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Cloud Connect: SMBs/SMEs offer new opportunities for operators

March 31, 2014
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The Indian IT landscape is undergoing significant changes as enterprises are increasingly becoming aware of and adopting cloud computing technology. These services, which were earlier used by corporate giants to pursue expansion goals, and achieve operational and cost efficiencies, have found many takers amongst small and medium businesses/ enterprises (SMBs/SMEs) in recent years. The provisioning of software over the internet results in faster time-to-market, reduced implementation cycles and better market penetration, providing several business opportunities for SMBs.

Consequently, India has emerged as one of the fastest growing countries in terms of cloud service uptake. As per Gartner’s reports, public cloud solutions are nearing maturity in the country with around $3.9 billion expected to be spent on cloud services during 2013-17. Software-as-a-service (SaaS) continues to hold a major share in the cloud service market in India, with infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) slowly catching up. Of the $3.9 billion investment to be made by Indian enterprises in the cloud space, around half or $1.7 billion will be spent on SaaS.

A subscription-based service model and cost effectiveness are key features of cloud computing services that are driving enterprises to utilise them. Cloud services offer companies scalability in terms of infrastructure capacity. Currently, the traditional IT architecture of most companies comprises several physical servers, which may face operational issues in the wake of irregular demand levels, leading to over-/underutilisation of resources. In the case of over-utilisation, servers are unable to cater to the demand, resulting in slow response and non-processing of several requests. In contrast, there can be situations where servers developed to accommodate the growing demand end up lying idle or unused during long stretches of normal user activity. In such a scenario, the pay-as-you-go and on-demand functions of cloud allow enterprises to better manage the demand-supply gap. Further, cloud deployment reduces the need for creating new physical infrastructure, which reduces IT spends, energy consumption and office space requirements.

Adoption by SMEs

Increasing mobility and changing customer expectations are transforming the Indian business space and the need for greater agility and flexibility is being felt across enterprise categories. Cloud services have opened up new opportunities for e-commerce and have helped small businesses to compete internationally, while offering significant cost benefits.

On-demand services and SaaS solutions build on the ubiquity and real-time availability of the web to deliver advanced business applications. Hosted business software applications require almost no upfront investments in technology. They also need lesser time and resources for software deployment and maintenance. As a result, these solutions reduce costs related to infrastructure, installation, maintenance and support. Further, SaaS providers are responsible for the performance of their solutions, thereby eliminating the need for acquiring additional hardware.

Currently, SaaS accounts for over 50 per cent of the overall cloud usage of SMBs. As per Zinnov Consulting’s estimates, there are around 50 million SMB units in India and given their growing appetite for cloud services, there is a huge market opportunity for SaaS vendors and solution providers.

Cloud services and the government

Cloud-based services can prove to be a game changer for governance in India, given their potential to facilitate public engagement as well as deliver social welfare services to the remotest corners of the country. At present, the level of IT involvement in government departments and offices ranges from low to moderate. The introduction of virtualised processes and network-dependent services through cloud technology can result in better information sharing and coordination between government operations at various levels. Further, cloud adoption would result in a significant reduction in capex, and make systems more effective, efficient and transparent. Currently,  services such as banking, insurance, health care, education and governance are being shifted to the cloud platform owing to its advantages in terms of cost, storage and mobility.

A positive development has been the government’s support for cloud initiatives through the National Telecom Policy, 2012 (NTP 2012). The policy aims to promote synergies between broadband roll-outs and government initiatives such as e-governance, e-panchayat, the Mahatma Gandhi National Rural Employment Guarantee Scheme, the National Knowledge Network and AADHAR. Besides, NTP 2012 emphasises that cloud computing will expedite the design and roll-out of services, and enable social networking as well as participative governance and e-commerce on a scale that was not supported by traditional technology solutions.

The Indian government has been taking several cloud computing initiatives under the aegis of the Department of Electronics and Information Technology. Recently, it launched a national cloud platform under the Meghraj initiative to expedite the delivery of e-services in the country while ensuring better deployment and utilisation of e-government applications and existing IT infrastructure. The initiative will help government departments to procure information and communication technology services on demand under an opex model. The platform provides cloud services such as IaaS, PaaS, SaaS and storage-as-a-service. Its key features include the self-service portal, multiple cloud solutions, secured virtual private network access and multi-location cloud.

New revenue stream for operators

With a huge enterprise customer base and internet data centre (IDC) infrastructure, Indian operators are well positioned to leverage the opportunities offered by the cloud business. With the slowdown in growth from traditional revenue streams, operators are increasingly focusing on investing in segments such as cloud computing. The strong and ubiquitous telecom networks set up by some of the large operators provide a platform for seamless delivery of over-the-top cloud applications to enterprises. SMEs that do not have strong IT infrastructure offer a significant opportunity for telecom operators to provide these services.

Many operators have formed strategic alliances with technology vendors to create and expand their cloud portfolio in a bid to offer innovative services. For instance, in 2012, Bharti Airtel partnered with Microsoft India and HP to offer a suite of SaaS and IaaS products for SMBs. Reliance Communications is offering Reliance Cloud Computing Services, which utilise its data storage IT infrastructure located at its IDCs. These are accessible through the internet on a dedicated/shared/virtual network on a pay-on-usage basis.

Similarly, Aircel has partnered with NEC India to power its cloud initiative – Business Unplugged. State-owned Bharat Sanchar Nigam Limited (BSNL) has also entered the cloud computing space through a partnership with Dimension Data. BSNL is providing enterprise-class cloud services using its nine IDCs across the country and Dimension Data’s managed cloud platform. Both the companies have signed agreements with about 12 organisations such as Indian Railways’ IT arm Centre for Railway Information Systems, EXL Services, Federal Bank, Genpact India, Hindustan Times, India Today, KPIT Cummins, the State Bank of India, Sapient Corporation and Agra-based B.R. Ambedkar University for cloud computing services.

Adapting to changing customer requirements

Cloud technology has brought about a significant change in the way enterprises utilise technology. As they move from traditional hardware and software platforms to private and public clouds, conventional IT vendors such as IBM, Infosys, HP and Microsoft are facing pressure to keep up with the growing adoption of computing resources by utilities. These companies often lack the footprint in terms of an application portfolio and are facing competition from companies such as Google, Amazon and Salesforce.com on the public cloud front; and Oracle and VMware in the private cloud business.

Several traditional IT vendors have expanded their portfolio to include cloud services either by partnering with third-party providers or by acquiring pure technology and service providers. For instance, IBM has purchased cloud computing infrastructure player Softlayer to strengthen its service portfolio. Similarly, Infosys has partnered with Amazon, Microsoft, VMware and various open stack-based cloud providers, besides developing its own set of cloud products. Such partnerships and consolidation are likely to increase as a higher number of niche service providers enter the segment.

The way forward

While cloud computing services are gaining traction among Indian enterprises, there are several challenges related to data security on the cloud. Therefore, it is important that players in this space collaborate with technology vendors to develop solutions, which would ensure greater user data security.

Growing awareness among operators about the potential of cloud computing services for SMBs will be a key growth driver for the segment. Moreover, operators’ entry in the cloud market will provide a major fillip to the adoption of these services. The government’s recognition of cloud services as a potential platform for the delivery of services such as telemedicine and tele-education will also drive growth. India is heading towards a cloud-optimised society and is poised to witness significant growth across business verticals on account of operational and cost efficiencies offered by cloud computing.

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