October 2, 2008

Indian SMBs to Spend US$605M on Network Hardware in 2008

Small and medium businesses (SMBs, or companies with up to 999 employees) in India are on track to invest up to US$605 million on networking hardware this year, up a healthy 24% over last year. About 40% of this spending will go towards purchases of hubs and LAN switches alone, according to a recent survey of Indian SMBs by New York-based Access Markets International (AMI) Partners Inc

"India's market for networking hardware continues to grow, driven by factors such as higher PC penetration and adoption, boom in ITeS, call centers, and the booming BPO market," says Dipendra Mitra, Analyst at AMI-Partners. "Also adding a boost are factors like the expansion of IT, BPO/KPO companies, mushrooming data centers and disaster recovery (DR) sites by large Indian organizations and MNCs."

Medium businesses (MBs, or companies with 100 to 999 employees) accounted for a majority (about 57%) of the total networking expenditure last year. However, the contribution of SBs (companies with up to 99 staff) to the overall SMB spend is fast rising as Indian SBs try to catch up with their larger counterparts.

Within the networking arena, routers and hubs/LAN switches will make up a large majority of the Indian SMB annual spend on networking hardware in 2008. Wireless LAN and other networking hardware - like network interface cards, structured cabling, etc - follow closely behind.

SMB wireless LAN spending is expected to more than double in the next 12 months, from a relatively small base in value terms. Some of the key drivers are easy availability of wireless LAN connectivity at many public hotspots, and increased notebook penetration. Penetration of Wireless LAN has also risen by over four percentage points in 2007 from 2006 and this increasing trend is set to continue in 2008.

Indian SMBs are moving along the growth path and adding more business partners, nationally and internationally. Many SMBs are planning to open new branches (15% of SBs and 20% of MBs), and networking will play an all important role to keep employees connected. Consequently the need for a secure network connectivity infrastructure has assumed greater importance among SMBs. This is also evident by a rise in VPN spending, which is on track to go up by over 18% from last year.

"Indian SMBs are gradually realizing the benefits of connectivity and this will usher in even brighter days for the networking market in India," Mr. Mitra says. "High speed Internet connectivity, cellular phone and notebooks are helping the SMB workers to stay in constant touch. Communications is key, as fast response to customers can make or break deals. Thus, networking capability is a must-have for most SMBs in the country for sustaining their increasing communication needs."

As for vendors, Cisco Systems leads the market in India in both routers and hubs/switches among SMBs. It is followed by D-Link Systems. However, the results are reversed for wireless LAN with D-Link leading the market, followed by Cisco.

Related Studies

AMI's 2007 India Small Business Overview and Comprehensive Market Opportunity Assessment and 2007 India Medium Business Overview and Comprehensive Market Opportunity Assessment studies highlight these and other major trends in the context of current/planned IT, Internet and communications usage and spending. Products and services covered include established and emerging hardware, software, applications and business process solutions. Based on AMI's annual surveys of SMBs in India, the studies track a broad spectrum of issues pertaining to budgets, purchase behaviors, decision influencers, channel preferences, outsourcing, service and support. Also covered are detailed firmographics and critically important technology attitudes and strategic planning priorities. This data points to key opportunities and messaging hot buttons for vendors and service providers seeking to match their offerings to SMB market requirements.

For more information about this study, AMI-Partners, or our global SMB research, call 212-944-5100, e-mail [email protected], or visit the AMI Web site at www.ami-partners.com

About Access Markets International (AMI) Partners, Inc.

AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital, and actionable market intelligence--with a strong focus on global small and medium business (SMB) enterprises and extending into large enterprises and home-based businesses. The AMI-Partners mission is to empower clients for success with the highest quality data, business strategy perspectives and "go-to-market" solutions. Led by Andy Bose, the firm has built a world-class management team with deep experience cutting across IT, telecommunications and business services sectors in established and emerging markets.

AMI-Partners has helped shape the go-to-market SMB strategies of more than 150 leading IT, Internet, telecommunications and business services companies over the last ten years. The firm is well known for its IT and Internet adoption-based segmentation of the SMB markets, its annual retainership services based on global SMB tracking surveys in more than 25 countries, and its proprietary database of SMBs and SMB channel partners in the Americas, Europe and Asia-Pacific. The firm invests significantly in collecting survey-based information from several thousand SMBs annually, and is considered the premier source for global SMB trends and analysis.