The $760 million (Rs 3,600 crore) Indian server market is in a flux. After years of high growth, the domestic server market has been shrinking in recent months though many expect a quick revival.
India's overall server market grew by just 3.7% in 2008, a sharp slowing from the 25.6% growth in 2007, according to research and forecasting firm IDC India Ltd, but the numbers hide more than they reveal.
The enterprise server market contracted by 28% in the December quarter, the latest period for which data is available. But this quarter also saw International Business Machines Corp., or IBM, displace Hewlett-Packard Co., or HP, as the market leader in the overall server market, and the entry of Cisco Systems Inc. into the server market. Servers run computer networks and websites.
A reinvigorated Sun Microsystems Inc., now part of Oracle Corp., is also expected to mount a battle to regain its declining market share. Besides, Lenovo Group Ltd entered the Indian server market a few quarters ago, even as local vendors such as HCL Technologies Ltd and Wipro Ltd try to increase their market share.
The Indian server market is broadly categorized into three different segments. The entry-level, volume-based server market constitutes the largest chunk and is worth around $420 million, according to IDC. The mid-range offering, better known as the Unix server market, is estimated at $300 million and the top-end market, comprising power systems and mainframe, is estimated at $40 million.
"Yes, after enjoying years of double-digit growth, the degrowth happening in the server market is a cause for concern for all players and not just us," said Mukul Mathur, director, systems and technology, India and South Asia, IBM. "(But the) Indian market holds plenty of potential and is still nascent."
Rajesh Dhar, director, sales, industry standard servers, HP India, too admits the contraction in the server market is a worry but says the situation will likely rectify over the next couple of quarters.
While sectors such as manufacturing and retail have been severely hurt in their server investments, telecom, government, utilities and the banking, financial services and insurance (BFSI) segments are expected to continue to grow.
Naveen Mishra, senior research analyst at technology research firm Gartner India says the contraction in the server market is a concern for vendors only if looked at in absolute terms. "From a relative perspective, (the) Indian market is still doing better than several other mature markets, and provides reasonable growth opportunities."
The entry of Cisco into the market is expected to inject new competition and shake up the market. The US firm, which primarily sells networking equipment, has firmly cast its eyes on dominating the entire data centre space with its unified computing systems. This combines computing, storage, virtualization and networking in a single package for customers.
Gartner's Mishra says Cisco has started challenging the established players with its offering, though "Cisco's entry is unlikely to have any direct impact in the short term. But if they aggressively do product-positioning, they may gain some market share in the medium term."
NETBOOKS SET FOR A WINDOWS-INTEL TURBOCHARGE
C Chitti Pantulu, Hyderabad
DNA
Already flying off the shelves in huge numbers in India, Netbook sales are set for a twin booster later this year.
Microsoft CEO Steve Ballmer announced on his India visit a leaner version of the forthcoming Windows7 for Netbooks.
At the same time, the world's biggest chip-maker Intel, whose Atom chips power most Netbooks, is also working on releasing a dual core version for Netbooks. Both will be in the market around the festival time this year.
The good news is the twin developments could bring Netbooks into the mainstream and boost their sales further. But the bad news is that for Intel it could also mean erosion of market for its existing entry and mid-level Pentium and other notebook chips.
Seen as little more than toys when they were launched in the country last June, Netbooks have become a rage, doubling sales to 36,000 units in the January-March quarter, compared with just 16,000 units in the Oct0ber-December, 2008.
In 2009, Netbooks are projected to hit 3 lakh units in sales. The total laptop market in India is put at 2.5 million units per annum, of which 10 percent is entry level notebooks.
The runaway success of Atom came as surprise even to Intel. "It did better than we expected and we ended last year with revenues of $500 million for Atom chip sales," said Prakash Bagri, director marketing Intel South Asia.
"Demand ramped up so fast in the second half of the year that we had supply issues," he added.
This kind of success also comes with a concomitant downside which Intel seems to be realising, which perhaps explains its attempt to talk down the Atom at an investor meet after its first quarter 2009 results.
"The new dual core Atom could be a double-edged sword for Intel," observed Diptarup Chakraborti, principal research analyst at IT research firm Gartner Inc. "There is a thin line which is getting thinner between Netbooks and notebooks," he added.
While the consumer segment has taken to the Netbook in a big way demand is also coming from the enterprise and education sectors which could mean erosion in sales of notebooks using higher margin chips from Intel.
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