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Cloud Computing Landscape in Key Emerging Markets<br />November 2010<br />
Global IT spending is springing back after a decline last year with a strong push from BRICSS markets<br />1<br />IT Spend...
BRIC countries have been growing faster compared to others for the last few years primarily owing to faster growth of user...
BRICSS nations contribute significantly towards the IT spend globally<br />2<br />Split of IT Investments by Category, US$...
Characteristics of the BRICSS nations are unique and mandate an altogether different approach<br />3<br />Highly Demanding...
Product should enable revenue generation
No need of advanced features – work should get done
Education about consumption – user friendly
Variance in needs based on demography/ location
Need for localization - tailor product to market needs
Attach to local brands/ channels for market acceptance</li></ul>Diversity<br />Limited Income/ Revenue<br />3<br />4<br />...
Young generation make 50% of the population
Huge market for “cool” product, entertainment & communication devices
Revenues lesser than counterparts in developed nations
Smaller/ compact models with variants preferred
Pay per use models thrive in emerging markets
Products for community/ group succeed for cost reason</li></ul>Poor Infrastructure<br />Weak Distribution Network<br />4<b...
Need to build infrastructure to support the business
Need to use existing infrastructure creatively
Lack of strong supply & distribution network
Lack of financing options – Microfinance required
Position smaller stores, telcosand other channels for reach</li></ul>Source: Zinnov Research<br />
CIO organizations’ top business and technology priorities, clearly spell out a future in cloud for the market constituents...
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Cloud computing market in key emering countries

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  1. 1. Cloud Computing Landscape in Key Emerging Markets<br />November 2010<br />
  2. 2. Global IT spending is springing back after a decline last year with a strong push from BRICSS markets<br />1<br />IT Spend Growth Trend by Regions/ Countries, 2010, In Constant Currency<br /><ul><li>Emerging markets such as Brazil, Russia, India, China, South Africa & South Korea (BRICSS) have shown tremendous growth in the IT investments over the last 12 months
  3. 3. BRIC countries have been growing faster compared to others for the last few years primarily owing to faster growth of user industries in these markets</li></ul>Source: Zinnov Research<br />
  4. 4. BRICSS nations contribute significantly towards the IT spend globally<br />2<br />Split of IT Investments by Category, US$ Billion in 2010E<br />$86.8<br />IT Spend Contribution by BRICSS Countries, 2010E<br />$21.8<br />$21.3<br />$15.4<br />$15.4<br />$9.4<br />Worldwide IT Spend (2010E) = US$ 1.51 Trillion<br />Source: World Bank, Zinnov Research<br />
  5. 5. Characteristics of the BRICSS nations are unique and mandate an altogether different approach<br />3<br />Highly Demanding Market<br />Rapidly Changing Market<br />1<br />2<br /><ul><li>Most value for least price is expected
  6. 6. Product should enable revenue generation
  7. 7. No need of advanced features – work should get done
  8. 8. Education about consumption – user friendly
  9. 9. Variance in needs based on demography/ location
  10. 10. Need for localization - tailor product to market needs
  11. 11. Attach to local brands/ channels for market acceptance</li></ul>Diversity<br />Limited Income/ Revenue<br />3<br />4<br /><ul><li>Large base of SMBs; fast growing enterprises
  12. 12. Young generation make 50% of the population
  13. 13. Huge market for “cool” product, entertainment & communication devices
  14. 14. Revenues lesser than counterparts in developed nations
  15. 15. Smaller/ compact models with variants preferred
  16. 16. Pay per use models thrive in emerging markets
  17. 17. Products for community/ group succeed for cost reason</li></ul>Poor Infrastructure<br />Weak Distribution Network<br />4<br />6<br /><ul><li>Limitations of climate, infrastructure and resources such as power
  18. 18. Need to build infrastructure to support the business
  19. 19. Need to use existing infrastructure creatively
  20. 20. Lack of strong supply & distribution network
  21. 21. Lack of financing options – Microfinance required
  22. 22. Position smaller stores, telcosand other channels for reach</li></ul>Source: Zinnov Research<br />
  23. 23. CIO organizations’ top business and technology priorities, clearly spell out a future in cloud for the market constituents<br />4<br />Top Business Priorities for CIOs in 2010<br />Top Technology Priorities for CIOs in 2010<br />1<br />Business Process Improvement<br />Virtualization<br />2<br />Reducing Enterprise Costs<br />Cloud Computing<br />3<br />Increasing Use of Information/ Analytics<br />Web 2.0<br />4<br />Improving Enterprise Workforce Effectiveness<br />Networking, Voice & Data Communications<br />5<br />Attracting & Retaining New Customers<br />Business Intelligence<br />6<br />Managing Change Initiatives<br />Mobile Technologies<br />While IT budgets increase at a fast pace, storage demand is growing at 20-30% and bandwidth demand is increasing at a fast pace of 30-50% in BRICSS nations, clearly mandating need for higher cost control from the IT departments within the enterprises – cloud is the way forward<br />Source: Zinnov analysis of interactions with CIOs of multiple Global & local companies<br />
  24. 24. The cloud market in BRICSS nation is slowly starting to come out of the nascent stages<br />5<br />Evolution of Public Cloud Spending (US$ Million) in BRICSS Nations 2008-2011E<br />Country Wise Share of Public Cloud Spending in 2010<br />$688.0<br />$457.4<br />$310.8<br />SaaS<br /><ul><li>Small and medium businesses are a key focus area for majority of the players looking to scale in BRICSS
  25. 25. The key SaaS adopting verticals in BRICSS are Telecom, Financial services, Government, Manufacturing, etc.</li></ul>PaaS<br /><ul><li>The PaaS/ Platform ecosystem in BRICSS is still in its early stages with very less local company participation
  26. 26. Most of the local developers leverage global platform providers such as Force.com, Google, Azure etc in the current landscape</li></ul>IaaS<br /><ul><li>The IaaS & Hosting ecosystem in BRICSS is very nascent. The hosting market is completely dominated by the state run telecom companies and has very few small or mid-sized hosting providers</li></ul>Source: Zinnov interactions with stakeholders across the cloud computing stack across geographies<br />
  27. 27. The BRICSS cloud ecosystem plays host to a lot of global companies across the cloud computing stack who are increasingly focusing on these markets<br />6<br />Illustrative List of Key Players (non-exhaustive)<br /><ul><li>Salesforce.com
  28. 28. WebEx
  29. 29. NetSuite
  30. 30. RightNow
  31. 31. Oracle
  32. 32. Microsoft
  33. 33. Citrix
  34. 34. Google
  35. 35. Yahoo
  36. 36. Symantec
  37. 37. McAfee
  38. 38. Zoho
  39. 39. TrendMicro</li></ul>Software as a Service (SaaS)<br />Focus of Top Global 150 Cloud Computing Companies<br /><ul><li>Force.com
  40. 40. Google
  41. 41. Microsoft
  42. 42. Zoho
  43. 43. Joyent</li></ul>Platform as a Service (PaaS)<br /><ul><li>Amazon Web Services
  44. 44. Power All
  45. 45. Rackspace</li></ul>Infrastructure as a Service (IaaS)<br /><ul><li>IBM
  46. 46. Oracle (Incl. SUN)
  47. 47. Microsoft
  48. 48. EMC
  49. 49. RedHat
  50. 50. HP
  51. 51. VMWare
  52. 52. NetApp
  53. 53. Juniper
  54. 54. Symantec</li></ul>Cloud Technology Enablers<br /><ul><li>IBM
  55. 55. Dell
  56. 56. Cisco
  57. 57. Alcatel Lucent</li></ul>Hardware Providers<br /><ul><li>HP
  58. 58. Huawei
  59. 59. Nokia Siemens Networks</li></ul>Source: Zinnov research & estimates based on preliminary interactions with key players in the market<br />
  60. 60. 7<br />While BFSI, Telecom & Government are the priority verticals in BRICSS, other verticals are also fast catching up<br />Key Vertical Focus for Cloud Solutions in BRICSS Countries<br />Focus<br />Low<br />High<br />Source:<br />
  61. 61. The future of cloud market in BRICSS countries is very strong with growth rates well over 25% for the next 5 years<br />8<br />Growth of Public Cloud Spending in BRICSS Nations 2010-2015E<br />$3,480.8<br />CAGR = 38.3%<br /><ul><li>Current cloud budget of enterprises in BRICSS countries is less than 50% of the budget of developed nations such as US & Western European countries
  62. 62. More than 50% of enterprises/ SMBs in India & China are looking to increase the IT investments over the next year
  63. 63. Private cloud opportunity in the immediate future to be significantly larger because of concerns around SLAs, data security and latency
  64. 64. Cloud vendors across the stack would be investing heavily to address some of the challenges on demand side</li></ul>$688.0<br />Source:<br />
  65. 65. BRICSS ICT ecosystem is continuously improving on multiple fronts which is enabling increased adoption of cloud services<br />9<br />Governments in BRICSS are extremely active participants in the Cloud ecosystem<br /><ul><li>The government is actively promoting cloud computing through construction of various testbeds and the launch of multiple cloud service initiatives such as e-governance, cloud grids etc.</li></ul>1<br />Telecom Service Providers are aggressively focusing on the cloud opportunity<br /><ul><li>With fast growing subscriber base and declining Average Revenue Per User (ARPU), the Telecom Service Providers (TSPs) are looking at targeting the cloud computing opportunity</li></ul>2<br />Internet Infrastructure is increasingly gaining traction in BRICSS<br /><ul><li>The penetration of broadband and 3G is building a promising opportunity for cloud solutions in the BRICSS nations</li></ul>3<br />Large base of cost sensitive small & medium enterprises looking for IT adoption<br /><ul><li>A large base of SMBs (closed to 100 million in BRICSS nations alone) are looking to enhance the global competitiveness by increasing use of IT</li></ul>4<br />Source: Zinnov Analysis<br />
  66. 66. Governments in BRICSS are aggressively promoting cloud computing through multiple policies and partnerships (1/2)<br />10<br /><ul><li>Huge investments in e-governance initiatives in India; administrators in India are trying to implement cloud computing in e-governance
  67. 67. Government is making headway into the cloud computing space by conducting various awareness programs for its IT departments
  68. 68. UID Authority is creating a platform (identify, authentication and payment) onto which they would like to get solution providers and startups</li></ul>India<br /><ul><li>Stimulus package of US$ 39 Bn to positively impact the IT spending of various industry verticals
  69. 69. Specific focus on cloud computing in the 12th five year plan
  70. 70. E-governance spending on a fast pace in China with a strong focus on cloud; 12 large golden shine projects towards e-governance initiatives</li></ul>China<br /><ul><li>The Korean government plans to invest about US$ 540 Mn till 2014 to stimulate the domestic cloud computing market
  71. 71. Key goals of the government are to globally increase the Korean cloud market share to 10% and reduce cost of public ICT infrastructure by 50%
  72. 72. Initiatives across public sector IaaS, cloud computing test beds, facilitating private sector services, and policy regulations/ standards implementation</li></ul>South Korea<br />Source: Zinnov analysis of Government’s Policy Updates; Official press releases by Ministry of IT<br />
  73. 73. Governments in BRICSS are aggressively promoting cloud computing through multiple policies and partnerships (2/2)<br />11<br /><ul><li>Starting to consider projects involving cloud computing technology by hosting services online. IT is moving from paper-based ledgers to state-of-the-art systems
  74. 74. Advanced public service agencies such as SARS are running cloud based technologies in their environments
  75. 75. The Department of Home Affairs (DHA) has announced that it will spend more than SAR500 Mn on IT projects in the current financial year</li></ul>South Africa<br /><ul><li>Government is trying to diversify the Russian economy by reducing its dependence on oil and gas exports. It has made developing hi-tech sectors and encouraging research the focal point of the economic agenda
  76. 76. Expansive projects like "Electronic Russia" and "Electronic Government“
  77. 77. Government is currently developing a modern center for R&D near Moscow and the first innovation project is a cloud computing based project worth US$29 million</li></ul>Russia<br /><ul><li>Huge investments in the national broadband plan to triple access to broadband services by 2014
  78. 78. Similar to India’s UID project, the government of Brazil has a civil digital identification project with projected investments of approximately US$800mn
  79. 79. As a part of its ongoing Growth Acceleration Plan – 2, the government plans to spend US$23 billion on science and technology with a focus on cloud computing</li></ul>Brazil<br />Source: Zinnov analysis of Government’s Policy Updates; Official press releases by Ministry of IT<br />
  80. 80. Mobile & 3G subscribers have grown significantly in the BRICSS nations<br />12<br />Mobile Subscribers & 3G Users in BRICSS Nations (Millions)<br /><ul><li>BRICSS nations are going through a mobile revolution – rapidly growing subscriber base. India alone adds 20 Mn new subscribers every month (fastest in the world)
  81. 81. BRICSS nations are jumping the technology curve – moving directly to wireless instead of wire line. Aggressive focus by government in BRICSS to build the 3G infrastructure</li></ul>Source: Zinnov Analysis of Statistics from Telecom Providers in Each Country<br />
  82. 82. Rapid growth of internet users provide promising opportunities for cloud based solutions in the BRICSS nations<br />13<br />Internet Users in BRICSS Nations (Millions)<br /><ul><li>BRICSS nations are witnessing a rapid penetration of internet over the last 5 years – Government & industry are aggressively focusing on providing internet in rural areas as well
  83. 83. Newer form factors such as mobile devices, touch pads & net books are slowly giving way to the desktops & laptops in these markets </li></ul>Source: Zinnov Analysis of Statistics from Internet services Providers in Each Country; Zinnov research<br />
  84. 84. Small & mid sized businesses (SMBs) form an important part of the economy in these countries and present a huge opportunity for cloud adoption<br />14<br />Small & Medium Sized Businesses (SMBs) in BRICSS (Millions)<br /><ul><li>Large base of small & medium enterprises – close to 100 million in BRICSS nations
  85. 85. SMBs account for close to 40% of exports and output in both India & China; accounts for 97% of the total enterprises in the country
  86. 86. While SMBs are slowly gearing up towards IT adoption to enhance competitiveness, cost constraints and lack of budget planning are the restraints to IT adoption</li></ul>Source: World bank; Zinnov research<br />
  87. 87. While the ecosystem is evolving, BRICSS nations by the virtue of large size, distributed SMB base and highly localized requirements poses unique challenges to cloud providers<br /><ul><li>Majority of the global cloud companies selling in BRICSS are offering the services at the global price points, with the exception of a few players
  88. 88. The global price points significantly overshoot the buying power of enterprises in BRICSS
  89. 89. Most of the Cloud services firms operating in BRICSS are aggressively SMB focused and they lack the sales bandwidth to effectively cater to the large base SMBs distributed across the country
  90. 90. Most of the sales efforts of the companies are focused toward the metro areas</li></ul>15<br />Cloud Service Provider Challenges in BRICSS Countries<br />Lack of Scale<br />Pricing<br />ProductLocalization<br />ResellerLeverage<br /><ul><li>Due to the lack of in-house sales bandwidth, companies are increasingly relying on reseller partnerships
  91. 91. Majority of the companies do not have a clearly defined reseller strategy to cater to the market. In many cases the reseller is also engaged in promotion of a competing cloud or on-premise product which also hampers the adoption
  92. 92. Low proliferation of English and regional dialects hamper the adoption
  93. 93. Also, the nature of business in BRICSS is predominantly relationship based
  94. 94. The cloud products/ services do not account for these nuances which impact their uptake</li></ul>Source: Zinnov analysis of Interviews with multiple senior stakeholders from the cloud ecosystem<br />
  95. 95. From the demand perspective – Security and Integration are the top concerns with using public cloud services<br />16<br />Public Cloud Service Concerns of CIOs, 2010<br /><ul><li>The CIO organizations are more cautious about data confidentiality & security
  96. 96. There is a strong skepticism around business continuity for cloud deployments
  97. 97. The seamless integration is crucial for leveraging cloud technology to the maximum. In the current scenario, the compatibility issues hinder the integration
  98. 98. The loss of control on the business processes is another concern which slows down the cloud adoption
  99. 99. The cloud computing market is in nascent stage. The ecosystem of academia, enterprises and government is essential to facilitate the cloud adoption
  100. 100. There is lack of service level agreements and guarantees by the providers which adds to the user skepticism
  101. 101. The regulations and policies are not very well defined. Also, the industry lacks standardization frameworks
  102. 102. More clear regulations are needed to increase service providers’ accountability to gain consumer trust
  103. 103. The government poses stringent regulations and auditing requirements in some of the BRICSS countries. This makes the potential customers hesitant and inhibits the cloud adoption</li></ul>Source: Zinnov analysis of Interviews with multiple senior stakeholders from the cloud ecosystem<br />
  104. 104. Cloud service providers have adopted unique and differentiating approaches to succeed in some of these fast growth BRICSS countries<br />17<br />1<br />Go Local – Language & Pricing localization for better market penetration – SuccessFactors, Salesforce.com<br />2<br />Local Infrastructure Presence – To showcase market commitment & remove latency issues – Salesforce.com, Amazon AWS<br />3<br />Local R&D Presence – For better market understanding & acceptance – IBM, Dell, HP, Microsoft, SuccessFactors <br />4<br />Aligning Strategy to Government Policy – For better revenue realization – IBM<br />5<br />SMEs Penetration – Extremely critical for scaling in the market – HP, Microsoft, Salesforce.com<br />6<br />High Touch, Local Field Sales Team Essential – For better market reach – Microsoft, Salesforce.com<br />7<br />Special Economic Zones/ IT Parks – To enable conducting business easier & market acceptance – Joyent, IBM, Google<br />8<br />University Partnerships – For local product innovation & ecosystem development – Google, EMC, IBM<br />9<br />Telecom Service Providers – For gaining immediate market foothold– Leading Telecom Providers in BRICSS<br />10<br />Increasing Private Cloud Adoption – To leverage legacy investments & mitigate security risk – Dell, IBM, HP<br />11<br />Alliances – Critical to operate in the market & reach out to potential customers – IBM, Dell, Oracle, Microsoft<br />Source: Zinnov analysis of Interviews with multiple senior stakeholders from the cloud ecosystem<br />
  105. 105. In a market with close to 3 billion population, partnerships – both strategic and operational, are extremely critical<br />18<br />1<br />2<br />3<br />4<br />Operational Partnerships<br />Strategic Partnerships<br />5<br />6<br />Source: Zinnov analysis of Interviews with multiple senior stakeholders from the cloud ecosystem<br />
  106. 106. Thank You<br />69 "Prathiba Complex", 4th 'A' Cross, Koramangala Ind. Layout5th Block, Koramangala<br />Bangalore – 560095<br />Phone: +91-80-41127925/6<br />Vatika Business Centre,<br />2nd Floor, Block B,<br />1st India Place, M.G Road,<br />Gurgaon – 122002<br />Phone: +91-124- 4028888<br />575 N. Pastoria Ave<br />Suite J<br />Sunnyvale<br />CA – 94085<br />Phone: +1-408-716-8432<br />21, Waterway Ave, Suite 300<br />The Woodlands<br />TX – 77380 Phone: +1-281-362-2773<br />info@zinnov.com<br />www.zinnov.com<br />@zinnov<br />
  107. 107. Zinnov Management Consulting Pvt. Ltd<br />Zinnov | 3<br />Zinnov prides itself on having grown over the last 7 years through a commitment to excellence<br /><ul><li>Started in 2002 with a focus on helping technology organizations globalize their operations
  108. 108. HQ’ed out of Bangalore with operations in Delhi, Mumbai, Valley and Houstan</li></ul>Evolution<br />R&D<br />Innovation<br />Focus Areas<br />Cloud<br />SMB<br />Customer Type<br />Global Technology Firms<br />Indian IT Firms<br />Government<br />Associations<br />Service offering<br />Growth Strategy<br />GTM Strategy<br />Customer Insights<br />Subscription Services<br />Ecosystem Connect<br />We are a strong team of 60 consultants that have been hired from across top B-Schools and Engineering Colleges in the world<br />
  109. 109. Zinnov Management Consulting Pvt. Ltd<br />Zinnov | 21<br />Our indicative client list speaks volumes about our growth<br />Clientele<br />Vertical<br />Enterprise software companies<br />Manufacturing R&D <br />Telecom and Networking<br />Server/Storage<br />Semiconductor/CE<br />
  110. 110. Zinnov Management Consulting Pvt. Ltd<br />Zinnov | 22<br />Zinnov has been at the forefront of driving thought leadership around ‘Cloud Computing’ in Asia Pacific<br />Zinnov conducted the first ever comprehensive study on the SaaS Market in India. The report not just gave insights on customer needs, market size and key market players, but also provided insights on drivers for the market over the next 5 years <br />India SaaS Market Report<br />Cloud-The way forward<br />Cloud- The APAC Story<br />Zinnov is currently executing a syndicated study on the APAC Market for Cloud based solutions and the report will be released in the next 2 months and will be one of only two comprehensive reports to be published on this market<br />The way forward report on cloud published by Zinnov has been widely acknowledged as one of the most easy to read and well articulated reports on how cloud is a perfect storm that could dramatically change the business landscape in India<br />Thought Leadership<br />
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