Global Transaction Services Asia Pacific

Opportunities from Cloud ComputingINSIGHTS | Corporate Clients

Headlines in the press announcingdeal activity around acquisition ofcloud computing assets has beenincreasing lately. SAP will spend $3.4billion to acquire Success Factors fortheir human-resources software,Oracle Corporation will spend $1.5billion on RightNow Technologies Incfor their cloud-based call center, salesforce and CRM automation, and IBMwill spend $440 million on DemandTecfor their cloud-based retail pricingsoftware.

EMC and Cisco jointly launched theirCloud Experience Centers in Bangalorein May last year. This is a first-of-its-kind collaboration between twoinformation technology (IT) industryleaders with the twin facilities locatedat the EMC Center of Excellence and atthe Cisco Globalization Center East,creating a lab that provides Indian

customers with an opportunity toexperience the benefits and reliabilityof cloud-based IT infrastructure. VCE,the Virtual Computing EnvironmentCompany formed by Cisco and EMCwith investments from VMware andIntel, accelerates the adoption ofconverged infrastructure and cloud-based computing models thatdramatically reduce the cost of ITwhile improving time to market for its customers.

Demand for cloud-based applicationsto fulfill requirements of big businessis increasing and the upgrade oftelecom infrastructure around theworld facilitates adoption. Companiesthat sell software and IT services havefound their next big opportunity. Somecompanies such as Microsoft andGoogle have already established

successful business models with cloud-based delivery and the press regularlycovers new announcements. Gartnerestimates the cloud computing marketwill grow from $68.3 billion to $148.8billion in 2014.

Where is the demand for these services?The demand arises from the need forbusinesses to continue innovation ontheir services and business processeswithout any access to incrementalinvestment budgets. Cloud computingprovides an opportunity to adoptbetter infrastructure at a variable cost and scale up or down dependingon the environment. Availability ofinfrastructure on rent reduces barriersto entry for new players and allowssmall and medium enterprises to useefficient infrastructure at anaffordable price.

Nissan recently announced it isworking with Microsoft to develop acloud-based dealer managementsystem to better connect it to itscustomers. A survey by OxfordEconomics (in collaboration with AT&T,Cisco, Citi, PWC and SAP) found that80 percent of business users consider

Demand for cloud-based applications to fulfill requirementsof big business is increasing and the upgrade of telecominfrastructure around the world facilitates adoption.Gartner estimates the cloud computing market will grow from $68.3 billion to $148.8 billion in 2014.

the cloud as essential for success.While cloud computing was firstadopted in the US and Europe, it isproving especially valuable in emergingmarkets, where rapid growth and alower level of legacy infrastructuremake it an obvious choice. The surveyfound that 70 percent of firms inemerging markets are evaluating amigration to the cloud, versus only 46percent in developed markets. There isconsiderable activity in India with ahuge potential for SMEs to leapfrogfrom paper based tools to the best ofbreed applications to run theirbusiness. Companies such asFreshdesk (online help), Zoho(collaboration and productivity tools)and OrangeScape (platform provider)have been at the forefront of thistrend and have seen significant take-up from companies migrating to thecloud. Similar initiatives in China arebeing encouraged by the government.

What is It? Cloud computing is the delivery ofcomputing as a service rather than asa product, and it is done so in real timeusing a grid of inter-connectedcomputers. Users pay for the amountof the service they use in a pay-as-you-go model, much in the same way youpay a utility for the electricity, gas orwater you use. The on-demand self-service cloud offers rapid scalingability and ubiquitous network accessfrom anywhere, anytime, using anykind of device via the client’s owninterface. The ability to pool resourcesmeans reduced costs, with companiesusing and paying for only what theyneed while avoiding large capitalinvestments in IT. Under a cloud

environment, IT is built, run, consumedand governed differently. It shifts thefocus from technical management of ITto more of contractual management.

Cloud computing is a game changer as it allows companies to rentinfrastructure instead of making largecapital investments. This lowers thebarriers to entry, particularly for SMEsand independent businesses. Once theservice is set up it provides companieslarge or small with an easy deliveryplatform for a rapidly increasing arrayof digital services, including thedeployment of sophisticated treasurysolutions. Personal usage of cloud-based “applications” such asFacebook, Linkedin and Emailapplications have helped createawareness among potential usergroups. 12 percent of the world’spopulation already use smart-phonesresulting in a 20 percent annual

increase in usage of cloud computing.Cloud computing has moved from thefringes of technological innovation to mainstream business. Nothingillustrates this as clearly as the pricesleading technology companies arewilling to pay for cloud computingexpertise.

Cloud Service ModelsAccording to National Institute ofStandards and Technology (NIST),USA, the cloud-based services can beclassified as IaaS (infrastructure as aservice), PaaS (platform as a service)and SaaS (software as a service). Whileweb-based servers, storage systems,virtual LANs and others would fall

under IaaS, the developers communitywould use PaaS to access Java, DotNetand other software infrastructure viathe cloud. The most commonly talkedabout model, however, is SaaS whichbenefits the end user community witha variety of business applications. Themost common applications are thosethat support payroll, enterpriseresource planning, various treasuryprocesses, customer relationshipmanagement, expense management,emails and others. Some of the mostcommon cloud-based applicationsinclude salesforce.com, Googleapplications, Office 365 as well asmany others listed on Wikipedia (Cloud Applications)http://en.wikipedia.org/wiki/Category:Cloud_applications

Public vs. Private CloudsNIST has also defined the clouddelivery models as private, public,community and hybrid cloud. A publiccloud, which many consumers alreadyuse on a daily basis via their emailsystems and smart-phone applications,is owned by the organization sellingthe service. A public cloud service canhost applications, email, databases andusually consist of large investmentsfrom the service provider and hence iseasily scaled up for growth in scopeand volume. A private cloud, on theother hand, is operated solely for anorganization and may be managed by that organization or a third party. A private cloud may exist on or off thecompany’s premise, as they choose. A community cloud operates much like a private cloud, but is shared byseveral related organizations or by acommunity of users, for example acloud-based offering for developmentof smartphone apps. Lastly, a hybridcloud — as the name suggests — is acomposition of two or more cloudsbound together for data and applicationportability. For example, a companymay have a private cloud infrastructurebut may still use a third-party SaaS forCRM, ERP, treasury and payroll.

Cloud computing provides an opportunity to adopt betterinfrastructure at a variable cost and scale up or downdepending on the environment. Availability of infrastructureon rent reduces barriers to entry for new players andallows small and medium enterprises to use efficientinfrastructure at an affordable price.

Growing Adoption DespiteChallenges While the components of technologyhave been available for some timenow, adoption had been limited givenconcerns around security, telecominfrastructure reliability and lack ofappropriate user applications. The needto innovate with limited resources hasnow resulted in large business housesprioritizing involvement and adoption.The Open Data Center Alliance(http://www.opendatacenteralliance.org/)was formed a year ago to push for thedevelopment of industry standards forsecurity, data center management andcloud-enabled applications and toaccelerate cloud investment. Membersconsist of representation from allsectors of the economy includingmanufacturing, services, financial

institutions as well as consulting. Thealliance predicts that its members willtriple their cloud deployment in thenext two years, an adoption rate fivetimes faster than earlier marketforecasts.

Security is a key concern amongpotential adopters and the cloudmodel has evolved accordingly.Deployment over a public cloud oftenresults in apprehension about securityof data, performance of theinfrastructure, lack of customization,costs and risks of contract termination,and reliability of support. At presentthere is no comprehensive legalframework in place to set and enforcestandards of cloud computing service.Hence public clouds have not beenpopular for business criticalinformation and related processes.

However, the cost pressures and needto continue innovating have forcedcompanies to evaluate the feasibilityof using cloud infrastructure. In arecent meeting with a startup venture,the CFO announced that the entireTreasury and HR teams would besetup on a public cloud infrastructure.A consulting company has beenengaged to find the appropriateapplications, infrastructure andsupport services that can be rented fora minimum of two years. ParticularlySaaS is increasingly becoming apreferred option as several largeglobal players have entered themarket with state-of-art solutions.According to Gartner, the adoption ofcloud-based emails by enterprises willgrow from 4 percent in 2011 to 55percent by 2020.

The de facto enterprise model forlarge international companies is ahybrid cloud, which combines bothprivate and public clouds for greatersecurity and flexibility while maintainingthe portability and accessibility of apublic cloud. Companies may chooseto move non-sensitive functions to thepublic cloud, while putting moresensitive data on their private cloud.

EMC Corporation — a global leader in data storage, virtualization andinformation management solutions —has saved over USD100 millionthrough virtualization of its ITinfrastructure, while also reducingover 90 million pounds of carbonemissions. By transitioning to a hybridcloud-based IT infrastructure, andusing the advanced capabilities thatsuch an infrastructure provides,

EMC IT’s ultimate goal is to enableend-to-end, on-demand, self-serviceprovisioning of IT services to itscustomers, i.e., the business units ofEMC. While the core infrastructure andmission critical applications reside onEMC’s private cloud, the company alsouses third-party SaaS for payroll,expense management, CRM and otherapplications. It has also introduced labas a Service (IaaS) at its R&D center inBangalore where different businessunits can rent customized virtualmachines from a common pool insteadof investing in their own infrastructure.EMC expects to recoup their initialinvestment within one year due toenergy and other efficiency savings.

Treasury in the CloudAn increasing number of corporatefunctions are moving to the cloud and users have a growing range ofcloud-based software offerings.Salesforce.com serves the CRMmarket, while Microsoft 365 is used in productivity management. TreasuryServices, tgoldsoftware.com andSungard all offer a range of cloudservices to assist in risk management,cash management, finance andtreasury control.

Many companies are already adoptingthese technologies for their financeand treasury functions. It is thecompanies whose treasurers worktogether with their CIOs and ITdepartments to adopt such higher-efficiency solutions that see greaterprofits and longevity in today’schallenging business environment.Efficiencies in data management,technology and resource centralizationquickly convert into wins fortreasurers who are being asked todeliver higher performance withreduced liquidity. New players as wellas new business units of existingplayer’s budget assuming usage ofcloud-based computing resources.

New business models result in large scale consumption of digital content over the Internet. Businesses require ahigh level of sophistication to collect the charges, reconcileagainst the services and ensure that the appropriate MIS isbeing collated for related analytics.

Manash Dasgupta

Sector HeadTechnology, Media, TelecommunicationsClient Sales Management, Asia PacificGlobal Transaction Services, Citi

Email: manash.dasgupta@citi.comTel: +852 3419 8737

New Business Models andBanking SupportBusinesses that have digital contentand services automatically use theInternet for delivery. While establishedplayers use their own infrastructure,startups often use cloud-basedinfrastructure for quick entry withflexibility to scale up. These newbusiness models result in large scaleconsumption of digital content overthe Internet.

While many services are free at thebasic level, the higher end versionusually has a price. Pricing modelsrange from monthly flat subscriptions,usage based tiered pricing or evenpay-as-you-consume models.Collection of some of these small-value but large volume of fees can be

challenging given the global reach ofthe Internet, the large number of userconsumption and the velocity at whichcollections accrue. Businesses requirea high level of sophistication to collectthe charges, reconcile against theservices and ensure that theappropriate MIS is being collated forrelated analytics. Credit cards havebeen the most common mode forpayment while other solutions includedirect bank debits, Paypal and similarregional solutions. The costs caninclude interchange, foreign exchangeconversion costs as well as bankservice fees.

For example, Microsoft sells digitalservices on Xbox360, Office 365 andAzure, among other products. Googlesells all of their services via the cloud,

while Facebook, the world’s mostvaluable social network, is a cloud-based infrastructure. Microsoftcharges for usage of the service whileboth Google and Facebook charge forthe advertisements. Users have theoption of paying by credit cards andPaypal in some cases. Banks like Citi have been developingcollection methods that can supportsuch business models and provide a onestop shop to support all collection models.Moreover, payment to app developerslocated around the world can befacilitated by single window paymentservices provided by Citi. Citi’s newgeneration of capabilities can providestandardized capabilities across morethan 100 countries to support thisadoption of cloud computing andrelated services around the world.

For more information about Citi’s Global Transaction Services, please visitwww.transactionservices.citi.com.

Global Transaction Services Asia Pacific — February 2012© 2012 Citigroup Inc. All rights reserved. Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates andare used and registered throughout the world.

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Sandeep Kejriwal

Chief Financial Officer EMC Software and Services India Private Limited

Email: sandeep.kejriwal@emc.comTel: +91 80 6737 8190