India's untapped connectivity market

Almost two-thirds of the US$500 million hardware spending by Indian SMBs will go toward network-related purchases, a study reveals.
Written by Jeanne Lim, Contributor

There is a huge untapped market for connectivity technologies among small and midsize businesses (SMBs) in India, as only 14 percent of SMBs that own PCs currently have a local area network (LAN), according to a new study.

In its latest report, New York-based AMI-Partners, identified servers and connectivity as critical IT investments in the Indian SMB market. AMI classifies SMBs as companies that employ between one and 999 employees.

According to the company's research, SMBs in India will invest close to US$500 million on servers and networking hardware this year, with two-thirds of the spending going toward network-related hardware purchases alone.

Dev Chakravarty, a Kolkata-based analyst at AMI-Partners, said in a statement that small businesses, which have between one and 99 employees, account for "a relatively smaller portion" of total networking expenditure. "However, small business' contribution to the overall SMB spend is set to rise in the future as Indian small businesses try to catch up with their larger counterparts," he noted.

Currently, server usage is lower among small businesses compared with medium-sized companies, which have 100 to 999 employees and where servers are widely deployed.

According to AMI, medium-sized businesses account for approximately two-thirds of the total SMB server spending in India.

In another recent AMI survey, at least one out of 10 businesses indicated that they plan to buy new servers in the next 12 months. In terms of server usage, Hewlett Packard is the market leader in the medium-sized business segment, followed by Lenovo.

In server usage among small businesses, India-based HCL leads the market among branded servers, while assembled servers and white boxes lead the pack in the overall small-business server space in India.

Connectivity opportunity
Routers and hubs/LAN switches will make up the majority of the Indian SMB annual spending on networking hardware in 2006, predicts AMI-Partners. Wireless LAN (WLAN) and other networking hardware, like network interface cards and cabling, follow closely behind.

SMB WLAN spending is expected to more than double in the next 12 months--though the current figure in absolute terms is relatively less. The research firm attributed the growth of WLAN access to the wide availability of WLAN connectivity at many public hotspots.

Chakravarty noted that the future looks bright for the networking market in India as more Indian SMBs adopt high-speed Internet connectivity. "Cellular phone penetration is nearing saturation. Thus, networking capability is almost a must-have for every tech-savvy enterprise in the country for sustaining their increasing communication needs," he said.

According to AMI-Partners, D-Link Systems is the market leader in the routers and hubs/switches categories among SMBs in India, followed by HP. However, the converse is true in the WLAN space. HP leads the market, followed by D-Link.

Cisco Systems is the third vendor with significant presence in all three market categories, said AMI-Partners.

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