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ATM: The technology advantage - Views on News from Equitymaster
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  • Dec 27, 2000

    ATM: The technology advantage

    One of the biggest hurdles to the growth of the Indian software industry is the availability of bandwidth. In September 2000, India had 325 Mbps (mega bits per second) of international Internet gateway bandwidth. The demand, meanwhile, with some 1.5 million Internet connections, was around 5 Gbps (giga bits per second). With about 2.6 million users in December 2000, the demand is estimated to be 10Gbps. The bandwidth usage in countries like China stands at 55 Gbps, the UK has 120 Gbps and Japan has 160 Gbps. Therefore, a huge gap stands between demand and supply.

    The solution not only lies in increasing the bandwidth per se, but also in optimizing bandwidth usage. One of the solutions that the technology industry has to offer is ATM (Asynchronous Transfer Mode). This is a networking technology based on packets of fixed size. Not only does ATM offer high speed (over 2 Gbps) but also QoS (Quality of Service), which dynamically allots bandwidth depending on the requirements, thus optimising bandwidth usage. ATM would benefit the ISPs (Internet Service Providers), ASPs (Application Service Providers) and organisations in terms of reliability and cost effectiveness.

    Recently, the ATM forum conducted a two-day seminar at Hyderabad to discuss the issues and opportunities of ATM in India. The President of the ATM Forum, Ms. Marlis Humphrey, commented that connectivity was the key to the exponential growth of the IT industry in India, especially in areas like e-governance, e-commerce and distance learning.

    One of the major competitors for ATM is Gigabit Ethernet, which claims to be far more cost effective than ATM. Gigabit has been available for commercial use since 1997 and since then the market has grown to Rs 140 bn (US $ 3 bn). The dominant market for Gigabit Ethernet is LAN (local area networks) and is making inroads into MAN (metropolitan area networks). But as far as WAN (wide area network) is concerned the ATM seems to have the upper edge.

    According to Nasscomís Survey, the International and national bandwidth requirement in India is expected to reach 300 Gbps by 2005. Therefore, this would mean a huge opportunity for the hardware companies, who supply switches and routers for ATM.

    But this is just a part of the opportunity. The growth of the software sector is dependent on the availability of bandwidth, which in turn is dependent on the availability of networking technologies. The technology for networking is provided by US based companies, for whom, the Indian companies do the software development projects. Majors like Infosys, Wipro and Hughes Software are already taking a keen interest in providing these solutions. This will be a key to their higher billing rates and sustained margins.



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