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Chinese firms continue network equipment spend

Boosted by finance and public sector spending, China's enterprise networking equipment market will grow to US$4.3 billion in 2012, predicts Springboard Research.
Written by Vivian Yeo, Contributor

With companies in China continuing to dedicate a significant portion of their IT budgets on equipment such as routers, the country is set to remain a key contributor to the region's enterprise networking equipment revenues through to 2012, says an analyst.

According to a new report released Friday by Springboard Research, the enterprise networking equipment market in the Asia-Pacific region (excluding Japan) will grow at a five-year compound annual growth rate (CAGR) of 13 percent, from US$2.8 billion in 2008 to US$4.3 billion in 2012.

China's share of the region's total network equipment revenues, will increase from 43 percent in 2008, to 46 percent in 2012.

Bryan Wang, research director for connectivity at Springboard Research, said in a statement: "China signifies an emerging opportunity in [the] Asia-Pacific [region] for enterprise networking, given the fast-paced growth of domestic enterprises as they expand their business footprints beyond existing boundaries, and a strong manufacturing vertical."

"Moreover, the ambitious investment plans of the government to pursue various e-governance initiatives, and the country's preferential location in the region also make China a lucrative market," he added.

Compared to other country markets in the region, Wang said Chinese customers continue to spend a large portion of their IT budgets on infrastructure-related products such as routers and switches, security and voice equipment. In a survey conducted by Springboard, 45 percent of mid-market respondents said their networking budgets made up over 40 percent of their IT budgets.

The banking, financial services and insurance (BFSI) industry, together with the public sector, are the main drivers for enterprise networking expenditure over the next three years, said Springboard.

"BFSI is among the largest networking spender in China and hence represents a lucrative business opportunity for equipment vendors," Wang explained. "Also, the recently announced economic stimulus plan by the Chinese government will build upon significant recent public sector investments in network deployment; thus increasing overall spending on networking."

The report noted that Chinese enterprises were most concerned with network performance, network security and risk, as well as network efficiency. Decision makers said they would consider an equipment provider's expertise and technological strength when making network purchases. Another factor commonly cited was value-for-money.

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