NEW DELHI: The government spending on hardware and software used to connect computers could touch $1billion (Rs4,400 crore) a year by the end of 2010, if such expenditure continues to acclerate at the current 50%. The growth is being driven by New Delhi and state administrations increasingly buying tech gear to set up projects to enable electronic delivery of services to citizens and to computerize offices.
The total market for networking software and equipment—which includes routers and switches, security software, storage disks, customer-specific applications and services—is already estimated at about $1billion today but of this, government buying is just a fifth. The majority 80% share of the market is accounted for by private buyers such as telecom, software, banking and financial companies.
An increase in spending by the government to take e-governance networks and Internet access beyond cities will help maintain growth in the networking market, say analysts. “In India, there has been an increased demand for networking equipment in the last three years from the government, as it increases its focus on rural penetration.
Government spend will fuel growth in Internet access by citizens, which will further grow network equipment sales,” said Sivarama Krishnan, executive director at consulting firm Ernst & Young.
The Central government has announced a host of e-governance projects in the last three years under the National E-Governance Plan 2003-07, including a Rs6,000 crore ‘Common Service Centre’ initiative that is being implemented with private sector participation; the National Gigabit Backbone Network that will cost Rs5,000 crore; and an ongoing Rs3,000 crore wide- area-network project in several states.
Besides these, the income tax department’s proposed Rs800 crore investment in five years starting 2006 and a recent Central Board of Excise and Customs project costing Rs600 crore will add to the government’s tech spending.
“The network equipment, bandwidth and maintenance cost of each of these huge e- governance projects is between 60% and 80% of the total project cost,” Krishnan says. In the common service centre project, however, the spending on networking equipment will be just a tenth because they will buy only the end equipment such as routers.
Yet, it is good news for makers of network equipment in India such as Cisco Systems, Juniper Networks and Nortel Networks. Cisco, the leader in the networking market in India with a share of around 80% of the market, is also the biggest provider of such equipment and services to the government. The company works with the state governments of Gujarat, West Bengal and Andhra Pradesh, besides providing services for the Lok Sabha Library, Supreme Court, National Highways Authority of India, and the Centre for Development of Advanced Computing.
“Today, the government is similar to private companies and is becoming a profit-making organization, as it looks for end-to-end intelligent equipment and services, with fundamental features that offer reliability, scalability and security. Because it is going in for a fresh new build-out, it wants to leverage the best technology,” says Ranajoy Punja, a vice-president of business development for Cisco in India and the South Asia region.
Cisco, Juniper and Nortel also have strong sales among defence buyers. And that is good news for them as the defence ministry is also increasing tech spending to integrate its three arms, the army, navy and air force. “With the defence using legacy technology and networks and its wide area network, local area network and routers not being up to date, there is definitely a need for a huge changeover, and it is investing on new applications for monitoring networks, high surveillance and cyber warfare,” said Naresh Singh, principal analyst at research firm Gartner.
Juniper, a comparatively new entrant in the field and has created a team recently to focus on the government and defence business, is also keen to grow its share in government spending on routers and security. “We are aggressively participating in all the government and defence tenders and have just won the networking project for the Himachal Pradesh state-wide-area network,” said Sanjay Joshi, director, enterprise and channels for India and South Asia, Juniper.
India will contribute significantly to the company’s $100 million revenues from government and defence operations in the Asia Pacific regionby 2010.