Cloud Computing Adoption in India

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<ul><li><p>8/3/2019 Cloud Computing Adoption in India</p><p> 1/44</p><p>Cloud adoption in IndiaInfrastructure as a Service (IaaS)Trends and perceptions in the Indian market</p></li><li><p>8/3/2019 Cloud Computing Adoption in India</p><p> 2/44</p><p>2 Cloud adoption in India</p><p>The cloud computing Infrastructure as a Service (IaaS) market is at a nascent stage both</p><p>globally and in India. Across industry segments, the Indian market has shown signicant</p><p>interest in the potential of IaaS services. Virtualization, often seen as the rst step in a</p><p>cloud strategy, has begun to be more widely implemented across Indian data centers.</p><p>Related markets such as Software as a Service (SaaS) is experiencing increased</p><p>adoption and this can be expected to contribute to a more rapid implementation of the</p><p>IaaS concept. However, there are signicant barriers to adoption, including the absence of</p><p>an IaaS ecosystem and the lack of awareness of available services on the part of</p><p>potential buyers.</p><p>This report is an attempt to reach out to chief information ofcers (CIOs) and analyze</p><p>their expectations from, and perceptions of, the Indian IaaS market and draw relevant</p><p>inferences for the entire IaaS ecosystem. It intends to dene areas that will benet</p><p>1. Executive summary 04</p><p>2. The Indian IaaS market 06</p><p>2.1 Drivers for cloud IaaS services in the Indian market 06</p><p>2.2 Barriers to adoption in the Indian market 07</p><p>2.2 Familiarity with cloud-computing concepts 08</p><p>2.3 Perception of cloud computing 09</p><p>2.4 Timeframe for adoption 10</p><p>3. Perceived benets of implementing cloud IaaS services 11</p><p>3.1 Perceived operational and business benets 11</p><p>3.2 Moving to an OPEX model 13</p><p>2</p><p>Appendix A: models of cloud computing 25</p><p>Appendix B: the global cloud market 26</p><p>Appendix C: IaaS and the enterprise 29Appendix D: addressing security concerns 32</p><p>Appendix E: customizing the cloud 34</p><p>Contents</p><p>Foreword</p></li><li><p>8/3/2019 Cloud Computing Adoption in India</p><p> 3/44</p><p>3Cloud adoption in India 33</p><p>4. Perceived challenges to cloud IaaS services adoption 15</p><p>4.1 Perceived technical, business and environment challenges 15</p><p>5. Expectation from vendors 19</p><p>5.1 Preferred pricing models 19</p><p>5.2 Preferred channel for cloud services 20</p><p>5.3 Enterprise expectation of security and controls framework 20</p><p>5.4 Vendor assessment criteria 21</p><p>6. Recommendations 22</p><p>6.1 Recommendations for service providers 22</p><p>6.2 Recommendations for enterprises 23</p><p>most from a conversation between emerging cloud IaaS service providers and interested</p><p>enterprises in the Indian market. The primary data for this report was collected through an</p><p>Ernst &amp; Young administered survey among leading enterprises and interviews conducted</p><p>with IaaS ecosystem players.</p><p>I hope the ndings of this research provide you with valuable insights and I encourage you</p><p>to share with us your comments, questions and suggestions. I look forward to continuing</p><p>our discussions on this constantly evolving and exciting space.</p><p>Milan Sheth</p><p>August 2010</p><p>Appendix F: benets of implementing cloud IaaS services 38</p><p>Appendix G: challenges in shifting to a cloud IaaS model 40</p><p>Appendix H: cloud enabling technologies: virtualization 41Appendix I: About the study 42</p><p>Sources: 43</p></li><li><p>8/3/2019 Cloud Computing Adoption in India</p><p> 4/44</p><p>4 Cloud adoption in India</p><p>1. Executive summary</p><p>Cloud computing IaaS brings utility computing closer to reality. It has the potential to</p><p>change the way IT hardware is purchased, designed and used. With its promise of innite</p><p>scalability and a pay-as-you-go pricing model, the primary benet that cloud IaaS services</p><p>extends to the large enterprise is greater business effectiveness at lower IT costs. For the</p><p>small and medium business (SMB) segment, cloud IaaS services lower barriers to market</p><p>growth by lowering technology costs and upfront investments.</p><p>What are the primary drivers of cloud adoption in India likely to be?</p><p>On the demand side, improving high-speed connectivity, an emerging SMB segment</p><p>investing in IT infrastructure and increasing enterprise data center expenditure are</p><p>drivers that are expected to contribute to a growing cloud IaaS market. From the supply</p><p>perspective, a maturing traditional IT market and an extremely competitive third-party</p><p>data center market are likely to be primary drivers of cloud IaaS services.</p><p>Our survey targeted CIOs of enterprises belonging to both the SMB and large enterprises</p><p>segments. On the buyer side, despite the low visibility of IaaS vendor services in the</p><p>market, most CIOs surveyed are aware of, and have expressed interest in, the concept and</p><p>the potential benets of moving at least part of their applications to servers and storage</p><p>on the cloud. The following are among the key ndings from the survey:</p><p>Positive perceptions, awareness levels and expected timelines for adoption are</p><p>indicative of a market that is ready to experiment with cloud IaaS services.</p><p>Effective communication from service providers at this stage should dispel some of the</p><p>concerns that enterprises have around ecosystem maturity.</p><p>The SMB segment is more attuned to the benets and challenges of the cloud.</p><p>Furthermore, the maturity of the ecosystem is less of a deterrent to the SMB segment.</p><p>This makes the SMB segment ideal to approach as an initial adopter of cloud IaaS</p><p>services.</p><p>Enterprises perceive data security and privacy as the biggest barrier to adoption.</p><p>Third-party data service providers and traditional IT service providers are being viewed</p><p>as the primary channels for enterprises to buy cloud services from. Such providersshould play a pivotal role in bringing the ecosystem together.</p></li><li><p>8/3/2019 Cloud Computing Adoption in India</p><p> 5/44</p><p>5Cloud adoption in India</p><p>Both enterprises and service providers are likely to benet from a consultative approach</p><p>and in-depth discussions with cloud IaaS service providers in the following areas:</p><p>The differentiating benets of cloud IaaS services</p><p>Pricing structures, nancial models and return on investment (ROI) that a cloud</p><p>adopter can expect from moving to the cloud</p><p>Guidelines and benchmarks to help enterprises select applications that are most</p><p>suitable for adopting either the private or the public cloud models</p><p>Addressing security and data privacy issues satisfactorily</p><p>Extending customer support to adopters of the technology</p><p>For the purpose of this report, IaaS includes both computing/processing capacity and the</p><p>storage capacity available through remote virtual server infrastructure.</p><p>The cloud services ecosystem is evolving rapidly. Active participation from both service</p><p>providers and enterprises at this juncture will help create a more robust ecosystem and</p><p>shorter time to adoption. In this report, we evaluate the opportunities, advantages and</p><p>challenges for cloud computing infrastructure as a service adoption in India.</p></li><li><p>8/3/2019 Cloud Computing Adoption in India</p><p> 6/44</p><p>6 Cloud adoption in India</p><p>2. The Indian IaaS market</p><p>At present, the Indian market does not have a mature ecosystem that supports cloud</p><p>IaaS services. As such, the cloud IaaS market in India is yet to take off. A few players from</p><p>the service provider segment such as Tata Communications, Wipro and NetMagic have</p><p>announced services that are likely to evolve into more stable cloud offerings.</p><p>Tata Communications, for example, offers its customers an advanced virtualized</p><p>environment with exible arrangements to enhance capacity. On the consumer side, Airtel</p><p>is offering Net PCs, low-cost online computers with processing capability accessible over</p><p>the net. Infrastructure providers of the cloud such as VMWare, NetApp and IBM havecrystallized offerings for the private cloud, and have taken proactive steps in educating</p><p>the consumer on the benets of cloud IaaS services. Some of the challenges the market</p><p>currently faces include:</p><p>Ecosystem maturity</p><p>Customer awareness of services</p><p>Connectivity</p><p>The market is seeing a concerted effort in the related Software as a Service (SaaS) space.</p><p>The SaaS market is increasingly gaining acceptance in the SMB segment, indicating a shift</p><p>in the thought process of CIOs and IT decision makers. A recent NASSCOM EmergeOut</p><p>session, held in August 2009, focused on SaaS and the cloud market. The IaaS market is</p><p>also likely to benet from the increasing maturity of these related markets.</p><p>2.1 Drivers for cloud IaaS services in the Indian market</p><p>While the market is currently at an embryonic stage, the presence of several positive</p><p>drivers lends to the promise of cloud IaaS services evolving into a fast-growth segment.</p><p>SMB segment: The size of the Indian SMB market exceeds that of any other country in</p><p>the Asia-Pacic region. India is also forecasted to achieve the highest SMB IT expenditure</p><p>growth rates, with more than 50% of the expenditure expected to be dedicated to</p><p>hardware. Even at its current stage of maturity, cloud IaaS is a viable proposition for most</p><p>enterprises in the SMB segment. Cloud IaaS services give SMBs access to technologies</p><p>they would otherwise not be able to afford. The low lead time of cloud IaaS to deploymentand scalability also negates technology barriers to growth. For vendors offering IaaS, the</p><p>Indian SMB market provides a unique opportunity to enter and grow this segment.</p><p>Low protability of third-party data center service providers: Third-party data centers</p><p>currently operate at extremely thin margins. This can be largely attributed to the product</p><p>mix, which leans toward basic co-location services rather than value-added, high-margin</p><p>services such as managed hosting. Cloud IaaS services offer service providers the</p><p>opportunity to leverage their existing IT investments to create a new line of value-added</p><p>services with more protable revenues.</p><p>ISP telecom operators: Moreover, in the Indian context, internet service providers</p><p>(ISPs) own and operate many of the larger data centers. Telecom ISPs have investedsubstantially in bandwidth creation, and currently, the market has excess bandwidth</p><p>capacity. Introducing cloud IaaS services to their current portfolio will help ISPs increase</p><p>bandwidth usage and increase customers switching costs.</p></li><li><p>8/3/2019 Cloud Computing Adoption in India</p><p> 7/44</p><p>7Cloud adoption in India</p><p>Enterprise data center expenditure: With signicant power and electricity overheads,</p><p>enterprise data centers are a major drain on enterprise IT budgets in India.</p><p>Ernst &amp; Youngs survey indicates that more than 80% of the enterprises surveyed are</p><p>considering initiatives to reduce the overall footprint of their data centers. The average size</p><p>of an enterprise data center in the Indian market is in the range of 1,0001,500 sq. ft. The</p><p>cost structure of an average data center is illustrated below. As a result of under-utilization,</p><p>the overhead cost of under-utilized infrastructure tends to be a signicant cost driver.</p><p>Maturing traditional IT market: The growth projection for the domestic IT market is</p><p>between 2008 and 2013 is expected to be 15.8%, as against the average annual growth</p><p>of 25% recorded during between 2003 and 2008 (IDC estimates). With slower growth</p><p>and increasing competition in the traditional IT outsourcing services market, vendors are</p><p>seeking new business models to increase their revenue streams.</p><p>Equipmentcosts</p><p>12%</p><p>Facilitycosts</p><p>10%</p><p>Man</p><p>powercosts</p><p>7%</p><p>Bandwidthcosts</p><p>12%</p><p>Power costs38% Maintenance costs21%</p><p>Data center cost composition</p><p>2.2 Barriers to adoption in the Indian market</p><p>Ecosystem maturity: While the cloud IaaS space has elicited interest from a number of</p><p>larger players across both system integrators (SI) and telecom ISP providers, there are</p><p>very few true cloud offerings at present. This is a major deterrent for a potential cloud</p><p>IaaS customer.</p><p>Customer awareness: Most potential customers are knowledgeable about IaaS services.</p><p>However, they not aware of its overall impact and the return on investment (ROI) that</p><p>adopting such technologies can yield. They are also not aware of the specic services that</p><p>vendors in this space offer.</p><p>NetMagic is the rst vendor</p><p>to offer cloud infrastructure</p><p>services in India. As part</p><p>of its cloud-computing</p><p>portfolio, NetMagic offers</p><p>the following services:Cloud Serve is targeted at the</p><p>SMB segment and provides</p><p>disposable servers thatare congured on demand</p><p>depending on business needs.</p><p>Cloud Net is a service model</p><p>that provides the customer</p><p>with the capability to create</p><p>complete IT infrastructure,</p><p>including servers, rewalls,</p><p>load balancers and switches.</p><p>This service specically</p><p>addresses the opportunities</p><p>of hosting portals, disaster</p><p>recovery and the testing of</p><p>mid-sized internet companies</p><p>and traditional enterprises.</p><p>PrivateCloud is a dedicated</p><p>hosted cloud infrastructure</p><p>service catering to large</p><p>individual enterprise</p><p>requirements.</p></li><li><p>8/3/2019 Cloud Computing Adoption in India</p><p> 8/44</p><p>8 Cloud adoption in India</p><p>Connectivity: Poor connectivity may prove to be a signicant barrier to adoption. Low</p><p>internet and PC penetration (less than1% in urban areas, 31 PCs per 1,000, according</p><p>to NASSCOMs report, Perspective 2020) are discouraging. However, given the recent</p><p>regulatory progress in third-generation (3G) and fourth-generation (4G) technologies, the</p><p>expansion of private players, government initiatives and the declining cost of PCs, India is</p><p>likely to see considerable progress in broadband and internet connectivity over the next</p><p>two to four years.</p><p>While exact price structures are yet to evolve, vendors are looking to reduce prices by</p><p>at least 2025%. Existing players can expect to see other international and local players</p><p>enter this space. As compared to the global market, India is yet to see the entry of cloud-</p><p>related, value-added software solutions related to billing, provisioning and management.</p><p>This could be a potential challenge for Indian service providers.</p><p>81%</p><p>67%</p><p>41%</p><p>IaaS</p><p>SaaS</p><p>PaaS</p><p>IaaSSaaS</p><p>Key:</p><p>PaaS: Platform as a Service</p><p>SaaS: Software as a Service</p><p>IaaS: Infrastructure as a Service</p><p>PaaS</p><p>Source: EY survey Cloud adoption in India, 2010</p><p>Which of the following concepts of cloud computing are you highly familiar with?</p><p>Familiarity with cloud-computing concepts</p><p>Gauging from the awareness indicated by 81% of the survey respondents, IaaS awareness</p><p>is certainly not expected to hinder cloud IaaS service adoption. A related question on</p><p>areas of adoption indicates that people are equally open to adopting cloud in storage and</p><p>processing capability.</p><p>Further, the survey indicates that awareness levels on SaaS are currently lower than that</p><p>of IaaS. The SaaS market in India has only just begun to enter a phase of realization. SaaS</p><p>vendors are pushing aggressively in the market for the adoption of their services. As this</p><p>market grows, a benecial spillover effect on the IaaS market can be expected.</p><p>The main drivers of growth</p><p>in the Indian cloud market</p><p>are the SMB segment, the</p><p>current low protability of</p><p>Indian data service providers</p><p>and the enterprises need to</p><p>reduce data center-related</p><p>costs. Ecosystem maturity</p><p>and customer awareness</p><p>of available services and</p><p>connectivity are the current</p><p>barriers to cloud adoption.</p></li><li><p>8/3/2019 Cloud Computing Adoption in India</p><p> 9/44</p><p>9Cloud adoption in India</p><p>2.3 Perception of cloud computing</p><p>The positive perception of IaaS indicates a signi...</p></li></ul>