ estimates

utilities others 4 media 2 technology

87,796 crore

Source: DQ estimates

Though BFSI gave 33%, another 26% came from the so-called “emerging verticals” comprising healthcare, retail, media and utilities; a fifth from the high technology and telecom sectors; and the rest from manufacturing. But going forward, the biggest opportunities, will be in the emerging verticals, which are growing at 22%—outpacing the rest by 1.5 times.

176 | August 31 - September 15, 2011

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with the mandate to restore the company’s fortunes. Soon after Kurien took over, he realigned the organizational structure, with client delivery, sales and proﬁtability tied more closely with industry domain-led strategic business units. Wipro was falling back on a tested model: TCS successfully underwent a similar restructuring some time ago; Infosys might do it in FY12. While Infosys too had leadership changes (Shibulal taking over as CEO from Kris Goplakrishnan), more importantly, it ﬁnalized its new brand strategy called Building Tomorow’s Enterprise. This was arguably the most exhaustive transformation document the company had undertaken in its history, prompting many to dub it as the launch of Infosys 3.0. The changes at Mahindra Satyam were more inevitable after the organization came back from the brink of extinction under the new management. The Mahindras moved in with an agenda to clean up the Augean stable and bring back proper corporate governance as well as bring back the company on a sound business footing in 3 years. After 2 years it was well on its course, thanks to the efforts of both Tech Mahindra personnel like CP Gurnani and Atul Kunwar who now occupy senior positions at Mahindra Satyam as well as senior lateral hires like Sriram Papani and Srirama Srinivasan. There were other top level changes too. MindTree’s founder and executive chairman, Ashok Soota, quit in January—reportedly after disagreements over performance issues. At Patni Computers, the promoter family (Narendra Patni, Gajendra Patni and Ashok Patni) moved out after selling their 44% in the company to iGate. The biggest new face was ICICI Bank chairman KV Kamath as successor to Infosys co-founder NR Narayana Murthy, who retired as non-executive chairDATAQUEST | A CyberMedia Publication

IT SERVICES EXPORTS

Top 50 Software Exporters from India Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

18 19 20 21 22 23 24 25 26 27 28

Company TCS Infosys Cognizant Wipro HCL Technologies IBM India Accenture India Mahindra Satyam MphasiS Tech Mahindra Capgemini Patni Aricent L&T Infotech CSC India Syntel Oracle Financial Services Polaris Mindtree Zylog 3i Infotech Infotech Enterprises Zensar Prithvi iGate Hexaware KPIT Cummins Honeywell India

2010-11 2009-10

Growth (%) 23 21 37 16 31

29,801 25,477 21,393 19,421 13,264

24,289 21,141 15,581 16,681 10,104

7,349 5,502

6,442 4,464

14 23

4,797

4,855

-1

4,453 4,144

3,874 4,297

15 -4

3,077 2,920 2,502 2,311 2,267 2,178 2,124

2,410 2,961 2,234 1,802 1,937 1,694 2,019

28 -1 12 28 17 29 5

1,395 1,388 1,245 1,213 1,152

1,216 1,205 543 966 924

15 15 129 26 25

1,065 1,045 1,039 965 921

885 1,341 831 918 666

20 -22 25 5 38

910

841

Rank

Company

2010-11 2009-10

Growth (%) 16

NIIT Technologies

903

781

Tata Technologies

879

782

Infinite Computer Solutions

821

637

Texas Instruments India

817

822

-1

Genpact

797

827

-4

Sonata Software

794

883

-10

Glodyne Technoserve

788

154

412

Sapient

736

624

Persistent

722

571

Mascon Global

674

1,084

-38

Geodesic

652

479

Birlasoft

644

518

ITC Infotech

572

477

Mastek

571

755

-24

SFO Technologies

523

378

Synechron

509

337

SunGard Technology India

506

403

Steria

499

468

IBS Software

487

361

Geometric

481

Subex Systems

471

461

Ness Technologies

391

382

Note : All revenue ﬁgures in `crore

man and chief mentor in August 2011 when he turned 65. There were other companies making organizational and structural changes either to bring their houses in order or to bolster their businesses. Soon after the appointment of Amitava Roy as the new chief operating ofﬁcer at Tech Mahindra, Vineet Nayyar, managing direc178 | August 31 - September 15, 2011

tor and CEO, reportedly said in an internal communication: “We are making other organizational changes to align ourselves to the demand of the market place, and we will be announcing the changes soon.” Similar activities were taking place across other IT ﬁrms too. MphasiS grew as a result of the business restructuring it did in visit www.dqindia.com

terms of geographies and verticals. To maximize its growth proposition, the company had compressed its focus in terms of geographies—matured (focused on 5 countries) and emerging (focused on 3 countries). And the geographies were identiﬁed on the basis of customer buying behavior instead of physical proximity. Even other Tier-2 players like DATAQUEST | A CyberMedia Publication

IT SERVICES EXPORTS

OND '11 44.93 JFM '11 45.51

46.45 JAS '11

JFM '10 46.03

48.75

AMJ '11 45.56

OND '09 46.87

AMJ '09 49.28 JAS '09

JFM '09 49.06

OND '08 48.03 JAS '08

44.16

AMJ '08 41.91 JFM '08 39.71

JAS '07

40.27

OND '07 39.53

AMJ '07 41.99

OND '06 45.11 JFM '07 43.92

45.96 JAS '06

JFM '06 44.74

JAS '05

43.69

AMJ '05 43.56

OND '05 44.41

AMJ '06 45.24

The Rupee—Dollar Tango

Source: DQ estimates

Dataquest has been harping about the dollar-rupee tango and how it has been impacting the IT exports segment for years now. The tango was in perfect harmony in FY11.

Mindtree, L&T Infotech, Polaris and Syntel followed the similar model more from a vertical perspective. On the other hand, 3i Infotech too emulated MphasiS, but more from the geographies perspective. They restructured their business into developed regions (under Som Sharma generating 57% of the revenues) and emerging regions (under Pankaj Chawla with 43% contribution).

DATAQUEST | A CyberMedia Publication

Geographical Status Quo The geographical contribution for India’s Top 6 IT services players (that would incidentally be fairly representative of the whole industry) hardly changed in FY11. This was again contrary to popular perception—the post-recession effects and the virulent anti-outsourcing posture (led by Obama himself) had given the impression that US

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contribution to India’s IT services exports pie would come down, if not significantly, at least by a few points. Actually it came down by 1 point only (from 64% to 63%), deinitely nothing earth-shattering to proclaim that US offshoring to India is under the cloud. Even Europe, where the continuing recessionary trends had led many to believe in impacting the offshoring pipeline to India, held firm at 26%. This proved two things: one, the quantum of outsourcing from the US to India has reached such a magnitude that slowdown or not, threats of backlash and government anti-posturing notwithstanding, there is little chance of it getting impacted; two, even if some organizations stop or reduce their offshore outsourcing work to Indian firms, there are several more waiting in the wings to more than offset the losses. In fact, the perceived loss in Europe had more to do with the worsening economic situation in the UK—Indian IT services firms have not been able to tackle mainland Europe to the extent expected. And the double currency fluctuations (dollar-euro-rupees) had acted as a double whammy for many. Actually, successes in Europe have not been the rule in FY11, but more of exceptions. And if this trend continues, there can be causes for concern in FY12 and FY13. It was true though and hearten-

August 31 - September 15, 2011 | 179

IT SERVICES EXPORTS

M&A Dossier Acquiring Company

Acquisition Made

iGate Alten Wipro Technologies

Patni Computer Systems California Software Science Applications International Corporation R.K.M.Equipamentos Hidr ulicos Ltd Gen-i

Infosys Technologies Serco KPIT Cummins Firstsource Omnitech Zensar TCS Cognizant

Deal Value (`crore unless otherwise mentioned) 4,950 100 675 undisclosed 44

Intelenet Systime

2,772 103

Dialog Axiata Avensus Akibia Supervalu Services PIPC Group Galileo Performance NTS Group

45 $66 mn 450 undisclosed undisclosed $6.5 mn

Techmart Telecom Distribution FZCO

undisclosed

HCL Infosystems HCL Infosystems Dimension Data NIIT Technologies Limited Mastek Mastek

SEG Kognitio offering

CMC

Vulnerability Research Labs

TCS UK subsidiary

Unisys Insurance

1,800

OnMobile Intelenet Rolta Capgemini

Dilithium Networks FirstGroup OneGIS Strategic Systems Solutions

15 £45m

OpSource Proyecta Sistemas de Informacion S.A. (Proyecta)

ing too that emerging geographies like Asia Paciﬁc, Middle East/Africa and Latin America started contributing—APAC increased by 1 point to 8%, while Latin America and Middle East & Africa (the emerging market) held ﬁrm and consolidated. 180 | August 31 - September 15, 2011

0.7

130

und isclosed

But for Indian IT services players it was still a US show. Historically, Indian IT service providers had always missed out on Japan—FY11 was no exception—though the economic doldrums in Japan as well as the earthquake were also responvisit www.dqindia.com

sible for this. For vendors like HCL Tech (15% to 13%), Wipro (3% to 2%) and Patni (1% to 0.10%) with shrinking fortunes from Japan, it could be Africa beckoning in the next couple of years..

Out of ADM/BFSI Shadows? One tremendously positive fallout of the challenges of the last three years has been the maturing of Indian IT service players. Nothing illustrates this better than the fact that ADM contribution to the overall pie was just 39% in FY11—down 12 points from the year before and what used to be in the mid-60s even a couple of years back. And if we take only the Top 4 players, this contribution would be even less proving that Indian IT services exporters were truly evolving. And in a tough environment, they had to look at more innovative ways beyond the obvious to sustain themselves. While ADM was still the meat and drink for most tier-2 players (like MphasiS at 56% or Patni at 64%), there was increasing traction in areas like RIM, software products, testing services and engineering services. The two-point increase in infrastructure management services (from 12% to 14%) was largely due to cloud engagements of Indian IT services companies. Continued growth across software product development and engineering services, reﬂected India’s increasing role in global technology IP creation. Export revenues from these relatively high value-added services such as engineering and R&D, offshore product development and made-in-India software products grew at 15%. Infrastructure outsourcing and managed services was one key growth area—while US-India offshoring relationship was deﬁnitely not under the cloud, it was surely reaching for cloud nine. Be it TCS, Wipro, HCLT or Tier 2 vendors like DATAQUEST | A CyberMedia Publication

IT SERVICES EXPORTS

MphasiS and Mindtree, cloud deals were on everyoneâ&#x20AC;&#x2122;s agenda. Cloud computing took centrestage this year, as it offered clients access to best-in-class process management at reduced capital expenditure levels. Though cloud was deďŹ nitely the buzzword and there were instances like TCS launching iOn (after 1,000 customers in India, they plan to go global), Indian IT services ďŹ rms were still not getting carried away and betting everything on cloud. It was critical to keep in mind that cloud services will not simply replace traditional delivery modes at the enterprise level overnight. Some analysts talked of â&#x20AC;&#x153;a new normalâ&#x20AC;? for the industry, built on three pillars: a new generation of highly distributed and virtualized business models; a new generation of cloud and mobile technologies; and a new

generation of born-digital workers and consumers, the so-called Millennials. Infosys continued with its focus on IP creation especially around the seven global themes it identiďŹ ed including digital consumers, emerging economies, sustainable tomorrow, new commerce, healthcare economy, smarter organization and pervasive computing.. Adding capabilities through a major acquisitions could often change the equation tooâ&#x20AC;&#x201D;this was best illustrated by HCL Tech whose Axon acquisition made two years back still continued paying dividends. As one of the largest SAP deployers in the world,enterprise application services accounted for 15% of its topline in FY11. Increased acceptance of platform BPO solutions was the key highlight, as Indian BPO providers

increasingly focused on transforming client businesses through a mix of re-engineering skills, technology enablement, and new service delivery methods. Additionally, the engineering design and products development segments that involve IP driven service capabilities command greater exports revenue share. BFSI at 33% in fact still remained the top vertical for Indian ďŹ rmsâ&#x20AC;&#x201D;for the likes of TCS (44%), Infosys (33.9%), Cognizant (45%), Patni (38%) and MphasiS (50%) it remained the lifeline. Manufacturing (15%) ceded some ground as did telecom . But the story of FY11 was that of the emerging verticals. The business opportunity landscape for Indian IT services ďŹ rms was changing rapidly. Though BFSI gave 33%, another 26% came from the so-called â&#x20AC;&#x153;emerging verticalsâ&#x20AC;?

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August 31 - September 15, 2011 | 181

IT SERVICES EXPORTS

comprising healthcare, retail, media and utilities; a ﬁfth from the high technology and telecom sectors; and the rest from manufacturing. But going forward, the biggest opportunities, according to Nasscom, will be in the emerging verticals, which are growing at 22%—outpacing the rest by 1.5 times. These four emerging verticals are supposed to be the main growth engines by 2020. The shrinking contributions from manufacturing and telecom and expected saturation of BFSI in future is already an indicator towards that.”Eighty percent of the new opportunities will come from areas we haven’t [yet] gone to,” says Nasscom president Som Mittal. He sees public sector and defense also as high-potential sectors.

Takeovers On Track Again There is action also on the takeover front. FY11 saw around 125 M&A deals of varying sizes and nature, according to Venture Intelligence, a research services ﬁrm in Chennai focused on private equity and M&A deals. Deal values disclosed for 12 of those total $1.645 billion, including iGate buying Patni ($1.2 billion), Pearson buying TutorVista ($127 milion) and Tata Communications buying BitGravity ($100 million). “The IT and ITeS segment emerged as the second most active industry for deal making in 2010,” says Arun Natarajan, founder and CEO of Venture Intelligence. Last year’s deals include NTT Data’s $199 million purchase of Intelligroup, and comprised 55 outbound deals, 18 inbound and 47 domestic deals. “Size has started mattering to a certain extent,” says Phaneesh Murthy, iGate’s chairman who formerly headed Infosys’ U.S. operations. “Many procurement departments [at client companies] believe that size and scale represent stability.” (for a detailed list, see “The M&A Dossier) 182 | August 31 - September 15, 2011

WITH THE ADM REVENUE COMING DOWN FROM 51% TO 39% IN JUST ONE YEAR, THE TOP INDIAN IT FIRMS HAVE A MORE BALANCED PORTFOLIO NOW Margins Pressure Leading to Changing Pricing Models There are other challenges, too. Analysts have for many years warned that Indian IT services firms will be unable to sustain their profit margins as their offerings get more commoditized. A Cognizant-commissioned report by IDG in FY11 says that while last year’s earnings reports generally show stable or improving margins among IT service providers (in India and elsewhere), “numerous factors conspire against sustained high-margin work.” Operating margins (profit before interest, tax and depreciation as a percentage of sales) at the top Indian IT services companies have in recent years ranged between 20% and 40%, with marginal declines. Infosys, for example, enjoyed operating margins of 31.3% in 2008. In JFM ‘11, this has fallen to 29.6%. Exchange rate imbalances and accelerating wage inflation are hurting margin growth at Indian IT services companies, according to the Cognizant-IDG report. “With multiple pressures and elusive price increases, [Indian] providers are looking for revenue streams that rely less on head count in anticipation of potential pressures on margins.” The biggest drawback that the Indian IT services firms face is in their ability to address the business needs of their clients. Most Indian companies entered visit www.dqindia.com

the fray when the CTO floated the RFP and even in FY11 did not have much visibility to events before that unlike an IBM or Accenture. However, at least the Big four or five tried coming in at the earlier stages -- translating the business needs into technology needs -- and thereby provide higher-value IT consulting services. Though they were trying to capture such consulting contracts and even doing so in isolation, there is still a long way to go. In some sense, they may have gone slightly ahead of the RFI/RFP stage in FY11 by going into the back office and recommending ways to standardize and automate disparate processes, but it is still not a market-facing solution at which they are interfacing. Even so, the big Indian IT majors have been winning business transformation contracts. Infosys in FY11 helped a multinational retailer in Europe define its global e-commerce road map; a grocery retailer in the U.K. to shape its workforce management system to achieve better scheduling and planning; a North American paper and building products company with an enterprisewide mobility strategy; and a global consumer electronics company with an engineering support model for its cloud-based services. Cognizant, on the other hand, developed a mobile application for a global consumer products company that allows delivery personnel to collect competitive intelligence about product placement in retail stores. The application captures information about where the competitors’ products are placed in each store, the amount of space they are allocated and a qualitative opinion of how their own placement stacks up. Why are these new business models important? In recent years, Indian IT firms have sought to break away from their conventional linear growth model to outcome-based pricing or hybrid pricing, where the DATAQUEST | A CyberMedia Publication

IT SERVICES EXPORTS

Big Deals of the Year Company

TCS

Client Amount (`cr) unless otherwise mentioned undisclosed du

TCS TCS

Duration (years)

Deutsche Bank

TCS

The Law Society of England and Wales undisclosed Malaysian Airlines (MAS) 225 Swisspost

TCS

Multi-million Royal Haskoning

TCS

Multi-million Air Liquide.

TCS

TCS Australia Wipro

22 22

End-to-end IT infrastructure management

Deploy accounts management and payments solution to the financial services unit Project covers end-to-end IT infrastructure services Provide end-to-end application development and maintenance services to 5,800 users It covers infrastructure management services Manage the firm’s fixed lines services for its enterprise business customers

Infosys Infosys

130 112

ANZ Australia Royal Philips Electronics N.V

Infosys

675

Microsoft

3 5

567

Vodafone Hutchison Australia Mecom Group Al Majdouie Group

Tech Mahindra HCL HCL

undisclosed

HCL

undisclosed Xerox Group

HCL

Computer Sciences Corporation

70 m

2,700

It is an integrated telecom service provider in UAE Deploy TCS BaNCS providing cloud based solutions Create online services for its members.

Multiyear Multiyear 5 3

AGL Vodafone Essar

Remarks

Teradyne

Arceolar Mittal

Infosys will also acquire its’ services delivery centers in India, Thailand, and Poland for US$28 million It will streamline implementation processes, simplify support and service for MS Manage the IT systems London-listed media company awarded infrastructure and application management deal Developing infrastructure, implementing Oracle’s e-business suite with over 70 modules and managing and running them To provide engineering services for some of its printer and imaging product lines It includes development and end-to-end Application and IT Infrastructure Management involving datacenter, network, security and help desk services Consolidating IT infrastructure across Europe and maintaining the data centre

Not a comprehensive list

latter is a mix of time-and-materials billing, ﬁxed transaction fees and payments linked to business outcomes. According to a Wharton study, outcome-based pricing or hybrid pricing model deﬁnitely scores over conventuional time-andmaterials transactions with higher margins in the last 200 Indian IT 184 | August 31 - September 15, 2011

services deals in FY11 and FY10. The fact that while the industry’s employee strength grew by 10% and revenues by 21% in FY11 was a testimony to the growing success of the non-linear model. About 40% of the industry’s total transaction value in FY11 came from ﬁxed-price deals (irrespective of the number of man visit www.dqindia.com

hours spent), and outcome-based pricing deals accounted for about a tenth of the total.

Hiring Binge Non-linear growth notwithstanding, India’s IT majors were again on a hiring spree in FY11. Though it might sound paradoxical, probDATAQUEST | A CyberMedia Publication

IT SERVICES EXPORTS

The Top 20 Captives in India RANK

COMPANY

2010-11

2009-10

Growth

4,181

2,839

Oracle

1,380

1,350

Cisco

1,142

656

SAP

772

720

EMC

594

389

Intel

489

464

Symantec

444

421

Microsoft

377

180

109

TE Connectivity

310

292

Google

248

171

Adobe

240

193

NetApp

225

186

224

212

Cadence

179

171

McAfee

160

161

-1

AMD

160

150

CommScope Systimax

110

SAS

Juniper

Red Hat

All ﬁgures `crores

ably it is the fait accompli for a hugely populated country like India. TCS led the industry with 187,000 employees, and plans to add 37,000 more people in two years. Infosys announced 26,000 new positions, pushing the total new hires this year by the top ﬁve ﬁrms to 180,000. The industry already employed 2.54 million, and added 250,000 in 2010-11. The coming year (2011-12) is likely be a bumper one, with an estimated recruitment of 400,000 people. This could be the highest employee addition ever by the country’s IT sector. What’s more, Indian IT companies are hiring actively on US university campuses this year against the backdrop of the Obama administration decrying the loss of 186 | August 31 - September 15, 2011

US jobs to India. They are also hiring senior talent locally in overseas markets. Meanwhile, attrition last year ranged between 13% and 30% at the top 10 companies, according to Zinnov. Infosys is currently asking its nearly 128,000 employees for ideas on how it can retain them, as it battled attrition of 17.5% in the last-reported quarter

The Software Captives While the Indian IT services players enjoyed the lion’s share of the exports pie, there were over 900 MNC captives in India accounting for over $10 bn. But excluding the BPO players, the top 20 of these accounted for only $1.99 bn. This showed how scattered this market is; not surprising, since basically this involves the visit www.dqindia.com

R&D centers of most global technology companies. The list includes giants like HP, Oracle, Intel, Google to the likes of TE Coonectivity, Juniper and Red Hat. And the fact that for many of them like Microsoft, SAP, EMC their India centers have become either the first or second largest outside the US is an endorsement of the quality of the workforce involved. And while even these R&D centers were impacted during the slowdown, many continued recruiting even in FY11 and subsequently the top 20 captives grew faster than the overall top 20 exporters. Most software companies looked to maximize RoI from their software products, while extending their output from their R&D teams on newer products. Unfortunately, still over 80% of total software R&D spend in FY11 went towards activities to support the products that were in maintenance mode. Yet margins on new products were significantly higher than on maintenance contracts. This presented two major challenges to software product companies—freeing up resources to work on new products and maintaining margins for legacy products . And to meet these challenges, many of these software companies outsourced low-end R&D work like QA/testing related to mature products to the centers in India. R&D centers in India have generated significant cost savings to the headquarters because of the lower operating costs over the years. In a conservative estimate, R&D centers in India have helped the parent organizations save a cumulative of $40 bn for the last 3 years. A Zinnov report also reads that in a long term scenario the costs are expected to go up only by 6.7% CAGR through FY20. These conclusions prove that Indian software exports is not just the story of Infosys and Wipro, but also the likes of Intel and EMC R&D centers. n DATAQUEST | A CyberMedia Publication

BPO

Transformation Time While many companies are transforming, captives have made their presence felt, for the first time in many years SHYAMANUJA DAS shyamanujad@cybermedia.co.in

BPO Exports from India $bn

Growth

55,132

6% 58,715

Source: DQ estimates

11.6

11% 12.9

2009-10

2010-11

2009-10

2010-11

While the IT and emerging services have shown a comeback, BPO growth has slowed down. The industry is changing to a newer model

DATAQUEST | A CyberMedia Publication

visit www.dqindia.com

all it the stability factor in India’s services exports story. In FY10, when the whole services exports segment had been severely affected by the global economic slowdown—IT services exports had grown 5% and engineering services had grown 6%—BPO had managed to hold its own by growing at 13%. While both the other segments, IT and engineering. have done a smart comeback in FY11, growing at more than 20% each, BPO has slowed down—growing at just about 6%. (All growths in rupee terms) August 31 - September 15, 2011 | 187

BPO

And this has happened despite a 13% growth registered by the Top20 companies and a marginal growth recorded by the captives—a first in 3 years. The other third party companies have actually shown a negative growth. While consolidation can be a reason, the fact is that BPO has become a scale game and increasingly smaller companies are not being able to compete unless they are into very niche areas. Despite the hype, knowledge services spending has still not come back to the 2008 levels. And that has affected the new generation KPO companies. What explains the growth of captives? Technically, it is not so much of a growth but more of a rationalization of our estimates. Earlier, we had not been able to estimate the size of the captive BPO services that was hidden among large development centers and the India sales offices of many large multinationals. Last year, we had highlighted the phenomenon. “While the percentage share dropped because of some large captives selling off, for the first time in many years, there is some positive activities on the captives side. One trend that is especially worth noting is that most large players which have offshore software development centers, or engineering companies which have engineering design/R&D centers are now doing some sort of back office and support work out of India. Many times, these are not even captured on the analyst radars,” Dataquest noted last year. This year, we managed to estimate that segment. That explains the growth of captives this year, which helped them to maintain their share, if not grow it. Among the third party players, the industry saw very uneven growth. While some companies grew more than 20%, many saw negative growth as well. HCL and WNS, which are transforming recorded a negative growth. 188 | August 31 - September 15, 2011

Third Party BPO Exports $bn

Growth

41,200

7% 44,173

2009-10

2010-11

15% 38%

8.7

18%

7.7

35,954

2008-09

11% 9.7

13%

2008-09

2009-10

2010-11

Source: DQ estimates

While the top players have grown faster at 13%, the smaller third parties have grown slower. Part of the reason is consolidation

Transformation Time Unlike IT, which is isolated from the business, BPO is business. So, any change in the business has a direct result on the BPO services, especially the vertical-speciﬁc services. So, in a way, this industry is perpetually under transformation. Interestingly, while the word BPO is a common umbrella term to describe a host of services, most companies do very different things. They provide diverse kind of services to a diverse set of customers. Yet, there are certain common trends that we noticed in the entire industry. There are some common buzzwords across the industry. Non-linearity: For long, the BPO industry (like IT) has operated on a time and and material based pricing, where the client pays for inputs of a supplier and not the output. While that model is less riskier, it is not very scalable and there is no incentive for efﬁciency. So, there was push to change it from both the clients and the suppliers. That is happening to some extent. Non-linearity, as it is called, is a big buzzword across all companies. There are various manifestations of it—some of them are buzzwords in their own right—such visit www.dqindia.com

Revenue Share by Category (%) Captive

25 Top 20 Third Party

20 55

Total Revenue :

Other Third Party

58,715 crore ($12.9 billion)

Source: DQ estimates

The large third party players have increased share at the cost of smaller players. After many years, captives have held on to their share

as better IT leverage, platforms, consulting capability, knowledge based services, etc. Onshore Capability: While it is still small in terms of numbers, there is a greater thrust on onshore capability by BPO service providers. So, while India and Philippines grow, many are setting up onshore/nearshore locations or are acquiring companies in those geographies. Verticalization: This is another industry-wide trend. Most companies are reorganizing their services across verticals as far as go-tomarket is concerned. TCS got 70% DATAQUEST | A CyberMedia Publication

BPO

DATAQUEST | A CyberMedia Publication

Top 20 Employees Over the Years People ('000)

13%

12% 10%

311.2

276.7 244

Source: DQ estimates

of its revenue last year from vertical-speciﬁc services. Many others such as 3i Infotech, Xchanging, Exl measure their revenues only based on verticals. Verticalization is also a common change factor for most others on their transformation journey. Mphasis has just done it and HCL and WNS are at it. IT Leverage: Platforms, analytics, IP are still buzzwords in the industry. We called it the most dominant trend last year. It continues. Cloud: This is a new buzzword. For an industry that is based on the concept of variablization, cloud was a natural ﬁt, as the model is helping BPO companies to club IT and business services to offer them as a bundle. Business Process as a Service (BpaaS as it is called) is now a steady offering from many companies.

2008-09

2009-10

2010-11

*Does not include domestic BPO employees

The growth in manpower for Top20 represents better future for them

Emerging Markets: While America recovered last year, Europe was still slow. This has prompted

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many companies to look at newer geographies such as Latin America, Asia Paciﬁc, and Middle East. And many of these require sound onshore/nearshore strategies. But that is not stopping companies from exploring the markets. Analytics: Like in the IT industry, analytics has become a big buzzword, both for value addition as well as a service line for the industry. We expect this will become a bigger trend in the coming years. Transformational Capability: Though companies have just taken baby steps, offering clients with business transformation through a combination of consulting, technology and business services is everyone’s wish list item. Some deals have happened. There is a long way to go but the buzzword and the desire to make it happen is strong. n

August 31 - September 15, 2011 | 189

ENGINEERING SERVICES

India is Engineering! The engineering services segment bounced back after the recession, catapulted by the beginning of big spending by the aerospace industry SHYAMANUJA DAS shyamanujad@cybermedia.co.in

hat a smart comeback it has been! Boasting of a growth ﬁgure (22%) that is higher than both IT services and BPO exports growth, engineering services segment has surely proved a point or two to the cynics who thought it was more hype than reality. In fact, its potential is un-

Engineering Services Growth $bn Growth

Growth

14,675

22% 18,528

15,179

2008-09

2009-10

2010-11

Source: DQ estimates

3.19

Source: DQ estimates

3.16

27% 4.06

2008-09

2009-10

2010-11

* Excludes revenues from high-tech, seminconductor, telecom and software verticals Engineering services segment impressed by registering higher growth than both IT and BPO services exports

190 | August 31 - September 15, 2011

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derrated because engineering like BPO and unlike IT is a combination of multiple types of services for multiple verticals but gets most of its business from manufacturing industries that are not reallly headline grabbers (unlike BPO which gets most business from ﬁnancial services, insurance, telecom, IT, and other services industries). Actually, if anything, it could do with a little more hype. We still do not have equivalent of something like Nasscom-McKinsey report which made the whole world sit up and take notice of what India could do, after Jack Welch championed the 70-70-70 formula. The Nasscom-Booz report and Carl Ghosn’s good words promoting Indian frugal engineering were no match for those 2 phenomenal factors that helped the BPO industry grow in its early days. The need to beef up marketing—our headline is a small but truthful assertion of that desire, becomes even more imperative, when we consider the growth of this segment could help realize India’s long-standing dream of becoming a global manufacturing base. DATAQUEST | A CyberMedia Publication

ENGINEERING SERVICES

No one in his senses would belive that India can ever match China in terms of cost of actual manufacturing. It is the design capability that could give it an edge in helping the customers in not just bringing down the cost of product development, but the cost of product itself which could create new market opportunities. In fact, the Indian engineering services fraternity has already started moving along that direction. If IT and BPO, even today, serve mostly the businesses of global corporations in mature and developed markets—where value means reducing cost—this nascent segment is already helping its client to innovate and tap newer markets through frugal engineering. The case of GE’s portable ECG machine and Jonh Deere’s tractor are now frugal engineering folklore. Similar efforts are happening in a smaller scale and even by third-party service providers. Take the case of TCS— India’s largest IT company and the largest in this category. It was working with a medical products company which wanted to introduce a surgical stapler in the Indian market, which was a use-and-throw type but was too costly for the local market. Through signiﬁcant design change, the 2 companies made it a reusable product. It is not classical lowering cost of the process or even product. The new product may cost the same or even a little more, but the per-patient cost reduced by more than 90% and it did help the medical product company to tap the Indian market. Not surprisingly, the company is taking it to other emerging markets. Mahindra Engineering did a similar exercise for Navistar, where it designed a complete minibus for the US truck maker to introduce in the Columbian market, using an existing platform but design the vehicle including chassis and interiors from scratch. DATAQUEST | A CyberMedia Publication

Category-wise Break-up %

Top third party providers (ranked by Dataquest)

52 Captives

3 Other third

party providers

Total Revenue (FY11):

18,258 crore

Source: DQ estimates

There was not too much change in the composition of the industry. While captives grew, not too many new ones came up last year. Saab AB and Dana were 2 notable new entrants

When Sky was the Limit While the Indian engineering services segment is surely moving to become a partner of the client, at present, the market is still dominated by deals and relationships that want to leverage India’s engineering and not necessarily innovation—prowess, lower cost, availability of resources, and faster development cycle. Call these the traditional drivers of offshoring engineering, if you like, but these still make a company look at India. For example, aerospace, which accounted for most of the big contracts announced last year. Unlike automotive, consumer electronics, and medical devices, it will take long before a design company suggests product innovation, but that still does not take away from the fact that it is a huge opportunity with tremendous scope for process innovation and of course resource augmentation. A lot of the engineering manpower in the West is going for retirement now and these companies are looking at hiring new resources in India. Most of the big engineering services contracts announced last year and in the ﬁrst part of FY12 are in the aerospace sector and unlike the contracts in the other verticals, which are more speciﬁc projects, these were mostly for setting visit www.dqindia.com

up dedicated technical centers in India. Examples of such deals include the TCS-Rolls Royce deal announced in the beginning of the year as well as one signed by Premium AEROTEC of Germany with Axis-CADES. The trend continues onto FY12. In early June, EADS announced deals with QuEST Global and CADES/Axis IT&T. The QuEST deal is an extension of the Wing & Pylon engineering center of the European aeromaker based in Filton, UK while the deal with CADES is for extending the fuselage CoE in Saint-Nazaire France. Both the Indian centers are expected to scale up to 300 people in the next 3-5 years. Another similar deal for establishing an India technical center was announced by SAAB AB of Sweden with Mahindra Satyam during the Paris Air Show in late June. The other big deal this year was more interesting. It was an integrated manufacturing-design deal signed by the #1 global helicopter maker, Eurocopter with Mahindra AerospaceMahindra Satyam combine. Actually, EADS, which unlike Boeing, was not outsourcing too much started doing that in the last few years and that has driven the market. Many see it as beginning of the spending again by the aerospace segment after the recession. So, in a way, it is the pent-up demand of all these years. However that India itself is becoming a major market for aerospace and defense means the momentum is here to stay. The MMRCA (126 fighter aircraft) deal has finally gone into the next level with 2 left in the fray—Dassault and Eurofighter (EADS/BAE). The contract itself is going to be $11 bn. There are more defense contracts already placed and are likely to be placed. It is estimated that the Indian defense would spend $25-30 bn on aircrafts purchase and upgrade in next 6-7 years. Even if 20% of the 50% offset (that is 10% of total) is spent on design, that makes it a $2.5-3 bn market from August 31 - September 15, 2011 | 191

ENGINEERING SERVICES

this opportunity alone. A lot of manufacturing/sourcing work is already coming to Indian companies. These include Rolls Royce/Mahindra, Eurocopter/Mahindra, Boeing/TAL, Rolls Royce/HAL, and CESA/Wipro. Many of them would have impact on the design outsourcing. In the automotive sector, the story is equally exciting but different. Automotive did not grow as much last year. One of the reasons is that the consumer demands have still not come back to the 2008 (pre-recession) levels. Especially in Europe, it would take some. So, the big spending on new projects is still rare but most automakers have a few common objective. They now want to make cheaper cars for emerging markets, fuel-efﬁciency as well as electric/ hybrid cars are also on everybody’s agenda, and there is a newer trend of making recyclable parts and components, and in many countries regulation requires them to build more reliability into products. All these requires new thinking and not just lower cost of development. So, the engineering services segment in the automotive sector is fast-moving up the value chain. While Mahindra Engineering did a full vehicle design for Navistar, Tata Technologies started a full vehicle program and already has 6 clients—3 of those for electric/hybrid. Many late entrants into engineering services segment did not enter into this area as things were too commoditized in this segment. But these new changes have made it an attractive segment to add value. In fact, TCS has already built 2 CoEs—one for reliability and one for green/sustainable engineering. Some of the other value adds of earlier years such as should-costing are becoming almost a staple offering in automotive. While aerospace and automotive together account for more than half the market, some of the other areas 192 | August 31 - September 15, 2011

Vertical-wise Breakup (Third Party) Automotive

28%

Aerospace

27%

12% 28% 5%

Industrial/Plant/ Agricultural Energy/utility/ power generation

Others Total Revenue (FY11):

8,969 crore

Source: DQ estimates

Despite a good show by aerospace recently, automotive, which overtook aerospace in FY10, still remained the #1 segment. This is because of 2 reasons. One, most large new contracts in aerospace came last or this year and still do not show in revenues. Two, the smaller players still almost entirely play in automotive

are emerging. Industrial plant and machinery/agricultural equipment has become a large segment. Almost all the large players have a footprint there. Energy/oil and gas/power generation as well as construction have become strong niche areas. TCS, Infosys, and QuEST are the major players in the oil and gas and energy segment. Though QuEST saw dipping revenue, primarily because of a reduction in onsite manpower, this area is nevertheless a promising area and provides excellent scope for value addition through IT. Construction is still a niche play and is dominated by players like Rolta, Aegis, and Neilsoft. Aegis, a BPO company owned by Essar Group, is a relatively new entrant. But in this area, the major market is in emerging countries including India. Most of the players have grown more in India.

Changing Delivery Models As the industry matures, there are certain trends that are getting visible. First and foremost and we have written about it earlier, is the greater momentum on the design to print (art-to-part) part, where clients visit www.dqindia.com

expect the service providers not just to design but to source/manufacture the product as well. While the large manufacturing groups such as Tata and Mahindra are strongly into it, others such as Wipro have started offering it. With more engineering companies joining in, this is likely to accelerate. Second, almost every engineering services firm now realizes that it is not easy to scale it up without carefully dissecting the processes and reusing the resources. Not long back, moving engineers from one vertical to another was a taboo. Now, engineering services firm are carefully deciding where they need to have vertical expertise and where horizontal skills would do. That does not lessen the importance of vertical specialists. It just reduces their number. They are still the most valuable resources but by dissecting the processes, scalingup becomes faster. Third and it is a newer phenomenon that everyone is realizing the virtue of IT-type nearshore capability. Earlier, it was either the client’s premises/vicinity or India. Now, many companies are building nearshore presence. Geometric has a facility in Romania while Quest acquired a company in Spain. It is looking at more acquisition in Europe. Tata Technologies too is looking at building nearshore capability. And finally, there is an undercurrent of realization of the need to develop right-brain creative design capability for India as a country. IDEO and Frog Design have come to India and a lot of boutique industrial design firms have come up in India but there is absolutely no collaboration between the 2 segment. Dataquest is planning some activities on this front later this year.

End Note The momentum has picked up again and there are new players who have entered. Many of the engineering DATAQUEST | A CyberMedia Publication

ENGINEERING SERVICES

Top Third Party Players Rank FY10

Rank FY11

Type

Company

Head Office

Revenues FY11 (`cr)

Revenues FY10 (`cr)

Growth FY11 (%)

IT Firm

TCS

Mumbai

1,415

1,230

Growth FY10 (%) -4

IT Firm

HCL*

Noida

1,097

891

Specialized

Tata Technologies

Pune

861

765

Specialized

Infotech Enterprises*

Hyderabad

822

620

IT Firm

Infosys*

Bengaluru

660

500

-43

Specialized

L&T Integrated Engineering Services

Vadodara

570

381

Re-entry

IT Firm

Mahindra Satyam

Hyderabad

538

472

Specialized

Quest Global

Bengaluru

517

422

Specialized

Geometric

Mumbai

386

291

-5

IT Firm

KPIT Cummins

Pune

325

235

-20

IT Firm

iGate Patni*

Mumbai

292

263

-3

Specialized

Rolta*

Mumbai

252

221

-1

IT Firm

Wipro*

Bengaluru

179

141

Specialized

Axis IT&T

Delhi

161

124

Specialized

Mahindra Engineering Services

Mumbai

147

145

-18

NEW

BPO Firm

Aegis

Mumbai

Specialized

Neilsoft

Pune

-19

NEW

IT Firm

Birlasoft

Noida

8,427

6,840

542

435

-55

Total Third Party (in `crore)*

8,969

7,275

Total Third Party (in $B)

1.5

Total Top 18 Others*

*These revenues are estimated by Dataquest Last year marked the re-entry of Mahindra Satyam. While the aerospace-focused companies did grow more than the automotive focused companies, L&T IES was an exception. But by and large, the growth was fairly secular with large third-party players, captives as well as smaller third-party players all recording similar growth. Last year also saw some good smaller players such as Ignis getting into the space, which still do not show up here. Like every year since 2007, the figures indicated here do not include revenues from verticals such as telecom, IT, high-tech, and software products

companies are entering this segment. After Tata and Mahindra, Essar through Aegis, and Hinduja through Deﬁance Technologies have entered. Punj Lloyd has entered indirectly through Pipavav, an offshore and defense engineering company in which it holds a stake. The latter bought 51% stake in Conceptia Software—an engineering design ﬁrm. DATAQUEST | A CyberMedia Publication

L&T is already strongly there through L&T IES, though it is going through a major transformation and reorganization. It hired Booz last year to suggest strategies and based on the inputs, changed its positioning in the market. It remains a company to watch. The CK Birla Group, through group IT company, Birlasoft, has entered the area. Birlasoft ﬁrst acquired group visit www.dqindia.com

company HM Engineering and last year bought the engineering design team from AVTEC. Genpact, the largest BPO company, has also been studying the space for some time. It has the GE backing and it may well announce its entry anytime. And do not yet rule out the likes of Accenture and IBM. The space is just getting more exciting. n August 31 - September 15, 2011 | 193

SEMICONDUCTOR DESIGN

Upward Swing The global demand for electronic products and the need for product innovation acted as the growth drivers for this segment

The Indian Semicon Market Growth

2008-09

12% 40,112 *DQ Estimates with inputs from ISA

32,200

11% 35,664

2009-10

2010-11

Despite modest growth, the opening up of electronics devices industry augurs well for vendors who are upping their ante across design domains Note: The numbers factor in the total consumption of semiconductors in India in any form like purchased locally, imported as part of CKD or SKD or imported as complete product

194 | August 31 - September 15, 2011

SHRIKANTH G shrikanthg@cybermedia.co.in

he Indian semiconductor design industry is offering fabless design operation cuts across VLSI design, board design, and embedded software. If one looks at the overall Electronics Manufacturing Services (EMS) industry, what is driving in India is the changing demographics, increasing consumer spending on electronics devices, and favorable economic conditions that have made India one of the hubs for semiconductor design activities. Moreover with more semiconductor companies expanding their production facilities out of India, the demand for EDA services has grown in tandem. Experts say that Indian design companies as well as IP and product start-ups are also growing and that presents a growth opportunity for EDA. The demand also signals the increasing maturity of the Indian design ecosystem. For instance, India today has the presence of top 25 semiconductor companies and 10 fabless companies that do more complex design jobs. Companies that have been in existence for more than 10 years in the country are slowly moving toward complete engineering ownership (including endcustomer support), which has been one of the key factors driving maturity in segments like VLSI.

Key Trends According to ISA, some of the key trends witnessed over the last 1 year were: Product customization due to localization: The growing consumer market is creating a need for localized product features, resulting in increasing activity in the embedded software development domain especially in the consumer electronics, defense, telecom, and automotive segments Greater requirement for flexibility and functionality: Growing affluence is redefining lifestyle aspirations influenced by growing self-confidence, expanding consumerism, increased spending power, and greater access to lifestyle goods and services in segments such as automobiles, embedded software being used in features such as power steering and windows visit www.dqindia.com

DATAQUEST | A CyberMedia Publication

SEMICONDUCTOR DESIGN

Legislative requirements: Country-speciﬁc legislations such as Bharat Stage-IV norms require customization of certain features/ functionality. Other instances are in the ﬁeld of green energy (emission control) and safety innovations (antilock brakes and air bags) Increasing capability of thirdparty service providers and Indian design companies: What this means is that Indian design companies, which are moving up the value chain to offer high-value activities relating to middleware and OS programming is driving the expansion of the embedded software industry in India Lower entry barrier for service providers: Embedded software development does not require costly tools and solutions such as EDA, and the presence of a large talent pool has resulted in the establishment of a large number of small and niche service providers in this space. With chip design companies adopting open-source platforms such as Linux and Google’s android, there is an increased amount of embedded software required to support a chip’s functionality, which has given a boost to the embedded software industry

Market Dynamics According to the experts, EDA is at the core of electronics devices—as the demand for electronics and related semiconductors increases, so will the demand for EDA. According to a Gartner report in July 2011, the Indian semiconductor consumption is projected to grow to a total of $8.2 bn in 2011, a 15.5% increase from 2010 consumption of $7.1 bn. For instance, companies like Cadence says that over the year applications have become important in end-consumer products ranging from phones to cars. As a result, companies are now expecting application-ready platforms with software and hardware from the semiconductor players. DATAQUEST | A CyberMedia Publication

VLSI Design Industry Split of Projects by Type of Projects (%) Module Design & Verification Spec to tape-out

18 29

15 30

Physical Design Chip Testing IP Development

*Source: ISA-EY Research 2010 This is in line with the trend of captives partnering with third-party service providers by participating in early chip development programs and providing modular IPs to reduce their time-to-market

This approach will also help close the profitability gap by enabling integration-optimized Intellectual Property (IP) creation and selection, to assemble System-on-Chips (SoCs), and system cost optimization. The most significant challenges that design teams face stem from time-tomarket pressures and those around design complexity. Hence there was a need to introduce new tools and approaches to overcome these issues holistically. Experts also say that over the last year customers demanded productivity, predictability, and profitability (3Ps) also gained ground last year but it’s easier said than done. Clearly companies need to churn out designs faster in the market to avoid being left behind, which in turn will increase the profitability. With the shift to applications-driven design paradigm for semiconductor companies, 3Ps will become even more imperative for them to be successful. One of the segments that grew well was the VLSI space. As per ISA, if we look at VLSI design projects forecast by technology, the distribution of total projects carried out in visit www.dqindia.com

India by technology shows the strong tilt toward digital design industry that still garners the majority of projects in India. Meanwhile the mixed signal design industry is showing significant momentum and is on an upward curve. Digital signal designs are more standardized, use simplified device models, work with easily available EDA tools, and there is an abundant supply of talent in India. However the percentage of work carried out in the analog industry is expected to remain constant due to the dominance of eastern European countries in the industry. Other reasons for this include the need for customizable synthesis tools, difficulty in testing designs, and shortage of talent due to lack of training focus and the need for specialized analog lab infrastructure, resulting in competition for already available talent. In terms of distribution of total projects carried out in India by type of design and given that industry is maturing, ISA says that companies have confidently begun developing their IP and investing in it. This is in line with the trend of captives partnering with third-party service providers by participating in early chip development programs and providing modular IPs to reduce their time-to-market. The share of projects in the module design and verification space has gradually declined over the last 2 years.

Key Challenges Clearly the industry is beset with multiple challenges and vendors are gearing up for that. Vendors like Cadence say that the ﬁrst challenge is the disruptive transformation in the supply of application-ready platforms (in an application-driven world) with hardware and software for a given application such as mobile computing. The repercussions of this paradigm change have already affected the EDA industry and will continue to do so in 2011. August 31 - September 15, 2011 | 195

SEMICONDUCTOR DESIGN

Experts say that traditionally the EDA industry has only addressed silicon, assuming that chips will be designed first and that software and applications will be appended later. However now the product designs will be driven by a top-down view of the end applications, and the design process must enable that approach. In other words, the approach should be a reverse methodology, keeping in mind the integration or the end utilization of the product than the silicon. The second challenge the industry says lies in IP integration. Significant problems like design complexity, cost of silicon, and time to market pressures are challenging the semiconductor providers and directly affecting their profitability. One way that companies can reduce cost and shorten design cycle time is by using commercial IPs and reusing in-house IPs from other design projects. For example, for standard interfaces or

for standard non-critical functions IP reuse or purchase is a good option. While commercial IPs and reuse might bring up integration and maintenance concerns, IP reuse is going to be an increasingly important business imperative. Given the above challenges, vendors like Cadence have introduced a new bold vision for the EDA industry called EDA360. EDA360 is a vision

VLSI Design Industry Split of Projects by Technology 2009

2010

2011

2012

Digital

62%

57%

53%

51%

Analog

19%

21%

22%

Mixed

19%

22%

26%

27%

*Source: ISA

The digital design industry still garners the majority of projects in India, the mixed signal design industry is showing significant momentum and is on an upward curve

Revenue and Workforce of India’s Semiconductor Design Industry 2010 and 2011 Segment

FY10 Revenue (`Crore)

VLSI Design % Share

FY11

Workforce

Revenue (`Crore)

Workforce

4,491

17,200

5,054

20,600

12.6

10.8

12.6

10.8

Revenue CAGR (2009-12): 17.3% Workforce CAGR (2009-12): 20% Hardware/Board

% Share

2,264

11,600

2,545

13,900

6.4

7.3

6.4

7.3

28,909

131,000

32,513

157,000

81.9

159,800

40,112

191,500

Revenue CAGR (2009-12): 17.3% Workforce CAGR (2009-12): 20% Embedded Software % Share

Revenue CAGR (2009-12): 17.3% Workforce CAGR (2009-12): 20% TOTAL

35,664

Source : DQ Estimates with inputs from ISA

While embedded software takes the bulk, on the other hand it is interesting to see niche areas like VLSI doing well and that shows the growing maturity and capabilities of India design captives

196 | August 31 - September 15, 2011

visit www.dqindia.com

for deﬁning the trends in the EDA industry, based on what Cadence is observing in the industry and the direction in which it thinks the industry will go. EDA360 represents ‘System Realization’—the development of a complete hardware/software platform ready for applications development; ‘SoC Realization’—the creation of a single SoC including hardware-dependent software; and ‘Silicon Realization’ that includes complex digital, analog, and mixed-signal designs. Meanwhile if we look at other companies, each one is adopting a unique strategy. Take the case of Xylinx that addresses the India semiconductor market with sharp focus on where product designs are executed and where product design decisions are taken regardless of where the production will take place. In that respect, it covers several different types of customers—each very important in its own way. Xilinx activities in India range from engaging with customers for business development and technical support, R&D, and building the ecosystem of organizations and people through the alliance program and the Xilinx University program. Apart from that, many Xilinx employees in India are involved with community service-related activities.

Outlook Experts say that the industry should focus on nurturing an ecosystem that encourages local systems design. The government has to take steps to encourage companies to design and develop indigenous products. The industry also feels that there should be a high level of alliance between various industry stakeholders, government policies, and incentives to ensure an upward growth for the semiconductor industry. With estimates suggesting that by the end of 2011, the total market revenues will exceed $10 bn is an indication of buoyancy in this space. With that prospect, one only hopes all these pending issue will be solved. n DATAQUEST | A CyberMedia Publication

New Awakening With the growing proliferation of data centers, the sales of enclosures and racks is increasing manifold

RACKS AND ENCLOSURES

New Awakening With the growing proliferation of data centers, the sales of enclosures and racks is increasing manifold SHILPA SHANBHAG shilpas@cybermedia.co.in

Indian Racks & Enclosures Market Growth

587

-23%

A Dossier

16% 524

Source: DQ estimates

452

2008-09

2009-10

2010-11

Racks & enclosures market reflected growth after bearing the brunt during recession supported by government spending while the telecom segment saw a lull. But the market was witness to major game changing moves as Schneider acquired 75% stake in APW President

198 | August 31 - September 15, 2011

acks today are no longer the ignored entity on an IT Managerâ&#x20AC;&#x2122;s purchase budgetâ&#x20AC;&#x201D;all in for compromises. From being sold in kilograms as an expensive and heavy commodity, it has come of age with innovation to its rescue.

But, yet the market scenario is dominated by 50-60% unorganized players, who have maintained their fortĂŠ which requires no rocket science explanation. These unorganized players have since ages continued to bundle a commodity and sell it to an IT Manager on the lookout (approximately every 2 years) for completing his IT purchase with less funds remaining. And since the market is huge it is extremely easy for the unorganized players to thrive in the market dynamics. As a passive device, it is treated as a commodity but with awareness spreading, these companies will be required to ensure innovation in its products to maintain its foothold. If this does not happen then the increased stake will see a downward movement, a tilt in favor of the organized players namely, Rittal India, APW President, Emerson, and APC. Meanwhile, this market is also witnessing the moves of companies like HP, Valrack, BCH Electric, etc. From a market etched by the transition from assembled PCs to the pure-play vendors with game-changer moves, even the racks market is visit www.dqindia.com

DATAQUEST | A CyberMedia Publication

ADVERTORIAL

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ata Centres are complex systems. Software, hardware and IT infrastructure must work together as efficiently as possible in order to supply the user with inexpensive, reliable IT services. Reducing operating costs is only effective if you adopt a holistic approach. Rittal’s philosophy is to address a whole range of issues, not just one. We focus, in particular, on the two main electricity consumers – power and cooling: These areas offer the greatest potential savings. Rising energy costs and the growing power consumption (plus increased heat loss) of powerful IT systems causes a significant hike in electricity and operating costs. The escalating operating costs for power and cooling may be significantly reduced with efficient IT infrastructure solutions from Rittal. The challenges an IT manager faces today while deciding on to build up a new facility are plenty. However, the major challenges to focus these days are:1. How to ensure the new DC facility is more efficient than the current one? 2. How to ensure that the cost, Performance/sq.ft is lower than the current one? 3. How to ensure the data centre, we build is modular & scalable to handle future expansions? 4. How to ensure the data centre, we build has the highest level of physical security? The increased density of the blades allows an IT manager to add a significantly higher number of processors in a confined physical footprint while still managing within tight power consumption and cooling requirements. 1. How will you ensure the new facility is more efficient than the current one? a. Use Chilled water systems for your DC cooling with high cooling output in a minimal area, as it’s a known fact that water is the most efficient means of cooling when compared to a refrigerant based system. With conventional room cooling, a very large volume of air must be permanently cooled. With direct rack cooling concepts, only the racks are cooled in a sealed system. This cuts investment & energy cost substantially. b. Operate your chiller at higher chilled water inlet/outlet temperature, reducing your working hours of the chiller. Further giving advantage to the chiller to make use of low ambient air. This is where maximum savings in energy can be achieved. c. Use scalable/modular cooling and power solution, which gives you the flexibility to add modules at a later stage without causing any shut down in your Data Centre. d. Deploy intelligent monitoring & management software for your IT infrastructure. This allows optimizing the availability and substantially increasing the efficiency of a data centre 2. How will you ensure that the cost, performance/sq.ft is lower than the current one? a. With the increased density of the blade servers, it’s possible to populate the rack to its maximum, but then the space saved is utilized by the cooling system, in terms of either a hot aisle or cold aisle containment. Thinking of heat loads in watts per square foot of data center space becomes meaningless at these higher heat loads. Clearly, traditional ambient air-cooled solutions cannot sufficiently handle these extreme heat loads, pointing once again to the need for Rack based liquid cooling solutions, which can support up to 30 kW per rack. b. Eliminate Cold / Hot Aisle from your Data Centre; maintain them within the rack itself using a rack based cooling concepts.

Shibu Mathews Business Head - IT Solutions 3. How will you ensure the data centre, we build is modular / scalable to handle future expansion? Most IT managers will agree that the data centre is never loaded to 100% of its planned capacity on day one. It happens in a phased manner, and hence it makes no sense to invest on your IT infrastructure on day 1 itself. Solutions are available, which gives the IT manager the flexibility to add on cooling and power modules as and when the load in his data centre increases without any shutdown. The investments need to be made only as the expansion happens. 4. How to ensure the data centre, we build has highest level of physical security? If you consider IT security from an overall perspective, you will immediately realize that it goes far beyond pure logical and technical security. It is of immense importance to ensure that the IT structures are protected from physical dangers in addition to the normal firewalls, anti-virus programs and memory concepts. Rittal offers a broad spectrum of products for the physical protection of your IT, ranging from basic protection through to high-MTBF protection. The system-tested & certified solutions protect against fire, water, dust, fumes and external access. With the modular roomwithin-a room solution, you invest and expand according to your individual requirements, while the option to dismantle and reassemble the system ensures flexibility and protects your investment. Conclusions: The importance of energy efficiency for data centre operators will continue to grow. The need for action will also increase in view of the costs, energy availability and environmental factors. RimatriX5 from Rittal meets the infrastructural requirements for a modern, energyefficient data centre. The modular design of RimatriX5 offers a wide variety of options for expanding and modernizing existing data centers, regardless of whether the operator wants to install a complete new Data Center or just start with a single rack Data Center.

RACKS AND ENCLOSURES

Vendor Dossier Rittal India APW President

230

(%)

60%

144

Emerson

-30%

137

Emerson

106 46

APC

60 35

Others

Market Share

130%

APW President

2010-11 2009-10

71%

12 6

-64%

APC Others Rittal

Total Revenues: 524 crore Total Revenues: 524 crore

Source: DQ estimates

Rittal India maintained its lead position riding on the back of strategic market moves in a market where unorganized players still enjoyed a major stake

not untouched. Consolidation, virtualization, information explosion, energy demand, and cloud computing will drive racks to a new era supported by the need to combat space constraint as IT capacity increases. Convergence of high-speed 3G and WiMax data services, ﬁnancial sector regulations and government data center projects are expected to open new market opportunities. This optimization drive has led to every device (read servers, UPS, storage, etc) being sold as a rack. This has supported a new trend of remote monitoring, wherein a company with various branch ofﬁces can maintain a single rack room and monitor the entire functions through the server room remotely—an intelligent rack that is now witnessing traction in the market. According to CyberMedia Research estimates, with the current penetration of data centers among Indian enterprises at 63% and with 85% large enterprises having set up a data center by 2010, offerings for SMB enterprises are expected to witness traction. Need for optimization of 204 | August 31 - September 15, 2011

Rittal India, APW President, Emerson and APC still remained the undisputed players in the racks and enclosures market

space, may support condensation leading to the requirement of proper air-ﬂow arrangements to combat heat generation and power management. Some of the major investors in racks are NCR (Puducherry plant), Nokia, Bharti airtel, Idea, Ericsson, etc and of late even SMBs have started purchasing though smaller versions.

Changing Dynamics Recession reflected a flat market as one vertical remained lull while the others rushed in to complement. Even though customer demand remained unchanged, recession has brought in a lot of change in the market scenario. Companies on a cautious note tried to put their best foot forward by ensuring cash flow and ensured optimizational moves. As a result the average prices of racks took a southward drive, shaping a fiercely competitive market. Companies that could weather this tide survived and while others fell to the rosy option of selling their concerns. Recently, in a surprising move that changed the dynamics of the pie, visit www.dqindia.com

Schneider Electric acquired 75% stake in one of the leading organized players, namely, APW President. With this move, Schneider has complemented its offerings, promising to become a serious competition with both APW President and APC enabling both companies to leverage on each other’s strengths under the same roof. This move is similar to the one made by Emerson 5 years ago to become a one-stop-shop for offerings by acquiring Kanur. The telecom segment that was riddled by scams reﬂected a dip in investments while government spending was still riding high on projects. Government projects which had seen a surge have started witnessing hesitancy since last September 2010.

Rittal If in FY10, telecom supported the stupendous growth drive of Rittal, its timely decision to stay away from the segment in FY11 and focus on data centers ensured that other segments like BFSI (50%), government projects (15%), manufacturing (10%), and healthcare chipped in to DATAQUEST | A CyberMedia Publication

RACKS AND ENCLOSURES

complete the telecom picture. Since racks is its core business, Rittal intends to innovate and be updated by launching new racks in the market and is in the process of chalking out a go-tomarket strategy. If FY11 was witness to launch of energy efﬁcient servers, in FY12 focus would shift to data centers in a box, and mobile data centers. New projects (50%) for clients like PNB Bank, Metro Cash & Carry, Mather & Platt Fire Systems boosted its morale no end. With a new CEO, Ajay Bhargava at the helm of affairs, the company is all set to enter the market with renewed vigor on the back of new policies.

APW President Whereas, though APW President also enjoyed a major stake, it did not witness game-changer moves but it did try to send ripples in the market. During FY11, its major contributor—the telecom segment, affected by various scams saw decline in investments due to diversion of funds in acquisition of 3G spectrum, uncertainty of government policies, etc, which in turn bore an effect on the company’s sales by 30%. But the company has been making all the right moves if its client list comprising TCS (Chennai), Tata Teleservices, NSEIT, are taken into consideration, which are a result of its strategy to plan for the future. It also started a new enclosure company namely, IMPress and also increased its reach through the online sales order booking portal, www.cabinets-racks.com. APW also introduced Advanced Thermal Management and Data Center Energy Optimization and other solution based business. In a move to pull its socks, even a business division was 206 | August 31 - September 15, 2011

FROM A MARKET ETCHED BY THE TRANSITION FROM ASSEMBLED PCS TO THE PURE-PLAY VENDORS WITH GAME-CHANGER MOVES, EVEN THE RACKS MARKET IS NOT UNTOUCHED

created to ensure that it catapults itself to a better position than its peers. To expand its geographic reach, APW has increased its number of regional distributors on a pan-India basis. But the year ahead, holds a lot of promise and action as APW President is expected to enter the market with renewed energy (Schneider), while APC maintains its strength with a complete set of offerings. This is one strength that even APC has realized and has tried to leverage on as it is a dominant player and much stronger in the UPS market. Hence, it has made a calculated move to couple its UPS offerings with its racks. This focus of APC ensured that it maintains its foothold.

APC During FY11, APC stood to beneﬁt from increased investments from the government, IT, ITeS, and infrastructure segments. And with the BFSI segment also showing traction, the future appears bright. APC was associated with the implementation of the data center for a large telecom company, and also the offshore development center for an American company. With the focus shifting to better utilizavisit www.dqindia.com

tion of capital, racks assuming importance in a CIO’s agenda, more greenﬁeld projects, the need to evaluate existing and new equipment (server rooms, etc) for energy efﬁciency offers to change the scenario for APC. The company strengthened its channel partner network, started its training center in Mumbai and also developed a web based training program. But now with the entry of APW President on the scenario, APC can leverage on APW President’s channel strength and also leverage on its positive aspects like being able to serve its customers on time.

Emerson In a market landscaped by fragmentation, Emerson is also a top player and has been concentrating on its channel strategy to increase its reach. It intends to have 5-6 regional distributors under the umbrella of a single national distributor and is also ﬁnancing the manpower of these distributors. Like the other players, Emerson has also been trying to integrate racks with other IT equipment in order to optimize its offerings. Even though FY11 was a witness to the revival of most segments, for Emerson, its association with the ambitious project of building, operating and managing 6 data centers awarded to Dimension Data by BSNL was a silver lining.

Road Ahead From being heavy and termed as a furniture, to gaining its presence as smaller entities and offering scope for more intelligence, racks is surely throwing a challenge in the face of the designer. And all this can be attributed to the awakening about racks from being a mere administration decision (purchase) to a CIO concern to optimize IT capacity. n DATAQUEST | A CyberMedia Publication

STRUCTURED CABLING

Back on Track The demand for high-end technology by end-users has brought an opportunity for the structured cabling business to grow

The Indian Structured Cabling Market Growth

30% 1,345

Source: DQ estimates

1,033

2009-10

2010-11

The market was in a positive mood when the industry revived from recession and some infrastructure projects that got halted earlier resumed last year

DATAQUEST | A CyberMedia Publication

PRAGYAN ACHARYA pragyana@cybermedia.co.in

n FY10, every segment which relied on the developed market and most often lucrative IT/ITeS vertical faced the brunt due to global recession. Quite unlikely, structured cabling which has always been a hot business area, was no exception to the ripple effect caused by recession. Except for Dax Networks and R&M, other players in this segment incurred losses in FY10. The market stepped towards the growth trajectory in the last ﬁscal after tolerating degrowth for nearly 2 years. It was an uphill task for the vendors as they had to adopt aggressive marketing strategies to reach to the customers and cater to large number of new customers but it was a lesson learnt for all those who did not take any other vertical seriously except for IT/ITeS. The market seems to be in a positive mood. The willingness of organizations to deploy internet led applications, IP applications, virtualization, and high computing business needs is swinging more number of customers to various structured cabling solutions. The Indian structured cabling market stood at `1,345 crore last year as compared to `1,033 crore in FY10. Undoubtedly, the industry revived from recession and certain projects which were immediately halted due to recession resumed last year. At the same time, non-closure of certain telco projects has put growth expectations of many vendors on hold. As per TE Connectivity, the word ‘connectivity’ substantiates their line of business better. The acquisition of ADC India Communications (formerly Krone) in FY10 was the trend setter in the market in terms of consolidation. Recently, Schneider Electric acquired DigiLink. The 2 biggies, TE Connectivity and Schneider Electric, could set a big challenge to other vendors or might pester them to a situation where they have to acquire or merge with other players in the market. There was an increasing demand for 10G over last year. CAT visit www.dqindia.com

August 31 - September 15, 2011 | 207

STRUCTURED CABLING

Structured Cabling Market Figures in crore `

TE Connectivity DigiLink

248

140 150 100

Commscope

141 130

Belden ADC Krone Schneider Electric Panduit Dax Others

63%

228

Molex

R&M

50%

373

50%

120

50%

80 46

12%

41 42

2010-11 2009-10

-20%

53 33

-6%

35 30

-21%

38 20

-42%

35 162

22%

133 Source: DQ estimates

There was an increasing demand for 10G over last year. CAT 5 cables are on their way out and CAT 6 continues to gain ground. Cat 6A deployments were preferred among customers because of its capability to meet higher bandwidth needs in data centers and work stations. Fiber multimode is also transitioning to OM3. There was a shift towards converged networks and fiber

the IT/ITeS sector. The vendors were shaken when their customers, mainly concentrated in the US and European markets did not invest the way they used to. This led to repercussions on the structured cabling market in India. Vendors tried out different ways to maintain themselves in the market during the slowdown phase. TE connectivity decided to focus on the SME sector and government when it realized that the IT/ITeS sector and other verticals were directly or indirectly hit due to recession. Though the deal size was not so big but it kept the business going. DigiLink which showed q-o-q growth through the recessionary period could maintain steady growth due to continued investments on its brand, product development, partnerships, and training. Molex and Commscope Systimax expect more growth in Category 6A solutions and intelligent networking solutions.

Key Market Trends 5 cables are on their way out and CAT 6 continues to gain ground. Cat 6A deployments was preferred among customers because of its capability to meet higher bandwidth needs in data centers and work stations. Fiber multimode is also transitioning to OM3. There was a shift towards converged networks and ďŹ ber. Data center implementation gained momentum. The major growth driver for

208 | August 31 - September 15, 2011

structured cabling business in India was FTTx/FTTH.

Revival of the Market The structured cabling business has regained the lost ground in the last ďŹ scal and the growth was back on track in double digits. The factors for the lack of growth during the dull period have been incorporated primarily to the over-dependence on the US or

visit www.dqindia.com

Structured cabling is growing faster than before with the mix of network technologies. With the adoption of newer technologies like virtualization and convenience, which brings along with it to the end-users, is driving change. There is a change in hardware and software suite and the demand for high-end technology by end-users has brought an opportunity for the structured cabling business

DATAQUEST | A CyberMedia Publication

STRUCTURED CABLING

Vendor Dossier Others

12 17

Digilink

28 TE Connectivity

11 9 3 3 2 2 2

Molex R&M Belden ADC India Communications Schneider Electric Panduit Dax

Source: DQ estimates

Commscope

Total Revenue : 1,345 crore *Others include Belkin, Nexans, Sterlite and other local and branded products

In preparation for the 10G migration, customers are refreshing the network with technologies that will support 10G. The largest single technology being deployed is Cat 6A UTP cabling which is again emerging as the dominant 10G ethernet physical infrastructure. Intelligent cabling is going to be a growth area

to grow. In the past, customers were holding themselves back from investing in many solutions like 10G and debate on shielded vs unshielded cabling resulted in delayed decisions on investments by customers. Customers were waiting to see some stability in the market, price cuts, and adoption of large-scale trends before budgeting on any of these solutions. A similar kind of pattern was also seen with 1G but in the last fiscal, broad scale adoption was witnessed. Vendors are not only showcasing newer and better solutions but they are also making the price points attractive. The adoption of Cat 6A grew significantly in the last fiscal with

DATAQUEST | A CyberMedia Publication

COMPANIES ARE LOOKING FOR AN INTELLIGENT NETWORK WITH SHORTEST DOWNTIME BUT AT THE SAME TIME, THEY DO NOT WANT TO OVERLOOK SECURITY AND ASSET MANAGEMENT ISSUES

visit www.dqindia.com

sales of 10G network gear driving the demand. 10G, without which many virtualization strategies would fail, is driving new business demands and is not merely limited to marginal network performance management. As these technologies become common, structured cabling industry along with network vendors have found a way to bring 10G infrastructure to every network at a reasonable price. It is predicted that 10G will grow exponentially. In preparation for the 10G migration, customers are refreshing the network with technologies that will support 10G. The largest single technology being deployed is Cat 6A UTP cabling which is again emerging as the dominant 10G ethernet physical infrastructure. Intelligent cabling is going to be a growth area. Companies are looking for an intelligent network with shortest downtime but at the same time, they do not want to overlook security and asset management issues.

Vendor Strategies For TE Connectivity (formerly Tyco Electronics), it was a good year and it rechristened itself on March 25, 2011 as it wanted to connect to its line of business better through the new name. It had acquired ADC India Communications for its wide range of connectivity products for wireline, wireless cable, broadcast, and enterprise networks. Though the acquisi-

August 31 - September 15, 2011 | 209

STRUCTURED CABLING

tion did not help TE to exactly revive out of recession but the company saw some amount of synergy by acquiring ADC. The acquisition also helped TE in adding Distributed Antenna System (DAS) products for the wireless market and expanded its network solutions offering. Through its 3 national distributors—Compuage Infocom, Ingram Micro and Redington India, 12 regional distributors and nearly 140 Netconnect design and Installation Contractors (ND&I) has expanded its geographical reach. DigiLink (now a part of Schneider Electric) focussed more on its product management and go to market strategies, prompt follow-ups on leads, pre-sales and post-sales service record, aggressive market promotions. In short, it made all efforts to create a good brand recall and brand perception. After the structured cabling business of DigiLink became a part of Schneider Electric, it targeted IT/ ITeS, BFSI, telecom, manufacturing, hospitality, government, PSUs, and retail. Other important verticals were SOHO, SMEs, and channels. Commscope Systimax adopted a very clear business plan of working with partners to ensure a tight distribution pattern to reach maximum number of customers. Despite giving a channel performance guarantee, it has also ensured that its partners have the required training, certiﬁcation to sell their products like Systi-

210 | August 31 - September 15, 2011

FOR ALMOST EVERY VENDOR, KEY VERTICALS LIKE IT/ITES, BFSI, MANUFACTURING HAVE ALWAYS BEEN THE MAJOR FOCUS AREAS. HOWEVER LIKE IT SERVICES COMPANIES, STRUCTURED CABLING COMPANIES ALSO REALIZED THE IMPORTANCE OF HAVING A PRESENCE IN THE DOMESTIC MARKET

max at a premium of 35%. Both Commscope and Molex have realized the potential of intelligent cabling network in the coming years. Molex introduced MIIM 1.7, an intelligent solution for passive cabling and is engaged in promoting it. R&M sees huge opportunity for cabling in industrial environments and healthcare segments. The company had launched Single Circuit Management (SCM) ﬁber optic product range, Optical Distribution Frame (ODF),

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and specific cabling solutions for new verticals like energy. Belden also joined the Merger and Acquisition (M&A) club along with TE and Schneider Electric. It had acquired Trapeze which was later sold to Juniper Networks and in the same year, it acquired GarrettCom and Thomas & Betts communications products business. Through this acquisition, Belden will be able to position itself as an end-to-end solution provider within the broadband/Cat 5, security and audio-video markets. Dax Networks recorded a flat growth due to non-closure of most of its telco projects. Domestic market has been its focus throughout and the homegrown company is in no plans to eye at the foreign market in the near future. It had launched field installable fiber connectors and ADSS cables in fiber category, semi-intelligent copper patch panels, attenuators, and unarmoured copper cables.

Deals Bagged For almost every vendor, key verticals like IT/ITeS, BFSI, manufacturing have always been the major focus areas. However like IT services companies, structured cabling companies also realized the importance of having a presence in the domestic market. TE Connectivity bagged projects from IBM, Vodafone, Etisalat, Aegis, and rural electriﬁcation project of Andhra Pradesh. TE realized that they are not

DATAQUEST | A CyberMedia Publication

STRUCTURED CABLING

bagging enough deals at the IT/ITeS front, so it shifted its focus to the SME sector and government. It also bagged some deals from the manufacturing sector which contributed 10% to its total revenues. FY12 will be an interesting year for DigiLink to watch out for. It will also get an opportunity to position itself in the global market. Its key projects have been in data center space which include CBI-DC&DR2000 sq ft, UBI-DC&DR, Dena Bank-DC&DR, and NICSI-DC. Other big projects were R-APDRP projects from 9 states, UID (Maharashtra), e-court (countrywide), e-panchayat, Mumbai International Airport, Maharashtra Gramin Bank, Sarva Shikhsha Abhiyan (in 9 states), SBI Life, and NSEIT. Molex has its presence in most of the verticals like manufacturing, government, PSUs, BFSI, industrial, education, and telecom. Though IT/ ITeS was sluggish for the company in the last ﬁscal, it could generate good business from telecom and automotive industry. Molex’s key projects were from Axis Bank, Lovely Professional University in Ludhiana, India Infoline, Tata Motor Finance, Jackson Engineers, Global Hospitals, Mahindra and Mahindra, NIT Agartala. While IT/ITeS, manufacturing, and telecom showed signiﬁcant growth over last year, verticals like BFSI, pharmaceuticals, hospitality,

212 | August 31 - September 15, 2011

and automobiles also contributed to growth. Dax Networks, which is the only company in both active and passive structured cabling won projects from Directorate of Technical Education, SREI Infrastructure, Rajasthan Schools, Salem Steel Plant, Maharashtra LAN, Mannapuram, BSNL GPON installation on ﬁber, Kalyan Jewellery, Sai Infosystems.

Challenges With the structured cabling market getting back on track, the deployment of solutions has increased. First of all, there is a dearth of skilled labor in India to sufﬁce the requirement of manpower. India has a scarcity of engineers to install, trouble shoot, design, and warrant the networks. Another major challenge is the volatile pricing of copper which impacts business upto a great extent. There has been frequent price revisions for copper based products and this ﬂuctuation in copper price pose a challenge for the customers to plan their budgets. Above all, cabling industry in India does not have any set of guidelines. It follows TIA/EIA 568B and other ISO standards.

Future Prospects The structured cabling market moved towards consolidation and the market picked up really well in the last ﬁscal. Vendors in the market not only initiated newer products and solutions

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but they also tried to diversify their focus from few rewarding verticals like IT/ITeS, BFSI, and manufacturing. Structured cabling installations will see exponential growth as the infrastructural expansion has already started falling in place. Since 2009, the trend has been to achieve higher speeds of transmission in copper medium, starting from 1000 Mb/s till 40 Gb/s. In the near future, advent of 100 Gb/s could be expected. As the demand for various structured cabling solutions will increase, vendors will also come out with various packages with attractive price points. Exponential shift in technologies will take place and the rate of adoption of technology will also increase. Customers have taken cognizance and have equipped themselves to adapt to changes in future. As speed increases, parallel or mesh topology may evolve. Cabling connections are expected to grow in capability and number in the future. When higher speed backbone technologies like 40G or 100G from copper to ﬁber is considered, there may be a shift in deployment. While there is some discussion of higher speeds on copper, there is no clear business case to substantiate this point. Fiber is considered as a ‘one-time solution’ but copper cabling still patronizes the structured cabling business because of its affordability. n

DATAQUEST | A CyberMedia Publication

ATMS

Money Matters The present number of ATMs in the country is posing challenges as well as throwing up lucrative opportunities for the players

he Indian ATM segment is witnessing a honeymoon phase with tremendous growth and demand from all the corners of the country. India is still hugely underdeveloped, with the density of ATMs being low both in terms of population and size of the country’s economy. In India, there are only 51 ATMs per million people, according to Asian Banker Report 2010. The comparative ATM numbers per million for Brazil, Russia, and China are higher—704, 536, and 155, respectively. As per Global ATM Market and Forecasts to 2015 and Retail Banking Research Report 2011, India has 70,000 ATMs and there will be about 175,000 ATMs by 2015. So this presents a huge opportunity to grow manifold in the near future. India has become one of the top markets in the world for ATM deployments.

The Indian ATM Market Growth

Growth Drivers

16% 1,720

19%

1,485 21% 265

Managed Services

30%

25% 180

Existing ATM mgmt/ Outsources services

30%

New ATMs

345 234

10% 1,141 2010-11

Source: DQ estimates

18% 1,040 2009-10

RUKHSAR SALEEM rukhsars@cybermedia.co.in

Managed services and outsourcing are considered as crucial alternatives for strategic operational services playing an important role in cost containment of ATMs considerably

DATAQUEST | A CyberMedia Publication

ATM growth in India till ﬁrst half of the last decade was primarily driven by private and MNC banks, but now State Bank of India and its associate banks have the highest number of ATM installations to its credit and have 70% ATMs across the nation. MNC and private banks still concentrate in tier-1 and -2 cities. But with the government emphasis and new directive of Reserve Bank of India to Indian banks has compelled banks to expand and penetrate their reach to smaller towns and semi-urban cities. The Reserve Bank of India remains responsible for regulating the Indian ATM market. As per this directive, it is mandatory for banks to open 1 rural branch on every 4 branches at urban or suburban locations. Therefore in FY11, the share of ATMs in rural areas has slightly increased to 27% against last year’s 25%. In addition, in May 2010, RBI’s liberalization of ATM environment provided relaxation to Urban Cooperative Banks (UCB) to set their off-site ATMs. Earlier they used to get the permission from the Central Bank every time they set up 1 ATM. But now, if these banks have the capital and a net visit www.dqindia.com

August 31 - September 15, 2011 | 213

ATMS

worth the RBI is convinced of, they can set up ATMs. Furthermore, shared ATM networks of banks have also changed the growth trajectory. At present, there are 5 shared networks—National Financial Switch (NFS), Cashnet, Cash Tree, MITR, and BANCS. In March 2010, NFS had 56,711 ATMs of 38 banks—95% of the country’s ATMs were on it. ATM usage gained momentum when RBI ordered banks not to charge cardholders of their rivals. Customers can make 5 free transactions per month on an ATM of other banks.

Challenges Over 50% of India’s population either is unbanked or underbanked which poses challenges as well gives tremendous opportunities to financial institutions to provide financial services. ATM deployment in Tier-2 and -3 markets will be the focus for financial institutions in 2011 and beyond. Increase in the number of transactions per ATM in both metropolitan and urban cities, financial institutions are keen to expand and ensure bank services to users where and when ever they want. But Indian topography coupled with weather and punctured telecommunications infrastructure adds to difficulty and high cost in deployment and maintenance of ATMs. Wireless or satellite solutions exist, connecting via a voice channel but have congestion issues and do not provide complete coverage across India. Another challenge for banks and non-bank ATM managed service providers is sustainable cost reductions and delivering a better Return on Invested Capital (ROIC). So, the future of ATM market certainly lies in self-service to reduce operational costs. Self-service transfers high frequency and low value transactions to more convenient channels. Therefore by automating such kind 214 | August 31 - September 15, 2011

Global ATM Market (ATMs per million of population) China

155

India 51

Brazil

704

Russia

536

Source: DQ estimates

Relaxation and liberalization of rules by the Reserve Bank of India has certainly given hope to players to expand their network and change the face of ATM industry. In few years, we can compete with nations like China, Brazil, and Russia

of transactions through self-service solutions, players can reduce and re-allocate staff and create additional capacity. ATMs in future will have more intuitive interface and the aim of technology and service companies will be how to humanize the ATM rather than automation.

Players ATM hardware market is still dominated by NCR and Diebold in India. Nevertheless both clocked healthy growth in FY11 but NCR increased its overall market share with the deployment of 9,000 ATMs (which is 50% of ATMs deployed in this ﬁnancial year) in India. Credit for such growth majorly goes to managed services component this year. Wincor Nixdorf continues to be the 3rd largest (actually far less market share than market leaders) player in the Indian market. NCR successfully once again partnered with National Payment Corporation of India (NCPI)—RBI initiative, for its 2nd phase rollout of CTS in Chennai. State Bank of India visit www.dqindia.com

and group of its 8 associate banks continues to be NCR’s biggest client in India owing to the biggest deal (order of 3,800 ATM machines) till date of Indian ATM industry. Rest of the client list includes Axis Bank, Canara Bank, Citibank, Corporation Bank, HDFC, HSBC, Kotak Mahindra, Punjab National Bank, and Standard Chartered Bank. NCR has expanded its network with 39,000 ATMs in 4,500+ towns with 260+ service locations and 600+ field support engineers. NCR introduced Self Serv ATM in February 2011, which is a wireless solution for the remote deployment of ATM. To maintain market leadership, it also launched NCR APTRA eMarketing software aid through the self-service ATM—NCR Smart Connections, a GSM based wireless solution through tie-up with Symstream Technology Group. To reduce overall cost of ATM installation and maintenance, it introduced NCR SelfServ 22e, which uses low-energy LED lighting and fixed length receipts to reduce power usage, carbon footprint, and paper waste. NCR SelfServ 32—India’s first ‘No Envelope’ multi-function intelligent deposit ATM is capable of handling high traffic at the ATM. SBI in its Request for Proposal (RFP) has expressed the purchase of 135,000-150,000 POS terminals across the country in the first year of operations for 2010-11 and for the managed services during the warranty period or the first year of deployment. So to leverage such opportunity, NCR is planning to enter the general retail segment in India aggressively through POS/self check-out solutions. On the other hand, Diebold India also got projects from private as well PSU banks in FY11. It got a new order from Axis Bank to manage 1,100 ATMS for 2 years. It also bagged a hefty deal to provide 1,750 ATMs to SBI for its full-funcDATAQUEST | A CyberMedia Publication

ATMS

Forecast of Number of ATMs and Shipments from 2010-2015 2010 Installations ATM per mn Growth in Installations (%) Replacement (based on 9 yr replacement cycle) Shipments (%)

2011

2012

2013

2014

2015

75,000 64

113

131

150

15,263 (25.6)

18,000 (24)

19,000 (20.4)

20,000 (!7.9)

21,000 (15.9)

22,000 (14.4)

2,250

3,147

4,227

4,457

5,184

5,983

17,513 (13)

21,147 (15)

23,227 (18)

24,457 (18)

26,184 (20)

27,983 (21)

There will be about 175,000 ATMs by 2015. So this presents huge opportunity to grow manifold in near future. India has become one of the top markets in the world and will continue to be at the top for ATM deployments

tion power-efﬁcient models (D450 ATM and D422 CD lobby machines) including 1,000 cash dispensers and 600 full lobby machines and 60 cash recyclers.

Services Domain With the relaxation and liberalization by RBI, banks are availing managed services and outsourcing to meet the growing market demand. Although, outsourcing concept existed in the global ﬁnancial services industry for some time now, but in India it is now more attractive than ever before. Managed services and outsourcing aid bank to bring down costs, increase time to market, and bring external expertise, assets, and/ or intellectual property efﬁciently. In India, there is focus on cost cutting, resultantly managed services and outsourcing are considered crucial alternatives for strategic operational services, keeping the core aspects of channel management with the bank. An ATM on an average costs `7.7 lakh for installation including the cost of hardware and software. Further the same amount has to be spent annually to service and maintain it including managed services. Cost of the machine goes up with the automation and features deployed, so likewise its maintenance cost also increases. Banks now are not only preferring outsourcing the managed DATAQUEST | A CyberMedia Publication

AN ATM ON AN AVERAGE COSTS `7.7 LAKH FOR INSTALLATION INCLUDING THE COST OF HARDWARE AND SOFTWARE services but also open to offsite deployments of ATMs. SBI leads the market in deployment of offsite ATM in urban as well as in rural areas. However banks do deploy many vendors for different types of managed services, so practically each bank is a client of every service provider. But even then, Euronet retains its numero uno position in the managed service segment with peripheral competition from AGS and Prism. Euronet India did exceptionally well in FY11 not only in India but also overseas which led to collation of multiple centers and emergence of 1 center as ‘Data Center’ in India. This data center will now support 25 countries in the world except UK and US. Furthermore, Euronet center in Pune is now global software development support with a quality strength of visit www.dqindia.com

250 people. Euronet has deployed 5,000 ATMs in India in FY11 along with end-to-end services and has 90,000 touch points in the country. Its Value Added Services (VAS) segment also registered strong growth of 35% with the launch of new retail products and new touch points. It handles VAS for 16 banks along with the handling of their IVRS and internal portals. Very soon it is about to ﬁnalize deals with 2-3 mobile operators to command 100% VAS market.

Trends ATM is now no more a simple cashn-dash machine, they are equipped with high level of functionality in India. Indian population now is more demanding for and is eager to adopt self-service technology to get customized and consistent messaging across industries. They prefer more control in accessing ﬁnancial services through multiple channels like online, ATM, and call centers. More and more tech-savvy Indian users are tuned to services like internet and mobile banking. Therefore, expected growth in ATMs coupled with higher internet and mobile penetration will bolster the self-service industry and give users more control on ﬁnancial transactions. Thus, the need rose for the banks to inter-link the mobile and August 31 - September 15, 2011 | 215

ATMS

internet platform with the ATM. Resultantly, banks and ATM managed service providers addressed the issue. Now, when any user visits an ATM, he inserts the card and enters the PIN. Owing to Near Field Communication (NFC) technology, users can easily use their cell phone to connect with the ATM and authenticate their identity. NFC synchronizes the experience of branch banking, online banking, mobile banking, and stretch upto the retail system as a payment device. Financial institutions are increasingly opting for a multi-channel strategy which synchronizes online, mobile and point-of-service options, through the combination of ATMs, kiosks, call centers, and branches. Multi-channel deployment is the step to be taken by all the banks and ﬁnancial institutions to retain

216 | August 31 - September 15, 2011

FINANCIAL INSTITUTIONS ARE INCREASINGLY OPTING FOR A MULTI-CHANNEL STRATEGY WHICH SYNCHRONIZES ONLINE, MOBILE AND POINT-OFSERVICE OPTIONS

and acquire new clients in this decade. The advantage for the ﬁnancial institutions that do respond to this integrated approach is enormous. And those who do not attune to such challenges will then face the future

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of reduced loyalty and decreasing customer base. Buzz in the ATM market for some years about ATM software for visually impaired ﬁnally is developed by Diebold India. Multi-channel involvement, video-teller ATMs, and faster and safer cheque clearing processes are some of the trends in today’s Indian ATM industry. Last year’s much talked and expected managed service, this year has been launched as a pilot project for travel space—a microinsurance product for traveling luggage by Euronet India. With the UID project in its last leg, it’s making the ATM industry very hopeful of biometric ATMs in the country. Let’s see whether experimental and technology savvy Indian market also tries to bring Scalable Deposit Machines (SDM) like US in a big way or not. n

DATAQUEST | A CyberMedia Publication

DISTRIBUTION

Back with a Bang The national distributors are back, with the trend this year in the distribution segment being expansion within boundaries and contraction within geography

AVISHEK RAKSHIT avishekr@cybermedia.co.in

he paradox this year in the distribution segment was expansion within boundaries and contraction within geography. This comes from the fact that as India’s top distributors took the route of expansion, both in terms of reach as well as their product portfolio across the nation. The trend remained that of geographical limits added by the factor of bad debts, inadequate credit policy, and some cases of over-concentration on product lines and categories. The play so far in the monetary market has been about growth; a much welcomed and positive sign than the previous year. As the market showed signs of recovery and the vendors keen on capitalizing from the vacuum in the market created thereby on account of the blues of FY10, national distributors took the first opportunity to streamline their process as well as strategy in formulating the distribution policy this year. Ingram Micro topped the charts again this time with 35% growth followed closely by Redington at 32%. The other national distributors, however, as usual do not seem to have made it yet to the top level as Savex rolled at `1,916 crore (having the largest growth figure at 64% this fiscal) and Compuage following suit at `1,413 crore. Other distributors however, kept on rolling in margins below expectations even as Neoteric, Supertron, and Rashi Peripherals continued a steady pace of growth. The growth figures however, were not restricted to the national distributors alone; their regional counterparts too made the most of it except a few cases like Caltron in the East which registered a decline by 14%. DATAQUEST | A CyberMedia Publication

visit www.dqindia.com

August 31 - September 15, 2011 | 217

DISTRIBUTION

Top 10 National Distributors 7,668 7,234

Ingram Micro 9,766 6,576 7,024

Redington 9,274 5,858 3,871

HCL Infosystems 7,282 841 1,166

Savex Computers 1,916 804 1,088

Compuage 1,413 812 945

Neoteric Informatique 1,135 611 927

2008-09 2009-10 2010-11

Supertron Electronics 1,107 709 838

Rashi Peripherals 1,098 Iris Computers Data Care Corporation

924 961 965 275 300 432

Source: DQ estimates

Market recovery at an estimated 34% positive for the distribution segment, is not the sole factor which pumped in growth for the distributors. Learning from the past year’s ‘bad experiences’, atleast 2 of India’s major distributors did streamline their internal processes with the correct manpower and talent balance followed by the incorporation of non-IT products, which has been the game changer as far as portfolio is concerned

A stark contrast to that of the previous ﬁscal, distributors — both at the national as well as regional level — seem to have made the most out of the aforesaid vacuum.

Factors Driving Growth Market recovery at an estimated 34% positive for the distribution segment, however, is not the sole factor which pumped in growth for the distributors. Learning from the past year’s ‘bad experiences’, atleast 2 of India’s major distributors did streamline their internal processes with the correct manpower and talent balance followed by the incorporation of non-IT products, which has been the game changer as far as portfolio is concerned. The move came in with Ingram Micro riding high on telecom fueled by the return of HP. Although the contribution of telecom products for the company decreased by 12%, BlackBerry acted as the major 218 | August 31 - September 15, 2011

player for the distribution major. Also, it took up distribution of PlayBook and the BlackBerry Enterprise Solutions which contributed signiﬁcantly to its growth. On the other hand, Redington too proﬁted hugely from its BlackBerry and Apple iPhone clusters. It even went ahead in helping the setting up of BlackBerry Zones in some key locales.

be focusing on mobility as ‘the option’ for its product mix this FY. It is now a fact that mere computing is no longer complete and mere hardware offerings are void now; the trend is to offer a complete package of solutions for the partners and offer a diversiﬁcation of product-lines. No longer is there a focus on maximizing vendor tie-ups and increase brands over the same product mix. Over the fact of product mix, it was a balanced and healthy year for nearly all the national distributors. Ingram Micro was appointed as the second ND by Buffalo following the appointment by Kingston for its DRAM range. Further, the mix was fueled by the appointment by Western Digital—a move which will be paying off too well for Ingram Micro after the acquisition of Hitachi Data by Western Digital. For Redington, it was a ‘more aggressive’ year than its largest competitor as it added Hitachi, Trend Micro, Quest, Brocade, Eaton, Autodesk, ECI, and components like LG, WD, Strontium, and Kingmax. For Compuage too, the FY witnessed the addition of Olympus Digicam range besides its regular offerings. However it was Samsung who made the boldest move with Compuage by appointing it as regional distributor, Delhi, for its smartphone range and tablets.

Shifting Geographically Varied Product Mix Overall non-IT business contributed to about 18% and 2% from services to its revenue whereas 80% came in from the IT space. For FY11, the company had a consolidated revenue of about `17,478 crore. Neoteric Informatique too focused over mobility and traditional non-IT products. Tablets, mobile phones, and related devices were the prime considerations for the company and from its strategy, it becomes apparent that Neoteric will visit www.dqindia.com

The primary trend, however, continued to be the shift in geographical distribution. After HP resorted back to the national distribution model doing away with the business contracts with key telecom players, major vendors have been opting for regional exclusive distribution focus. Whereas key players like Dell and Samsung continued with the regional exclusive model, new entrants in this strategy like Acer and Lenovo reaped the maximum beneﬁts out of it. DATAQUEST | A CyberMedia Publication

DISTRIBUTION

The Regional Kings 2008-2009 2009-2010 2010-2011

381 327

195 135 98 65

106

109

Source: DQ estimates

265

2008-2009 2009-2010 2010-2011

Fortune Marketing Comexcell Technologies Elcom Trading Company

205

195

178

210 184 180

125

Source: DQ estimates

109 78

2008-2009 2009-2010 2010-2011

400 369

382 341

Lalani Infotech

Balaji Solutions

Caltron Group

321 292 220

Maxtone

Mediaman

Source: DQ estimates

190 185

Roop Technologies

2008-2009 2009-2010 2010-2011 260

250 186 161

135

Shwetha Computers and Peripherals

143

Compage Computers

169 116

Source: DQ estimates

150

Sogo Computers

New entrants like Asus and others are appointing regional distributors and tweaking the traditional notion of distribution. New vendors this FY preferred to opt for the regional model. What needs to be seen this FY will be the impact of these ‘new entrants’ and how long they hold on to the regional model. As revenue grows alongwith the company size, these ‘new entrants’ will have little choice other than going ‘national’

FY11, so far would be most remembered by the distributors as the age of regional expansion and national proliferation. India’s 2 largest distributors made a sterling return proving yet again the dictum that ‘volume of business still rules’ while other players were left away with expansions in the region. Although regional expansion does limit the scope of national exposure, players like Savex, Compuage, and Neoteric 220 | August 31 - September 15, 2011

seem to be contented with the trend. So far, as these distributors have exclusive rights over the likes of HP, Dell, Lenovo and others, the regional front seems to be a safe bet. On the other hand, it needs to be emphasized that new entrants like Asus and others are too following suit appointing regional distributors and tweaking the traditional notion of distribution. Although new vendors this FY preferred to opt for the visit www.dqindia.com

regional model and Lenovo followed suit after its internal restructuring, it is the likes of HP and Dell which kept the ﬂow going. However, what needs to be seen this FY will be the impact of these ‘new entrants’ and how long they hold on to the regional model. Supertron, particularly is of the opinion that as revenue grows alongwith the company size, these ‘new entrants’ will have little choice other than going ‘national’. DATAQUEST | A CyberMedia Publication

DISTRIBUTION

Channel Favorites Traditionally, HP has been the channels’ favorite when it comes to either distribution or retailing; this was indeed shaken by the emergence of Dell in CY10, but HP seems to be back again on the distributors agenda and over growth terms, Savex seems to have made the most out of it. Besides continuing to focus over exclusive distribution rights for the 300-odd HP Worlds pan-India, the return of the pro-IT distribution policy (both national as well as regional) of HP helped Savex register the highest growth percentage in the entire distribution forum. For Rashi Peripherals too, it was a comeback of business as HP discontinued its ties with 7 out of the 9 former telecom distributors. The game changer of last year, Dell too has been in the limelight like the previous year coming up with both printing and mobility products. Routing through the same policy of exclusive regional distribution that too on the basis of product lines (based on verticals), Dell managed to register a revenue of `7,666 crore—much higher than expected from last FY’s record. The global ‘Protect and Attack’ strategy of Lenovo seems to have been well implemented in India, bringing the vendor enormous growth at 49%. The bounce back was primarily the result of the channel policy revision and the focus over LES. With major government deals on the go and an aggressive channel expansion plan, particularly targeted on the SMB and the retail segment formulated in FY11, Lenovo came into focus as being one of the several channel favorites last CY.

Policy Issues Back on the core distribution front, credit policy issues continue to echo since inception. With Super222 | August 31 - September 15, 2011

LOOKING BACK AT THE MARKET DYNAMICS OF FY11, IT SEEMS THAT ISSUES AND CRISIS POINTS RELATED TO DISTRIBUTION HAVE NOT CHANGED MUCH tron resonating the same factor of ‘cheque bounces’ and partners ‘not paying up on time’, the entire distribution segment however, is on a stagnant note. Like the previous year, the distributors did stick to its credit policy while the channel partners kept on raising the issue of stockpiling and hoarding. Distributors blame that lack of effective credit control and policy is resulting in stockpiling and under-valuation of the commodities for the channel partners while the counter argument often put up is over the ﬂux in Market Operation Price and trade terms. Also, distributors have often been blamed for the ongoing scenario of putting its partners under pressure for hoarding and over the impending case of DoA.

Rising Vendor Expectations An upcoming trend in this space is the rising expectations of the vendors from its distributors. No longer are the distributors considered as just ‘logistics partners’ by the vendor. In the words of Savex, the vendors now want value added offerings from the distributors, be it in terms of organizing partner meets, seminars or conferences or extending themselves as support points and more marketing activities. The change in pattern stepped in sometime back with most of the vendors asking its distributors to expand its sales and support base to visit www.dqindia.com

the Class B regions. The proliferation, then expected did not happen so but took time to mature. Support is no longer confined to mere sales leads and facilitation of post-sales hold up. In fact, shortly after the slowdown ceded, partners were in need of cash and with the distributors not consenting for a better credit period to the partners, the need was felt to arrange for the cash flow whereby the partners can sustain the relationship and even expand their footprint. ‘Mutual growth’ was the primary factor behind this move. Redington, as a solution, came up with NBFC which provided for the financial support program which did expand beyond Redington and now arranges for finance from a neutral point of view. Further, Savex fueled the same through its financial support to its partners initiative whereby Savex indirectly organizes for funding (namely from banks and financial institutions). Organizing channel meets has been a norm for the distributors and FY11 was no different. All the distributors arranged for partner programs, either on basis of enabling them with better financial or technical training or felicitating valued partners. Discounts over bulk purchases, freebies and other benefits also ruled the overall scenario. Looking back at the market dynamics of FY11, it seems that issues and crisis points related to distribution have not changed much over the years but the trend has undergone significant changes. As regionalization and the advent of a more potent product mix have come into play, both these factors need to be put to the test for at least 3 years before conclusions can be drawn. For the time being, the growth figures and success stories of the national distributors remain convincing. n DATAQUEST | A CyberMedia Publication

TRAINING

The Modern Face of Education Post-recession, the Indian IT training segment is witnessing change in content due to change in demand, and focus is shifting from customers to employees, and from the private sector to the government sector and education RUKHSAR SALEEM rukhsars@cybermedia.co.in

“If you think education is expensive, try ignorance”

IT Education in India Growth

2% 2,376

32%

E-learning

68%

IT Training

2009-10

31%

69%

Source: DQ estimates

2,321

2010-11

The recession proved to be a boon for the IT training industry as it led to consolidation, change in focus, strategy, and product offerings. And savior for the industry was our own Indian government as it started absorbing more and more IT offerings to enhance its online presence and equip its workforce with IT skills. FY11 proved to be an year of rebuilding for the IT training segment as IT penetrated in every industry—either through training in IT or any training through IT

DATAQUEST | A CyberMedia Publication

—Derek Bok, president, Harvard University

he recession might be over (there are talks of another one coming), but the Indian IT training segment still breathed slowly in FY11 seeing a marginal growth of just above 3%. The IT industry and its allied segments might have regained its status as a premium career choice but had also undergone major changes. In fact, recession has proved to be a boon for the IT training industry as it led to consolidation, change in focus, strategy, and product offerings. And savior for the industry was our own Indian government as it started absorbing more and more IT offerings to enhance its online presence and equip its workforce with IT skills proactively to keep pace with its virtual surrounding and global environment. Therefore, FY11 proved to be an year of rebuilding for the IT training segment as IT penetrated in every industry—either through training in IT or any training through IT. In such a phase, every player in IT training industry has witnessed different kinds of demands from the existing as well as new breed of customers. So to cater to those demands, they also responded and molded their business model, products and services accordingly to survive fast changing phase of the market. The IT training industry continues to be operated by private players and has predominantly indigenous players (barring isolated exceptions like Shri Ram New Horizon whose parent company is based in US). It caters now primarily to corporate, newly emerged government sector, and individuals. The share of individual takers especially for basic computer training (based of mass retail model and earlier was considered bread and butter for IT training players) has gone down considerably with the strong emergence of school education segment. On the other visit www.dqindia.com

August 31 - September 15, 2011 | 223

TRAINING

E-learning Growth

1,721

7% 1,841

Source: DQ estimates

hand, corporates have realigned and refocused on the high-quality IT training needs of their employees to stay in tune or ahead of competitors in their respective industries. Whereas, government has emerged as a strong contender to be paid attention and considered as segment separately owing to its voluminous needs.

Corporate Training With organizations acknowledging the worth of its workforce like never before, business focus has shifted from sole attention for customers to employees also. Moreover, they are also witnessing an increasing rate of attrition, since they are unable to provide career progression and growth to its human resource pool. So in such times to maintain balance between cost-benefit analysis along with quality employees, Charles Darwin’s rule—survival of the fittest—shines. Therefore, corporates are increasingly recruiting staff, which is equipped with basic computer handling skills, and for their sustained growth they are placing more specific, customized, and high-value IT demands for its employees. As a result, IT training vendors are also forced to design and offer products and services to meet such demands. Keeping in view this trend, IT training vendors are moving closer to its corporate clients strategically by entering in partnerships and alliances. Specifically, in FY11 NIIT’s corporate learning solutions won 6 big Indian and international clients including Philips for multi-year managed training service engagements. Its learning products from Element K clocked 19% growth. Overall, revenue from corporate training services mounted to `605 crore, which is marginally 2% more than the last year. To make most of the e-governance initiative of the Indian government, NIIT al226 | August 31 - September 15, 2011

2009-10

2010-11

NIIT and TATA Interactive Systems, Gurukul Online Learning solutions are e-learning pioneers and industry leaders. In addition, IT companies, pure players, KPOs, BPOs, and publishing houses such as Accenture, ElementK, IBM, Lionbridge, McGraw-Hill, Oracle, and Skillsoft also got interested seeing the steady growth shown by the industry. These global companies have set up e-learning centers in India

lied with Chattisgarh Infotech and Biotech Promotion Society (CHiPs) and conducted training workshops for MLAs. Also it partnered with Ministry of Agriculture to promote IT skills for livestock management, and NIIT Uniqua introduced a technical and soft skill training program for Uttar Pradesh police department. NIIT Enterprise Learning Solutions Business won its 5th award this year at 2010 Top 20 IT Training Companies list by TrainingIndustry.com. Aptech presented itself to the industry with a new corporate identity accompanied by ﬁrst ever audience approved logo. Aptech added a total of 204 new centers across all brands and regions and expanded into 43 new towns across India in FY11. Aptech’s Assessment & Testing Solutions and Corporate Training segments within the corporate business speciﬁcally witnessed strong growth. It got 2 orders from private insurance playvisit www.dqindia.com

ers and awarded a contract for NAC 2.0 tests by NASSCOM. These assessment and training solutions are accredited as partner for skill assessments nationally by Director General for Employability Tests. Last year’s tie-up with ICSI delivered spectacular top-line growth (net proﬁt of `449.8 mn) However, it withdrew from the projects verticals (ICT capital intensive projects). It got most of the clients through ICSI from telecom, insurance, and government sectors. New Horizon India, Indian subsidiary of New Horizon, US based IT training provider tied up with Shri Ram group and rebranded as Shri Ram New Horizon. It is the only odd man out among pure indigenous players in Indian market. It has acquired 8 ITIs as per PPP model and plans to acquire at least 50 more to reach out to tier 3 and 4 cities in the coming ﬁnancial year. KarROX India and HCL Infosystems are also catering to the IT training needs of this expanding corporate market. Jetking Infotrain in FY11 tied up with Allied Digital, Microland, and Everonn. It has launched Centre of Excellence in Kolkata and further has plans to open 25 new CoE across the nation in the coming year.

School Education Importance of education and government’s increasing focus is clearly visible from its initiatives and higher spends of private players to tap this over-regulated and undergoverned industry. Union budget 2011 has announced substantial increase of 24% in the education sector. Allocations to achieve the objectives of the Right to Education (RTE), which has been aligned with the Sarva Shiksha Abhiyan, have been hiked from `15,000 crore to `21,000 crore with focus on vocationalization of secondary education to enable students to DATAQUEST | A CyberMedia Publication

TRAINING

228 | August 31 - September 15, 2011

IT Training Market Individual Corporate Growth

-7% 1,369

19%

1,279

1,134 952 Source: DQ estimates

pursue job oriented courses at the plus two level. Another implication of surge in school education through e-learning is that it has played an increasingly crucial role in decreasing the pie of individual learning business as a whole. Indian Education Sector (IES) is broadly classiﬁed as follows: schools, professional colleges, and vocational training institutes. The most attractive and scalable sectors in this group are test preparation, K-12, and preschools. However, this segment is dominated mostly by private players like Career Launcher, Educomp, ETCN (Zee Learn), EuroKids, Everon, Excel Soft, Hurix, IMS, Kangaroo Kids Education, Liqvid, Mahesh Tutorials (MT Educare Pvt Ltd), Manipal Universal Learning (MUL), Navneet Publications, NIIT, Tree House, Tutor Visa, Russel Spoken English, Shri Ram New Horizon, Shloka Infotech, Tata Interactive Services, and VETA. But Educomp and NIIT lead with 50% market share and set standards for the industry. In FY11, NIIT added 581 private schools with a sweeping growth of 76%. This year it booked a slot in New Guinness Book of World Records by partnering with Gujarat State Chess Association when 20,840 chess players participated at Ahmedabad on December 24, 2010. NIIT also tied up with Fourier Systems and launched Mobile Science labs for schools. It also partnered with Ryan International Group of Institutions to launch state-of-the-art NIIT eGuru Math lab and NIIT Mind Champions Academy NIIT at Ryan International School, Greater Noida. Further, it promoted eGuru for the schools in Jaipur; tied up with Mayoor school, Raipur for providing classroom solutions and ERP solutions for school and teachers training in ICT skills. It launched GNIIT for

2009-10 Total Revenue (2010-11):

2010-11 2,413 crore

With organizations acknowledging the worth of its workforce like never before, business focus has shifted from sole attention for customers to employees also. Moreover, they are also witnessing an increasing rate of attrition, since they are unable to provide career progression and growth to its human resource pool. Inspite of doing well after recession and also this year (overall growth of 6%), individual training’s share in overall market has reduced owing to increasing share of the school education sector

engineers in Kolkata and South India. With GNIIT Cloud Campus, it has become the ﬁrst player in the industry to cloud computing for its new age programs. In addition, it has also launched an eBook to aid higher education institutions. Being an environment conscious organization, it also joined hands with Ministry of Corporate Social Responsibility to ‘Go Green in FY11’. Educomp leads the school sector with its product innovation. In FY11, it entered into a pact with India Today group ﬁrm Universal Learn Today to set up 30 schools across India, which made it top gainer in BSE’s ‘A’. It has bagged 2 major multimedia content development projects from the Government of Gujarat and Assam worth `6.81 crore. It also procured projects for visit www.dqindia.com

BOOT model from the Director of Education, state government of Maharashtra, worth `67.93 crore for the implementation of ICT and schools project-phase 2 in 540 schools in Nashik and Latur; and `51.14 crore order from Bihar government for advocating computer literacy in 600 senior secondary schools covering 1.5 lakh students across its 13 districts. Educomp made an exciting move by forming a joint venture with Zeebo India to introduce a Zeebo’s 3G connected wireless education and entertainment platform for school children. To cater higher education and vocational segment, it forayed in GATE preparation services after acquiring majority stake in Gateforum Educational Services and strategic partnership with Great Lakes Institute of Management. It also plans to open 75 IIT coaching centers by the name of ‘Leap’, which will charge `15,000-20,000 per year for the preparation and later roll out test preparation material for BBA and medicine also. Educomp’s initiatives are recognized by whole industry as Institute of Economic Studies (IES) recognized Educomp with ‘Excellence Award’ and Mr Soumya Patil, president, Edureach with ‘Udyog Rattan Award’. In addition, Shantanu Prakash, its top man has been conferred ET Now ‘Leap of Faith’ award in category of education and also bestowed with ‘Entrepreneur of the Year’ at the Indian Education Awards 2011, National award of excellence in education. Its CFO, Sangeeta Gulati also won ‘Business Today Best CFO’ award in category of ‘Sustained Wealth Creation’. Tata Interactive Systems is taking giant leaps in bringing mobile and digital technology to school education. Its focus on gaming and mobile has led to innovation in customized e-learning solutions and sustained growth of 50% in FY11. DATAQUEST | A CyberMedia Publication

TRAINING

Inspite of doing well after recession and also this year (overall growth of 6%), its share in overall market has reduced owing to increasing share of education sector. This has made all the players of the industry to offer high quality, more value based, and customized training programs to ensure employment prospects and career growth of individuals. NIIT Individual Learning Solution in FY11 recorded the growth of 10% along with 66% rise in job oriented diplomas. Placements scenario witnessed a record increase of 31% from the last year. Like the whole IT training industry, NIIT also witnessed bifurcation of its customer groups with the emergence of a new generation Y–social media generation (responds fast and demands new technologies and short-term courses). So it designed and launched Google certified ‘Advanced Online Advertising Program’, partnered with SAP for ERP training, tied up with Zend to launch global PHP training and certification program, and partnered with Microsoft and launched training in MS AZURE platform to develop cloud ready applications. Also partnered with IGNOU to launch industry linked partnership programs—Executive MBA, Finishing School Programs, and B.Sc (IT)—and entered into agreement with Tally to train people on next generation for SMB businesses. NIIT conducted NITAT 2011 (National IT Aptitude Test) in 120 cities in the country to identify job-ready talent for the 240,000 jobs ( as per NASSCOM estimates) in FY11. IFBI, a combined initiative of NIIT and ICICI bank, has been launched to provide preparatory programs for probationary officers and clerical jobs in public sector banks. Similarly, it also collaborated with IBM to offer Career Education projects to bridge the DATAQUEST | A CyberMedia Publication

Top IT Trainers 1,141

1,123

NIIT Aptech Educomp Jetking

129

187 158

2009-10 Total Revenue (2010-11):

191 166 138

Source: DQ estimates

Individual Training

2010-11 1,636 crore

NIIT was still the undisputed leader in IT training, be it for individuals, corporates or schools. Others have carved out their own niches, like Educomp with schools, Aptech with application-based courses and Jetking with their hardware and networking courses

gap between young IT professionals and industry. Expansion of its network has been one of the key focuses of Aptech in FY10-11. With its pan India focus, it successfully covered 60%+ share of tier 3 cities and smaller towns in the 846 center strong domestic retail network. Aptech enhanced its animation offerings with the acquisition of Maya Academy of Advanced Cinematics (MAAC) in `76 crore. To showcase talent and promote employment, it hosts an annual ﬁlm festival, 24 Frames-per-second (24FPS), and has tied up with United Nations Informatics Centre for which ﬁlms will be made revolving around Millennium Development Goals (MDG) of UN. Aptech also forayed into aviation and hospitality industry with the rebranding of Avalon. During FY11, Aptech entered in many strategic partnerships to offer high-value proposition to its customers. Therefore, the company announced partnerships with visit www.dqindia.com

Microsoft to integrate its content in Aptech curriculum and launched ‘R. ACCP Pro’, with IGNOU to offer a joint degree for 2-3 year courses in computer programming, in Tiruchirapalli state university. It also introduced world’s first course in cloud computing. Benefiting from Sarva Shiksha Abhiyan, Shri Ram New Horizon bagged orders from different state governments such as Haryana government to train 35,000 teachers with IT skills over a period of 3 years; Uttar Pradesh government to train its 30,000 employees based in all cities; and Gujarat Industrial Training Center project, where the state government has provided infrastructural facilities to open 100 centers for training. In North East, Shri Ram group is working on a contract to make courts paperless and train 78,000 judicial officers with IT skills in a period of next 3 years. It has 200 IT centers across the country excluding coaching centers and ITIs.

International Market International destinations like Africa, South Asia, Vietnam, and Philippines are major attractions for Indian IT training players. Indian style of training and content, lifestyle, and emotional compatibility scores over US and Europe style based training for these locations. China continues to woo Indian players as huge demand over there is a strong compelling factor. Aptech Vietnam continues to be the top IT training player in Vietnam as it has been bestowed with ‘ICT Gold Medal & Top ICT Training Cup’ for IT training and education domain in Vietnam for the 8th consecutive year by the Hochiminh Computer Association (HCA), Vietnam, the ﬁrst IT association in Vietnam. It has been awarded 4 stars for the ICT Gold Medal Awards for the recognition based on its sales August 31 - September 15, 2011 | 229

TRAINING

E-learning The economic slowdown has benefited the e-learning industry and opened more avenues of growth for this $10 bn industry. In India it continues to be an outsourcing industry involving third-party suppliers and offshore delivery centers of international e-learning solution players and consulting firms. The Indian market compared to other countries has been slow in adapting to e-learning, but the expected annual growth rate is 20-25%. NIIT and TATA Interactive Systems, Gurukul Online Learning solutions are e-learning pioneers and industry leaders. In addition, IT companies, pure players, KPOs, BPOs, and publishing houses such as Accenture, ElementK, IBM, Lionbridge, McGraw-Hill, Oracle, and Skillsoft also got interested seeing the steady growth shown by the industry. These global companies have set up e-learning centers in India. E-learning/online learning has been extensively used across various organizations to add to the existing knowledge base and train employees on new skill-sets. The increasing use of outsourcing in higher education is reflective of general acceptance of e-learning solutions by institutes, organizations and government sector with open arms. The corporate segment globally has also channelized the concept of e-learning technology with innovations in mobile learning, social/Web2.0 learning, and learning on the cloud. Among various challenges faced by the industry, easy entry and exit level barrier is the biggest one, followed by adaption of content to suit the Indian market as generally players offer content with a global perspective. This industry faces huge talent crunch owing to non-availability of certified Instructional Designers. Tata Interactive Systems clocked strong growth in revenue in FY11 (50%) after slowdown. It bagged new contracts from Johnson&Johnson, Vodafone, airtel, and Tata Group, and repeat orders from its existing client base. Majority of the clients were from manufacturing, pharmaceutical, BFSI and telecom sector.

of business in the calendar year 2009, which amounts to $13.65 mn for Aptech Vietnam. Award in the best ICT product category by PC World Vietnam for the outstanding contribution to IT training and education domain also went to Aptech Vietnam on the basis of the readers votes, Aptech won the majority of votes by 45%, followed by Nhat Nghe (Vietnam Local Player) 18% and NIIT 14%. Aptech’s curriculum is translated into Vietnamese to reach across wider audiences. As per ﬁgures, it has 44 centers in Vietnam, offering 32 centers of Aptech Computer Education, 9 centers of Arena Animation, the animation & multimedia training brand, and 3 centers of N- Power, Hardware, and Networking training brand. In China, Aptech sold of its 50% stake in BJB Career Education’s subsidiary for `108 crore and reinvested the amount to buy 22.4% stake in the parent company. Aptech is foraying into Africa and has 20 centers in Nigeria only. Further, it plans to expand soon through tie up 230 | August 31 - September 15, 2011

with local players (franchise model) in all English speaking African cities—Ghana, Kenya, and Uwanda— and few French speaking cities as well. In Angola and Brazil, Aptech is providing computer courses in Portuguese. Most celebrated program of Aptech—‘India Window Program’—has beneﬁted 1,500 students till date. In the international market, out of the total of 29 new centers added, 10 centers involved foray into a newer market either in terms of a new country or a new brand in an existing country. Chinese IT training market is dominated by NIIT China. It is the top IT trainer and has been recognized as ‘Most Inﬂuential IT Training brand’ by the Chinese Society of Educational Development Strategy, under Chinese Ministry of Education. It also organized the 11th IT scholarship test in Nigeria and gave 100% scholarship to top 50 meritorious students to commemorate 50th year of Nigerian Independence. NIIT entered Afghanistan IT market with a Standvisit www.dqindia.com

ard Education Agreement with ARIA Institute of Higher Education to develop an employable talent pool of IT professionals in Afghanistan. As per this agreement, NIIT will offer courses of 6 months to 2 years of duration, a host of modular programs such as Ofﬁce Productivity tools, hardware and Networking programs, Creative Publishing, and other high-end technology programs. NIIT in partnership with Alif Technology eKnowledge Society (ATeKS) will offer full range of professional ICT courses to the youth of Brunei. Educomp also tied up with China Distance Education Holdings, a provider of an online education in China to provide students and schools in China with SmartClass, Edulearn, and Wizlearn. Shri Ram New Horizon is also working to expand its network and plans to adopt both organic and inorganic ways to grow. Jetking Infotrain is also proactively looking for opportunities in Africa, Sri Lanka, Bangladesh and Vietnam. n DATAQUEST | A CyberMedia Publication

E-COMMERCE

It’s Working This Time While investors have been vying to make investments, FY11 witnessed growing roster of acquisitions in all areas of e-commerce DRISHTI D MANOAH drishtim@cybermedia.co.in

“E-commerce is an evolution. You don’t have to get everything right immediately; you can learn from it”

Overall Retail E-commerce Market* (%) 94

5 Online Retail

Travel

1 Non-Travel Services * excludes financial services, content downloads, bill payments and brand-owned e-tailing *non-travel services include online photo printing, movie ticket booking Source: DQ estimates

Overall market was dominated by travel segment, while the non-travel segment too saw a lot of activities in FY11

232 | August 31 - September 15, 2011

—Lauren Freedom, founder and CEO, the E-tailing Group Inc (from the book Online Marketing Heroes)

reedom’s words were for the US market then, but surely similar realization is drawing across the Indian e-commerce industry today. Entrepreneurs are beginning to recognize the potential of India for business through e-commerce. While the trend is not new—Dataquest called it the Second Coming of E-commerce in its January 31 issue—so far too many companies are still ﬁguring out the best business strategy for them. Nevertheless, with its comeback, the industry did give foothold to quite a few e-commerce companies and FY11 was a year of ‘more highs than lows’, as stated by most of the industry leaders. In FY11, online retail industry was dominated by travel segment with 94% market share. IRCTC sold 90 mn tickets with 25% growth in transaction over FY10. Total online gross booking amounted to `20,073 crore, with OTAs making `7,733 crore and IRCTC alone made `7,800 crore. The online retail (e-tail), though just 6% in the pie, saw a lot of activities with eBay standing out as a clear leader and companies such as HomeShop18 and Flipkart taking their scores much higher. Newer start-ups such as Fashion and You and Snapdeal too managed to get their foothold. The nontravel online estimated market size was about `1,230 crore. On the other hand, the online ﬁnancial services—banking, credit cards, brokerage, insurance, and more—witnessed substantial growth and visit www.dqindia.com

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E-COMMERCE

adoption, though that’s the segment we haven’t touched in this overview. The other 3 segments we kept aside are online bill payments (utility and telecom), brand-owned e-tailing and online content downloads. In brand-owned e-tailing, direct selling cosmetic players such as Oriflame, Amway, and Forever Living witnessed better attraction in rural areas, which forced them to increase their distributor network in tier-I and tier-II cities. Dell marked a huge online presence and music portals like Saregama stood strong too. Banks too are using the online platform effectively as it cost them a fraction of ATM or branch transactions. Overall, online retail market (travel and non-travel) witnessed significant growth, in spite of flaws still remaining in payment gateways and logistics.

Leaders Emerge While IRCTC was the clear leader in the online travel segment, 40% of business was being controlled by OTAs. And, with MakeMyTrip

Online Travel Market Break-up p (%)

IRCTC

28 27

OTA

45 Airlines and Hotels Total Revenues: 27,873 crore Source: DQ estimates

While Indian Railway topped the chart, a number of OTAs emerged last year with MakeMyTrip, Yatra and Cleartrip standing out as leaders

going public last year, leaders are beginning to emerge. Unlike many major travel markets around the globe, local OTAs in India are beating out not only airlines and hotels in terms of trafﬁc, but also their own global counterparts. Last year, led by MakeMyTrip, the top OTAs in India were all local players. Yatra and

Top Sites in the Travel Category by Unique Visitors, April 2011 Company Names

Unique Visitors

Indian Railways

8,399,000 (+8%)

MakeMyTrip

3,864,000 (+63%)

Yatra

3,520,000 (+82%)

ClearTrip

2,147,000 (+80%)

Expedia Inc

1,832,000 (+12%)

TravelAdNetwork

1,456,000 (+78%)

Mustseeindia.com

1,049,000 (+138%)

Indiarailinfo.com

922,000 (+42%)

Redbus.in

807,000 (+99%)

HolidayIQ.com

725,000 (+60%)

Source: comScore, Inc.

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Cleartrip round out the top 3, with the latter attracting over 3 times as many monthly unique visitors as the most popular global competitor, Travelocity India. Cleartrip is also in the verge of setting up its office in Dubai and soon plans to tie up with trains in Dubai as well. Meanwhile, the number of visitors to travel sites increased 32% (18.5 mn visitors) and Indian Railways led as the most-visited travel destination with 8.4 mn visitors, an increase of 8% from the previous year. MakeMyTrip reached nearly 3.9 mn visitors (up 63%) followed by Yatra with 3.5 mn visitors (up 82%) and Cleartrip with more than 2.1 mn visitors (up 80%). Though not as huge as travel, the upward spiral of the non-travel e-commerce graph in India is becoming most visible in 1 segment—group buying. Virtually an unknown concept until even a year ago, group buying, where sites offer products and services at a significant discount so long as the deal has a minimum number of buyers, has seen a virtual explosion of portals in the past months. Some of them has made their presence felt significantly. The vast scale branding exercise done by group-buying site Snapdeal has certainly paid them well. Not only have they secured a market share of around 70% in their space in FY11, but have also managed to raise series B funding worth `200 crore from Bessemer, Nexus Venture Partners, and IndoUS Venture Partners—the highest fund raised by an e-commerce company in FY11. Taggle too raised funds of around `39 crore from Battery Ventures and Greylock. At present, there are about 20 group buying sites in the country, half of which have operations in multiple cities. But with most sites focused on a single city with a hyper-local model, it is only a matter of time before there is a shake out in this crowded market. August 31 - September 15, 2011 | 233

E-COMMERCE

Meanwhile, eBay secured over 2.7 mn registered users from over 3,296 cities in India (including tierII and tier-III) and stood ahead of all with a market share of 23% (enabled sales of `290 crore), and HomeShop18 increased 10 times in past 6 months and its trafﬁc increased by 300% in FY11. Fashion and You had 6,000-8,000 transactions per day throughout the year. It is growing 25% month-on-month and has been able to take the average cost of product/apparel sold online to a much higher range. Naaptol enabled sales of `200 crore (300% growth over FY10) and Flipkart managed `75 crore along with gaining much popularity among book lovers. Overall, even among e-tailers, the rule of the best prevailed.

Revenue Drivers: Electronics Rule For most of the e-tailers, electronics was the major revenue driver (48% share by volume), followed by apparels and lifestyle products (34% share by volume). In FY11, it was primarily electronics and books that helped Indiaplaza witness a growth of 50% and Flipkart witness a banging growth of 275% over FY10. However, apparels and lifestyle items proved to be the fast-

FOR MOST OF THE E-TAILERS, ELECTRONICS WAS THE MAJOR REVENUE DRIVER (48% SHARE BY VOLUME), FOLLOWED BY APPARELS AND LIFESTYLE PRODUCTS (34% SHARE BY VOLUME) 234 | August 31 - September 15, 2011

OTA Market Share

Creating Employment

(%) Yatra

25 45

(i-mint) to give attractive discounts to buyers.

Cleartrip

Others Make My Trip

Total Revenues: 7,733 crore Source: DQ estimates

OTAs in India are beating out not only airlines and hotels in terms of traffic, but also their global counterparts

est growing category. Apparel has been high on gross-margin category as compared to gadgets, electronics or books. Typically apparel worked on 30-40%. Most of the group buying sites too are now branching out to product deals and even niche segments like travel. Product deals are seen as the future drivers. Snapdeal started its product category only in the month of May this year and are already selling brands like BlackBerry to Apple iPhones, CK perfumes to Chhabra Sarees, and Reebok sunglasses to Satya Paul handbags. The major revenue drivers in online travel space were the commissions from airlines and hotels. 8590% of the business for the OTAs came from air-tickets. Though commissions from domestic airlines ticketing were low, it remained the biggest revenue driver in online travel space. Commission for international tickets and hotels too were huge and all players focused largely on increasing their hotels and holiday package business. Of late, most e-commerce sites have tied up with credit card companies like Amex and ICICI as well as loyalty programs like Payback visit www.dqindia.com

It was also a year that saw signiﬁcant growth in e-commerce workforce. The number reached up to approximately 20,000—the ﬁgure might not be as interesting as the percentage of growth. In about a year’s time, the industry witnessed about 567% growth in this number, from 2,000 to 3,000 people in FY10 to a thumping 20,000 people today. Companies like Snapdeal had 30 people in FY10 and has moved up to 500 people this year and plans to hire 250 more by the end of 2011. HomeShop18 hired 300+ employees, primarily in technology, even professionals from the US and European market. In the travel sector too, the top 3 travel companies have around 2,000 people, out of which about 400 is with Cleartrip. Companies such as Naaptol believes in grooming its own people and using them in various verticals. Naaptol has 200 direct employment and 1,000 indirect (outsource call center) employments. They have outsourced their call centers to 4 Mumbai based companies.

Logistics and Payments Need Attention The pioneers of e-commerce did not pay much attention to the issue of logistics, particularly the distribution, warehousing, and delivery aspects. They were more concerned with website design and marketing. Though the second generation ecommerce players have understood the importance of logistics, yet logistics and payments still remain the areas that needs to be addressed. Even in FY11, like all previous years, most of the high-value transactions were on cash on delivery (CoD). Payment gateways are still not as simple and efﬁcient DATAQUEST | A CyberMedia Publication

E-COMMERCE

as customers expect by now. On the other hand, while CoD works very well with customers, for the e-commerce companies it’s not really a happy deal. Firstly, it costs them more. The 2 major logistic companies, Blue Dart and Aramex charge a transaction fee (about `50) and a percentage of the amount (about 1-2%) collected. Customers are not necessarily willing to pay more because they are paying by cash; so this eats into the merchant’s margins. Although the fees are similar to credit card transaction fees, payments from them are much faster to the merchant. Secondly, the return rates for merchandise is about 40% in CoD (according to Blue Dart). This may vary for certain companies; but if a small merchant (doing 100 transactions a day), sells about 30% through CoD (30 transactions per day), and the returns are at 40%, then `1,200 is lost daily. The courier company charges an extra `50-100 as return fees to ship merchandise back. Therefore, reverse logistics is still very weak. Last year many e-commerce companies tied up with recognized logistics players and almost every key e-commerce company moved on to 2-3 warehouses, being surprised by the volume they had to deal with. Naaptol is now working with 7 logistics players—Blue Dart, RMX, Quantum, AFL, Expert, Aramex, and First Flight. Fashion and You got choked with the huge orders and had to open 3 warehouses in FY11 (Delhi and Gurgaon). HomeShop18 opened up 10 warehouses across 13 cities in India. No one really had planned for such huge volume of orders; but if handled properly, that’s indeed a happy problem to have!

Industry Trends While investors have been vying to make investments, there has been a growing roster of acquisitions in DATAQUEST | A CyberMedia Publication

Online Retail Vendor Market Share (%) Naaptol

eBay

9 8 6

Indiatimes HomeShop 18 Flipkart Others

Total Revenues: 1,230 crore Source: DQ estimates

While eBay clearly stood at #1, there are other companies too who could have featured above, but we could not estimate their exact revenues. Some of them are Futurebazaar, Shoppers Stop, Rediff Shopping and new startups such as Fashion and You and Snapdeal

all areas of e-commerce. In FY11, M&A was a major story, and one can only expect to witness more of it this year as well. As a matter of fact, group buying is beginning to tally with the online travel portal sector during its wee days, when a number of travel sites came up and consolidation started right from the beginning. Last year alone, Wanamo got acquired by Group Buying Global AG and Harish Bahl (founder, Smile Interactive Technologies Group) and rebranded to DealsandYou; Grabbon was bought by Snapdeal; SoSasta got acquired by Groupon; Mobstreet got shut down and was

MANY PLAYERS ARE EXPECTED TO GO THE MERGER WAY AND EXPAND. UNDOUBTEDLY, WE ARE GOING TO SEE FEWER NUMBER OF BIGGER PLAYERS visit www.dqindia.com

acquired by GrOffr; and so on. The trend was seen among e-tailers too. Flipkart acquired weRead, a social book discovery tool from Lulu, a US based on-demand publishing ﬁrm. The goal was to give Flipkart a social recommendation platform for buyers to make informed decisions based on recommendations from people within their social network. Meanwhile, HomeShop18 acquired online books, movies, and music retailer Coinjoos and are looking at quite a few things in the tech space as well. In the travel space too, earlier this year MakeMyTrip bought Singapore based Luxury Tours & Travel, eyeing a Southeast Asia market that is soon becoming a preferred destination for Indians. In evidence of its commitment to growing its business around the world, Travelocity Global too acquired India’s leading online hotel distribution network, Travelguru. It is evident that market growth would drive more mergers and acquisitions, and possible initial public offerings (IPO). IPOs are obviously the tougher route and we can surely expect more consolidation in this space. Many players are expected to go the merger way and expand. Undoubtedly, we are going to see fewer bigger players. Growing organically to a large number of cities would require heavy investments and a longer gestation period, something most companies would not want to do. Therefore, acquisitions will happen, as companies want to scaleup faster. It is not hard to foresee that even in the wider e-commerce space, only few companies will survive in each segment, while others will either fail or get acquired. As for now, e-commerce in India is surely growing and the good news is, while the bloodbath continues between companies, it’s the happy discount times for customers! n August 31 - September 15, 2011 | 235

E-WASTE RECYCLING

Turning Threat into Opportunity The formal e-waste recycling segment is small and fragmented. But the industry is getting a lot of attention

PRAGYAN ACHARYA pragyana@cybermedia.co.in

ndia has 1.2 bn people. It is the second largest base of mobile phones globally with annual sales of 160 mn handsets. It ships 12 mn PCs annually. It has 150 mn households with television sets. It is not surprising that close to half-a-million tonnes of ewaste was generated in India last year. But most Indians treat e-waste with minimum sensitivityâ&#x20AC;&#x201D; lack of awareness being a big reason. Most of the old mobile handsets lie in drawers, or given to kabadiwallas. The trail of those rejected handsets is something few have a complete idea about. Needless to say, many of them are disposed in a very unsafe manner. Of late, there is some concern about e-waste and some small measures are taken by vendors and NGOs to recycle. But according to various estimates, not more than 5-7% of ewaste in India is recycled by the formal sector. The Central Pollution Control Board (CPCB) has started authorizing e-waste recycling units. According to sources such as Greenpeace, there are 35 such authorized recyclers. As of September 2010, there were 23 e-waste reprocessing units, as the CPCB calls them. These were owned by 20 companies (see list) with no company having more than 2 units. Now, the licensing process has been made simpler and decentralized. The responsibility has shifted to respective state pollution control boards from CPCB. However many are sceptical that it may dilute the quality of scrutiny that was carried out by CPCB. According to Dataquest estimates, in FY11 the total market size of the formal e-waste recycling generated from Indian customers stood at `72

236 | August 31 - September 15, 2011

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E-WASTE RECYCLING

crore, up from just `41 crore in FY10. With more than 20 players, the market is highly fragmented but is expected to grow sharply once the potential is understood by the ﬁnancers and venture capitalists. The good news is that many of these companies are getting attention. Attero Recycling, one of the largest players in the area, has got 3 rounds of funding—from Draper Fisher Jurvetson, Granite Hill Capital Ventures, and IFC—amounting to more than $8 DATAQUEST | A CyberMedia Publication

mn. Eco Recycling, the only listed company among these, trades at a P/E of more than 60! While the market is dominated by specialized e-waste recyclers, there are many like Ramky group (who are into solid/municipal waste management) who have entered the market.

Lack of Strong Regulation There is no law in India yet which stresses on the responsibility of each tech producer. None of the existing environmental laws have visit www.dqindia.com

any direct reference to electronic wastes or refer to its handling as hazardous in nature. Global MNCs have been accused of not implementing their Individual Producer Responsibility (IPR) in India. But the scenario seems to be changing for good. There are few MNCs who are taking responsibility in ensuring that their products are recycled. And the recycling strategies of Nokia, Acer, HCL, and Wipro are not only becoming their USPs but also forcing their competitors to join the August 31 - September 15, 2011 | 237

E-WASTE RECYCLING

league. Increasing consumer awareness is another big reason which is getting tech vendors serious about the issue, though there is a long way to go in terms of bringing in real change. Indian companies like HCL, Wipro understood the problem better because of their understanding about the local scenario. Nokia has been exemplary with their strategy to collect e-waste from its end users. Most of the MNCs had their global IPR policies in their respective India websites but their action at the ground level has not been witnessed until recently. Dell claims that it began its recycling services in India in 2006 but had formally launched the recycling service in 2010. So now we see a time, when global tech vendors have to adopt their IPR policies seriously, in order to build their goodwill in the market. Companies have implemented various e-waste recycling programs to generate substantial e-wastes from every possible source. HCL has tied up with the major e-waste recyclers in the country. Under its ‘Green Bag Campaign’ it sends all the e-wastes to the recyclers who service them. Nokia has placed nearly 1,400 recycling bins at all its Nokia Care centers or priority dealers across India. But for recycling of e-waste from India, Nokia works with an international recycler. As per the market leader in mobile devices, there are no full scale recycling plants in India. Wipro had launched its take back and recycling program in 2007 and it generates e-wastes through its 17 collection centers across India, which in turn is recycled through authorized recyclers. Presently, the market is quite active in the B2B segment. There needs to be an expansion in the B2C segment as well as it has to move beyond metropolitan cities. It needs to go to tier-2 and -3 cities 238 | August 31 - September 15, 2011

IF EVERY MOBILE PHONE USER ACROSS THE WORLD RECYCLED JUST 1 UNWANTED PHONE AT THE END OF ITS LIFE, IT COULD PREVENT NEARLY 240,000 TONNES OF RAW MATERIALS FROM BEING MINED AND RESULT IN SAVING ENERGY AND REDUCING GREEN HOUSE GASES BY AS MUCH AS TAKING 4 MN CARS OFF ROAD FOR A YEAR and even rural areas. Companies across various verticals are eyeing the tier-2 cities. A lot of investments are being done in those areas due to the availability of required resources and most importantly, the availability of skilled manpower is attracting industries to explore the virgin markets. For that matter, BPOs are also looking at tier-3 cities for setting up rural BPOs. This will also drive the demand for technology products to carry out daily operations. Tech vendors are increasingly focusing on their SMB strategies to tap the potential but not so explored markets out there. Recently, Lenovo has announced its plans to tap the SMB market. The strategy seems to be very aggressive but it also nails a thought, ie, electronic and tech products are going across the country. At the same time, we have authorized ewaste recyclers limited to big cities like Delhi, Mumbai, Bengaluru, visit www.dqindia.com

and Chennai. This will generate ewastes in the tier-2 and -3 cities.

Impediments and Opportunities Major tech vendors and authorized e-waste recyclers pointed out that dealing with the consumer mindset was the biggest challenge. Their willingness to recycle their obsolete tech products against its depreciated value, is restricting the growth of the formal sector. The absence of information systems for people on how, when and why to recycle, is making it more difﬁcult to deal with the consumer mindset. According to a global consumer survey done by Nokia, 44% of old mobile phones are lying in drawers at home and not being recycled. If every mobile phone user across the world recycled just 1 unwanted phone at the end of its life, it could prevent nearly 240,000 tonnes of raw materials from being mined and result in saving energy and reducing green house gases by as much as taking 4 mn cars off road for a year. The number of e-waste recyclers is increasing but the government has not been able to maintain checks and balances in the licensing system. After government comes out with concrete policies, huge amount of e-wastes will move to the formal sector and the share of the formal sector will increase. The current state of this segment is not so encouraging. But it can be a business opportunity for many. As per a report by International Resource Group (IRG), India’s domestic waste alone will amount to 1,600,000 tonnes by 2012. By regularizing this segment, a lot of people can be employed and many new players can be welcomed to this segment. This segment certainly has a lot of opportunity to grow but ﬁrst it has to pass through the existing loopholes that are impeding its growth. n DATAQUEST | A CyberMedia Publication

UNIFIED COMMUNICATIONS

Leaders All With the landscape marked by leaders for different segments, consolidation can help cater to customer demands better

oftware and hardware enterprises follow the mantra of interoperability, acquisition, and integration of diverse applications for uniﬁed communication (UC) in this age of social media. UC is one segment, scattered with different players maintaining their forte. UC has etched its presence through collaborative tools like audio/video/web conferencing, email, IM, voice, presence, etc. Change in economic conditions and government policies has caused companies to save travel costs, share information without delays and affecting productivity, etc. Also with the popularity of smartphones gaining ground, there is demand for a platform where all applications can be used. Even the gaining popularity of social media adoption is proving as a shot in the arm. Even though bandwidth and infrastructure still remain a challenge, government projects (state-wise deployment, NIC planning to place orders), BFSI, service providers, and IT/ITeS have supported the penetration of UC. But with its increased adoption security concerns have become an issue especially when it concerns organizations like banks.

Uniﬁed Communications Market in India Growth

33%

24% 1,829

1,475

Changing Dynamics

2009-10

Enterprises are witnessing a shift towards a mix and match of applications, but there is an increased demand for infrastructure characterized by minimal hardware. Vendors have also realized the importance of improving infrastructure to ensure better adoption of UC as robust broadband infrastructure and cost of bandwidth are big hurdles in India. Earlier, vendors would adopt the ‘rip and replace’ policy and replace the entire legacy infrastructure with a completely new IP infrastructure, culminating in huge costs and hence the failure to generate uptake from companies. Realizing this, vendors eventually introduced solutions to assist smooth migration to UC without replacing the IT setup leading to increased adoption. “Though vendors have tried to address the issue by supporting virtualization in a private cloud environment. Take the increasing preference and popularity of IM over videoconferencing owing to bandwidth and infrastructure concerns. But if you consider the usage perspective then it can be termed as the ﬁrst phase,” says Parminder Saini, Industry

Source: DQ estimates

1,109

2008-09

SHILPA SHANBHAG shilpas@cybermedia.co.in

2010-11

Recession forced enterprises to adopt new avenues to save travel costs, share information, increase cash reserves, a practice which even spilled into FY11. Consequently, enterprises witnessed a shift towards mix and match of unified communication applications, a trend characterized by minimal hardware

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UNIFIED COMMUNICATIONS

Manager, ICT Practice, South Asia & Middle East, Frost & Sullivan. As individuals prefer to use IM over an email, it has proved as an advantage for Microsoft. Till a few months back, the SMB segment remained untouched from the effects of UC mainly due to ﬁnancial constraints. According to market estimates the number of MSMEs in India currently stands at 26 mn, a number that vendors cannot afford to ignore. And with customized offerings on the array, SMBs have started adopting solutions that are cost-effective and easy to deploy. Popular among them are hosted solutions as it is based on the ‘pay as per usage’ model. Avaya introduced Avaya IP Ofﬁce 6.0-its communications solution for SMBs, while Siemens launched OpenScape UC Server Xpress for midsize companies.

Battling for Space Microsoft, which commands the IM space with its Microsoft Ofﬁce Communications Server (OCS), is very popular as it does not have hassles related to bandwidth attached. It has been one of the pioneers in the UC space to adopt the cloud mantra with its solutions. Even its investment of $8.5 bn to acquire Skype is a right noise made at a time when enterprises require ﬂexibility in order to connect to their users better. As per market estimates there are 170 mn connected users over 207 bn minutes of voice and video conversations in 2010, emphasizing the importance of Skype and this deal. This deal is of importance for Microsoft that has been making the right noises through its focus across various platforms like Lync, Outlook, Messenger, Hotmail, and Xbox LIVE. Whereas in the videoconferencing space, which is the domain of Polycom, the company is gaining strength riding high on colDATAQUEST | A CyberMedia Publication

Dissecting the UC Market (%)

Avaya

Cisco Microsoft

Siemens Polycom Others

Total Revenues: 1,829 crore Source: DQ estimates

Cisco, Microsoft, Avaya, Polycom were leaders in their own

laborations like Ericsson, Motorola, Uniﬁed Communications Interoperability Forum, etc. It also enhanced its offerings Matrix IP-PBX and Polycom IP Phones, Microsoft Lync Server 2010; launched a portfolio of Uniﬁed Communications Professional Services, Polycom Open Telepresence Experience (OTX) 300; and entered into strategic tie ups with Microsoft, McAfee, Bharti airtel. It even strengthened its portfolio through acquisition of Accordent Technologies for $50 mn and HP’s Visual Collaboration business, including the Halo Products and Managed Services business. Riding high on government and BFSI segments, India emerged as a major geography for the company. Meanwhile, Avaya after the acquisition of Nortel for $900 mn has not only strengthened its portfolio but also offers stiff competition to major players like Cisco. After this acquisition the space seems to have dried of news for any such big acquisition, though the same cannot be totally ruled out. But there was news of a different kind, as Avaya sold its 59% stake in AGC Networks to Essar Services Holdings for `206.19 crore. But surely Cisco was on the mind as early during the FY11, Avaya had struck a 3-year agreement with HP to jointly sell visit www.dqindia.com

and service Avaya’s UC hardware and software. This deal is similar on the lines of HP’s partnerships with the likes of Microsoft and Alcatel-Lucent to grab a pie of Cisco’s market share and boost its managed services space. Expanding its existing relationship with Polycom, Avaya joined hands to deliver fully integrated, end-to-end UC solutions that use Avaya Aura Session Initiation Protocol based platform and the Polycom Open Collaboration Network strategy. Cisco also made game-changing moves by launching Jabber, a uniﬁed application that enables users to access presence, IM, voice, video, voice messaging, desktop sharing and conferencing, and Cisco TelePresence MX200. Cisco riding on the back of TANDBERG, went strength to strength. Meanwhile, Siemens joined hands with Fujitsu India to provide customers with uniﬁed IT and communications solution. During the time when Siemens’ enterprise communications unit rolled out its enterprise-class UC server, the company closed its hardware manufacturing facilities. This led to an increased focus on the software aspect of UC. To strengthen its offerings, Siemens acquired FastViewer.

Road Ahead Though interoperability may still be a challenge, with many vendors scaling up the graph the scenario is expected to change. Polycom has taken a prime step with its Open Collaboration Network where its offerings can be seamlessly integrated with those from Microsoft and IBM. On a ﬁnal note, Parminder Saini adds, “With each vendor vying to grab a bigger share of the pie, it is difﬁcult to conclude which company will consolidate with the other. But from an overall perspective, the segment is expected to grow for the next 7 years.” n August 31 - September 15, 2011 | 241

Afterthought

Shyamanuja Das The author is Editor of Dataquest shyamanujad@cybermedia.co.in

Common Sense, Numbers and Top20

Q Top20 is all about numbers. Or is it? Internally and externally, that is what I keep hearing. The engineer in me even gets delighted when people praise our efforts in capturing, estimating, and analyzing so much of the numbers. Some—including a few of my colleagues—never understand why I get so excited by numbers. And why I keep staring at the tables and graphs and get flared up if I find some mistakes. My reaction is not half as intense if I find some mistake in the body text. I just point that out the same way that I do in other regular issues and allow the normal process to take over. When dealing with numbers in Top20—well, they do not tell that to me that way exactly—I apparently become abnormal. But honestly we are not driven—even if I get excited sometimes—by numbers. I always tell budding business journalists what I consider to be a golden law in business journalism: Never underestimate the value of numbers; never overestimate the value of numbers. And that has also been my guiding philosophy in Top20, as I complete 5 years of doing it. So the heart of Top20 may be all numbers but the soul is much more than that. Many of the common sense beliefs come alive through these numbers and how. Take this year’s data. There are only 4 segments that have a revenue of more than `1,000 crore and they have grown more than 40%. Three of them happen to be laptops (40%), storage peripherals (MP3 players, digicams, flash cards and flash drives) (59%), and smartphones (97%). Do you need 4 months of research to tell that these are the hot areas in technology today? How many times have you heard/discussed about consumerization of technology in the last few months? But there are many who

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take decisions that affect you who may not have the evidence. DQ Top20 provides that. Research does not provide common sense. It validates or rejects that. Take another example from this year’s research. While by and large the industry had a great year and good growth, there is one segment that saw an overall decline—printers. Are you surprised? I do not think so. It may or may not be the beginning of the journey to paperless enterprises but it surely denotes that there is less printing, a lot of it is now outsourced as a service. Yet, within this segment too, there is 1 subsegment that has grown 70%—PoS printers. Does that surprise you? I am sure not. Indian organized retail is on a roll and we experience it everyday. Much of these is common sense. It is backed by Top20 research now. But the role of Top20 goes beyond just taking a stock of the overall market and providing support for your common sense. It often throws out hypotheses which probably need further validation. One such finding this year is that hardware has grown far more than software and even services. There are 2 ways of looking at it—maybe both are correct. Many would say it shows lack of maturity. I would say it just shows that investment in infrastructure is back, fueled by government and SMB spending. And all of us know that in these 2 segments, hardware and services sell big as compared to software. That is an opportunity for software. But that is another story. There are so many stories hidden in those numbers. We may have told a few of them. But you, with your experience and knowledge on the ground, may find so many more hidden in those numbers. I urge you to do that and add your stories to ours. That would be utilizing our research to the maximum extent possible. And do share some of those stories with us!

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DATAQUEST | A CyberMedia Publication

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