Most enterprises continue to spend on hardware as they upgrade their networks to keep pace with expanding business

While spending in other areas has reduced in the current year, enterprises have actually increased their spending on hardware.

Hardware revenues come mainly from companies with rapidly expanding business, such as banking and financial institutions. Although not in the top three focus areas of the IT budget, Enterprise Hardware is a focus area for 34 percent of the survey respondents.

87 percent of the respondents said there was an increase in requirement. The average rate of increase in requirement is 30 percent.

For this survey we placed all enterprise/networking hardware in two categories: Servers and Networking Gear. The Networking Gear segment includes hubs, switches, routers and structured cabling. We also considered a third category: PCs/Workstations & Peripherals (which includes network printers), but it has been left out of this story, since we didn't notice any appreciable trends.

SERVERS
Every CIO knows that choosing enterprise servers is no easy task. It involves decisions about the operating system platform, the processor type (Intel or RISC), the server applications, the number of users served and so forth. Then there are decisions to be made about the form factor of the server—rack mounted, blade servers, appliance servers or the usual boxes.

In India, low-end departmental servers for file/print, databases and messaging are common. These servers are used by the SMEs.

Mid- and high-end servers are used mainly by banking and financial institutions, and telecom companies. While Windows NT/2000 servers have a strong presence in the Indian enterprise, Unix/Linux servers are catching up. Around 87 percent of the respondents said they use Windows NT/2000 servers and 56 percent said they have a requirement. 50 percent respondents have Unix/Linux servers and 44 percent said they would require these.

Sun/Solaris servers are also gaining ground. About 21 percent of the respondents have these servers and 27 percent have a requirement.

At one time the demand for Netware (File/Print) servers was strong, but these are fading out. Just 4 percent of the respondents said they have a requirement for NetWare servers in 2002-03.

The rest of the respondents use other flavours of Unix (such as HP-UX), which are proprietary. Unix servers (especially those that come with high-end variants of Unix) are more prevalent in mission critical environments.

An industry analyst says that, over the next 2 - 3 years, many enterprises will go in for server consolidation to optimize and simplify the existing IT infrastructure.

CIOs are now looking at server consolidation as a means to cut costs. Consolidation reduces TCO by reducing administration costs, maintenance costs, cost of software licenses/upgrades and cost of acquisition of new servers. But consolidation also presents other benefits. By reducing the number of servers a company can save power and floor space. Server consolidation also reduces the points of failure.

NETWORKING GEAR
The deployment of bandwidth-intensive applications like ERP, SCM and data warehousing has led to increased deployment of networking infrastructure like hubs, switches, routers and structured cabling. The demand for hubs is on the decline. This is balanced by the increased demand for switches.

Hubs: The price gap between hubs and entry-level switches for 10/100 Mbps connectivity is narrowing. Since switches offer better performance, they are likely to replace hubs in the near future. However, there is still demand for hubs from enterprises.

About 75 percent of the survey respondents said they use hubs and 53 percent said they have a requirement.

Switches: Vendors are offering switches for different levels of the LAN. With reference to the seven layer OSI model, there are Layer 2 switches, Layer 3 switches and Layer 4 - 7 switches.

Performance-wise, hubs were found to be inadequate for LANs and routers were considered to be too expensive for use at the LAN level. So Layer 3 switches, which cost a fraction of the price of routers and offer equivalent/better performance, are replacing routers at the LAN level on campus networks. Layer 2 switches have already replaced hubs in many application areas. However routers are pushed to the edge of the enterprise network and are used at the WAN level.

The demand for switches is high and 63 percent of the respondents said they have a requirement.

Depending on the required functionality, one can choose between Managed Switches, Unmanaged Switches, Stackable Switches and Chassis Switches.

Routers: These devices are used at the WAN level on enterprise networks. Routers interconnect different offices/branches. They are also used for connecting the enterprise network to the Internet (via the service provider's gateway).

About 60 percent of the respondents said they use routers and 40 percent said they have a requirement. This indicates that enterprises are increasingly extending their networks and interconnecting offices at different locations. Demand for routers is expected from the Banking & Finance, IT/Telecom verticals. There will also be some requirement from the Government as e-governance increases.

Structured Cabling: From a confusing array of various cabling systems for different communications systems, we now have either copper or fiber structured cabling systems. The current standard is CAT 5E (Enhanced CAT-5 cabling), but vendors are already talking about CAT 6 and CAT 7 cabling. CAT 6 has not yet been ratified by the EIA/TIA and CAT 7 is an ISO development.

Network consultants advise organizations with more than 100 network nodes to go in for structured cabling. We found that 46 percent of the respondents already have structured cabling systems and 29 percent have a requirement for it.

VERTICALS
This year the average amount allocated for Enterprise Hardware has gone up from Rs 184 lakh to Rs 288 lakh. The demand is even across all industry sectors.

Last year 52 percent of the respondents spent Rs 25 lakh on hardware. This year too, 52 percent have allocated the same amount for hardware.

Going by average spending, hardware is one of the few areas where spending has actually increased in the current year. The increase in average may be due to the fact that some more companies are spending between Rs 1 - 10 crore on hardware.

Demand for low-end and mid-range Windows servers is almost equal across all sectors, while demand for proprietary Unix and Solaris-based servers is high in IT & Telecom sectors. We can also expect demand for high-end RISC/Unix servers from the IT/Telecom, Banking & Finance, and Insurance sectors. The SMEs will require entry-level or mid-level (Windows NT/2000) servers. There may be some requirement from the government too. There is also opportunity in the Telecom sector, especially for rack mounted and blade servers, which save on floor space and power.

The biggest buyers for networking equipment will be IT/Telecom companies closely followed by Banking & Finance.

INCREASED INVESTMENT
Investment towards Enterprise Hardware is expected to continue. The deployment of data-centric applications will fuel demand for networking infrastructure like routers and switches. Converged Networks are becoming common and enterprises will procure hardware for voice-enabling their networks.

The deregulation of the Telecom sector will increase demand for hardware like switches and high-end servers. Many ISPs who have entered the International Long Distance (ILD) and Net Telephony business will require switching equipment.

Banks and financial institutions will continue to spend on hardware as they go about expanding their businesses.

Research Snapshots The average amount allocated for Enterprise Hardware has increased from Rs 184 lakh to Rs 288 lakh this year 87 percent of the respondents said there was an increase in hardware requirement While Windows NT/2000 servers have a strong presence in the Indian enterprise, Unix/Linux servers are catching up 87 percent of the respondents said they use Windows NT/2000 servers and 56 percent said they have a requirement 50 percent have Unix/Linux servers and 44 percent said they have a requirement for Unix servers in 2002-03 Sun/Solaris servers are also gaining ground. 21 percent of the respondents have these servers and 27 percent have a requirement NetWare servers are fading out. Just 4 percent of the respondents said they had a requirement for NetWare servers 60 percent of the respondents said they use routers and 40 percent said they have a requirement 72 percent of the respondents said they have a requirement for PCs/workstations and peripherals (including printers)

Top 5 benefits CIOs seek Better connectivity with regional offices Data/system security Meet core business demands Improvement in operational efficiency Better customer service