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Growth in networking, NEW STRAITS TIMES-MANAGEMENT TIMES

Posted on: Thursday, 13 November 2003, 06:00 CST

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Emerging Markets DatafileNovember 13, 2003

NEW STRAITS TIMES-MANAGEMENT TIMES

MALAYSIA

ENGLISH

Growth in networking, NEW STRAITS TIMES-MANAGEMENT TIMES

Rozana Sani

ASIA

WorldSources, Inc. 322 MASSACHUSETTS AVENUE 2ND FLOOR, NE WASHINGTON, DC 20002

COPYRIGHT 2003 BY WORLDSOURCES, INC., A JOINT VENTURE OF FDCH e-Media, INC. AND WORLD TIMES, INC. NO PORTION OF THE MATERIALS CONTAINED HEREIN MAY BE USED IN ANY MEDIA WITHOUT ATTRIBUTION TO WORLDSOURCES, INC.

THE local networking market looks set for recovery as industry observers are confident of healthy growth continuing in the segment. For the current year, the market is estimated to record 7.5 per cent growth and the momentum is expected to continue into 2004.

This is certainly a welcomed change after seeing a significant dip of 14 per cent last year.

Research company IDC Market Research (M) Sdn Bhd said the upward movement of market, which comprises network interface cards (NICs), hubs, local area network (LAN) switches and routers, is largely propelled by investments led by the government, education and the telco sectors. There are also some revived interests from the private sector, IDC Malaysia added.

Its analyst Loo Jian Sern said spending is expected to be focused on areas such as LAN deployment, replacements, upgrades and network expansions, bandwidth demand and broadband adoption.

According to him, the LAN market alone is expected to grow by nine per cent next year, and IDC projects a compounded annual growth rate of 10.4 per cent over the next four years for the segment.

``The market will continue to be driven by the government and education sector, especially with the additional RM50 billion development fund that has been injected to the remaining 8th Malaysia Plan period (as announced in the mid-term review in late October),'' Loo said in Kuala Lumpur.

``However, IDC has still yet to see any large-scale LAN deployment in the private sector as most of the networking spending from this segment are coming from replacements, upgrades or network expansion,'' he added.

As for technologies, Loo noted that Layer 3 switching has been growing steadily in the past few quarters mainly because of its increased functionalities and decreasing price-per-port. ``We foresee that Layer 2 switches that has become more affordable will eventually replace the hubs and thus allow more smaller businesses and even home users to own them,''

he said.

Country manager of Alcatel's e-business networking division, C.T. Lim, attributed the projected increase in spending on networks infrastructure next year to more applications using enterprise networks.

``Applications like voice, legacy SNA (system network architecture) banking applications, and control system applications have traditionally been running on dedicated infrastructures. More and more organisations will migrate them to a common enterprise network to save costs and simplify IT (information technology) administration and achieve overall decrease in total cost of ownership,'' he explained.

This, he said, will generate the need for more network connections, greater network capacity and in general, will require intelligent network equipment that is able to prioritise time sensitive applications like voice.

``We also foresee that with the anticipated global recovery, organisations that have been putting on hold their network upgrades for the last two years will have the confidence to go ahead and modernise and/or expand their enterprise networks.''

Alcatel, Lim added, also believes that the government sector will continue to drive IT in line with Malaysia's e-Government strategy and the MSC flagship applications (such as smart schools and e-government), especially in the context of the MSC Phase II implementation.

``Finance/banking institutions will likely engage in IT investments provided that they will be able to quantify business returns for their organisation.''

Meanwhile, Cisco Systems Malaysia's Johnson Khoo said the company is seeing sustained investments in core networking infrastructure and a pickup in deployments of newer technologies such as Internet protocol (IP) telephony. This trend is expected to continue into next year.

``Malaysian companies know they need to have robust and reliable computer networks in order to compete effectively in the global market,'' Khoo said.

``Business confidence among industry leaders also seems to be picking up and this reflects the overall recovery in the global economy,'' he said.

Copyright 2003 NEW STRAITS TIMES-MANAGEMENT TIMES all rights reserved as distributed by WorldSources, Inc.

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