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Virtual Connect: Enterprises leverage cloud services to enhance business efficiency

October 28, 2013

Faced with increasing business complexity and declining profit margins, Indian enterprises have turned to cloud computing as a viable business model to achieve cost benefits as well as business agility.

Consequently, the cloud computing segment in India has been witnessing steady growth over the past year. According to Gartner, the cloud services market in the country is expected to be valued at $443 million in 2013-14, registering a growth of 36 per cent from $326 million in 2012-13.

According to Knowledgefaber, the cloud computing segment is expected to cross the $1 billion mark by 2014, expanding at a compound annual growth rate (CAGR) of 32 per cent between 2011 and 2015.

 Key growth drivers

A study conducted by Frost & Sullivan established that the growing uptake of cloud services is driven by:

• Increased competition in the enterprise segment, which requires flexibility, elasticity and scalability in IT expansion.

•  The need to reduce capex by opting for new-generation business models such as pay per use and pay per profit.

•   Increasing mobility of the workforce. Enterprises are moving to the cloud platform to ensure easy access to applications from smartphones, tablets, etc.

•  The need to deploy an operating expenditure payment structure for ensuring increased control over its IT requirements and investments, while reducing the total cost of ownership.

•  The need to ensure shorter time-to-market for new products.

 Cloud computing trends

•   According to Gartner, the infrastructure-as-a-service (IaaS) segment, including storage and print services, continues to be the fastest growing area of the cloud market in India. The segment registered a growth of 22.7 per cent in 2012 to be valued at $43.1 million and is expected to grow further by 39.6 per cent in 2013 to $60.2 million.

•   The IaaS segment is followed by the software-as-a-service (SaaS) vertical, which accounted for 36 per cent of the total market in 2012. In fact, the research firm believes that $4.2 billion will be spent on cloud services during the period 2013-17, of which $1.6 billion will be spent on SaaS. In particular, SaaS applications based on enterprise resource planning (ERP), customer relationship management (CRM), and collaboration and desktop productivity are likely to witness rapid uptake going forward.

•  The cloud business process services segment comprised 23 per cent of the total market in India in 2012.

•  Further, cloud infrastructure services accounted for 13 per cent of the cloud market in India in 2012, while cloud advertising services accounted for 12 per cent, followed by cloud management and security services at 11 per cent and cloud application infrastructure services at 5 per cent.

•   Cloud computing services have gained a steady momentum amongst small and medium enterprises (SMEs). According to Frost & Sullivan, this segment is more inclined towards such on-demand products owing to benefits like minimal capex, higher scalability and flexibility, and viable business models.

•  A study conducted by AMI-Partners India states that cloud-related expenses currently comprise about 10 per cent of an SME’s total information and communications technology budget. This is expected to increase at a CAGR of 23 per cent over the next five years.

•   Amongst SMEs, the cloud platform is primarily deployed in two areas – website-related functions and remotely managed IT services.

•   Meanwhile, the large enterprise segment in India is more likely to deploy private cloud services owing to concerns related to the control and security of their IT infrastructure.

•   According to Knowledgefaber, IaaS as a cloud delivery model will witness increasing adoption amongst large Indian enterprises and the segment is expected to grow at a CAGR of 40 per cent between 2011 and 2015.

Segment-wise trends

Enterprises in the manufacturing, banking, financial services and insurance (BFSI), health care, information and communication technology, and the government and education sectors are expected to drive the adoption of cloud services in the near future. This will be facilitated by increased expenditure on IT and data applications by these industries.


As per a joint survey carried out by Cloud Connect and the Everest Group, BFSI players have been deploying cloud computing largely for activities pertaining to web applications and the company’s websites, email and collaboration, and CRM and marketing automation. Going forward, cloud-based applications will be used for business intelligence/analytics, customised business applications and ERP in financing and accounting.

Accenture states that cloud computing is likely to be used for the following in the BFSI segment:

•  Cloud-based financial service offerings will be promoted through social and mobile media

•  Single-tenant private clouds (through virtualisation) will play a pivotal role in core banking, thereby enabling banks to monitor the location of customer data

•  Public cloud and cloud-based shared services are likely to dominate non-core and non-differentiated banking activities, which include workforce collaboration and document management.

 Manufacturing, distribution and retail

Players in the manufacturing, distribution and retail segment have deployed cloud computing for enhancing their storage capacity over the internet. Moreover, cloud-based solutions will be used for standardised applications such as finance and human resources. The cloud platform has not been deployed as a full replacement for existing systems but as a hybrid patchwork of on-premises, public and private cloud services as required. Going forward, IaaS and ERP-based SAP applications are expected to be deployed by small and medium businesses in the manufacturing segment.

 Health care

According to Marketsandmarkets, the cloud computing segment is expected to grow at a CAGR of 20.5 per cent during the period between 2012 and 2017 in the health care space. So far, players in this segment have deployed private and hybrid clouds, as opposed to public clouds. Although cloud computing offers significant advantages to health care operators, utilising this medium involves several challenges. Lack of security of patient information, interoperability and compliance with government regulations are some of the key concerns.

Meanwhile, according to Frost & Sullivan, IaaS and SaaS solutions are the most viable for the health care segment.

Net, net, cloud computing has been witnessing an upward trend in the Indian enterprise segment. Various innovations and initiatives in the cloud computing space will continue to make India one of the fastest growing markets in terms of adoption and usage of these services going forward.


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