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Cloud Computing Market in Key Emerging Countries


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  • It will be good if you can revisit this research now. I want to know where cloud fits the bill for Indian companies where infrastructure costs are anyway lower than anywhere else in the world. Also, the myth about cloud being safe has taken a hit post the spying revelations of NSA. Also, Indian enterprises do not like transparency in business operations, so what does cloud adoption mean for them in the context of keeping operational data outside the physical walls of the enterprise?
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  • 1. Cloud Computing Landscape in Key Emerging Markets November 2010This report is solely for the use of Zinnov client and Zinnov personnel. No part of it may be circulated, quoted, orreproduced for distribution outside the client organization without prior written approval from Zinnov
  • 2. Global IT spending is springing back after a decline last year with a strong push from BRICSS 1markets IT Spend Growth Trend by Regions/ Countries, 2010, In Constant Currency 25.0% 21.0% 20.0% 17.0% 15.0% 14.0% 13.0% 10.0% 8.0% 6.0% 6.6% 5.0% 5.0% 3.0% 0.5% 0.0% Worldwide United Western Japan China Russia Brazil India South South States Europe Africa Korea • 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 • 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 ZinnovSource: Zinnov Research Confidential
  • 3. BRICSS nations contribute significantly towards the IT spend globally 2 Split of IT Investments by Category, US$ Billion in 2010E $100 IT Spend Contribution by BRICSS Countries, 2010E $86.8 $90 $80 $18.4 $70 ROW $11.3 $60 89% $50 $40 $30 $57.1 $21.8 $21.3 $15.4 $15.4 BRICSS $20 $9.4 $8.9 $9.4 11% $6.4 $3.9 $10 $2.9 $3.8 $3.2 $5.7 $3.5 $9.5 $8.6 $8.3 $1.8 $0 $3.3 $4.1 China India Brazil South Russia South Korea Africa Worldwide IT Spend (2010E) = US$ 1.51 Trillion IT Equipment/ Hardware Software Products IT Services ZinnovSource: World Bank, Zinnov Research Confidential
  • 4. Characteristics of the BRICSS nations are unique and mandate an altogether different approach 3 1 Highly Demanding Market 2 Rapidly Changing Market • Most value for least price is expected • Variance in needs based on demography/ location • Product should enable revenue generation • Need for localization - tailor product to market needs • No need of advanced features – work should get done • Attach to local brands/ channels for market acceptance • Education about consumption – user friendly 3 Diversity 4 Limited Income/ Revenue • Large base of SMBs; fast growing enterprises • Revenues lesser than counterparts in developed nations • Young generation make 50% of the population • Smaller/ compact models with variants preferred • Huge market for “cool” product, entertainment & • Pay per use models thrive in emerging markets communication devices • Products for community/ group succeed for cost reason 4 Poor Infrastructure 6 Weak Distribution Network • Limitations of climate, infrastructure and resources • Lack of strong supply & distribution network such as power • Lack of financing options – Microfinance required • Need to build infrastructure to support the business • Position smaller stores, telcos and other channels for reach • Need to use existing infrastructure creatively ZinnovSource: Zinnov Research Confidential
  • 5. CIO organizations’ top business and technology priorities, clearly spell out a future in cloud for 4the market constituents Top Business Priorities for CIOs in 2010 Top Technology Priorities for CIOs in 2010 Business Process Improvement 1 Virtualization Reducing Enterprise Costs 2 Cloud Computing Increasing Use of Information/ Analytics 3 Web 2.0 Improving Enterprise Workforce Effectiveness 4 Networking, Voice & Data Communications Attracting & Retaining New Customers 5 Business Intelligence Managing Change Initiatives 6 Mobile Technologies 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 ZinnovSource: Zinnov analysis of interactions with CIOs of multiple Global & local companies Confidential
  • 6. The cloud market in BRICSS nation is slowly starting to come out of the nascent stages 5 Evolution of Public Cloud Spending (US$ Country Wise Share of Public Cloud Million) in BRICSS Nations 2008-2011E Spending in 2010 $800 $688.0 $700 $106.2 India $600 $457.4 South 16% $500 $128.8 Korea $310.8 $400 $69.4 29% Brazil $85.8 $300 13% $44.5 $58.8 $453.0 $200 $302.1 Russia $100 $207.4 4% China $0 36% 2008 2009 2010E South Africa SaaS PaaS IaaS 3% SaaS • Small and medium businesses are a key focus area for majority of the players looking to scale in BRICSS • The key SaaS adopting verticals in BRICSS are Telecom, Financial services, Government, Manufacturing, etc. PaaS • The PaaS/ Platform ecosystem in BRICSS is still in its early stages with very less local company participation • Most of the local developers leverage global platform providers such as, Google, Azure etc in the current landscape IaaS • 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 ZinnovSource: Zinnov interactions with stakeholders across the cloud computing stack across geographies Confidential
  • 7. While BFSI, Telecom & Government are the priority verticals in BRICSS, other verticals are also 6fast catching up Key Vertical Focus for Cloud Solutions in BRICSS Countries India China S. Korea S. Africa Brazil Russia BFSI Telecom Government IT-ITeS Healthcare Education Manufacturing Oil & Gas Focus Low High ZinnovSource: Confidential
  • 8. The future of cloud market in BRICSS countries is very strong with growth rates well over 25% 7for the next 5 years Growth of Public Cloud Spending in BRICSS Nations 2010-2015E $4,000 $3,480.8 $3,500 • Current cloud budget of enterprises in BRICSS countries is less than 50% of the $727.0 budget of developed nations such as $3,000 US & Western European countries $2,500 CAGR = • More than 50% of enterprises/ SMBs in $675.1 38.3% India & China are looking to increase $2,000 the IT investments over the next year $1,500 • Private cloud opportunity in the immediate future to be significantly larger because of concerns around $1,000 $688.0 $2,078.7 SLAs, data security and latency $106.2 $500 $128.8 • Cloud vendors across the stack would $453.0 be investing heavily to address some of $0 the challenges on demand side 2010E 2015E SaaS PaaS IaaS ZinnovSource: Confidential
  • 9. BRICSS ICT ecosystem is continuously improving on multiple fronts which is enabling increased 8adoption of cloud services Governments in BRICSS are extremely active participants in the Cloud ecosystem 1 • The government is actively promoting cloud computing through construction of various testbeds and the launch of multiple cloud service initiatives such as e-governance, cloud grids etc. Telecom Service Providers are aggressively focusing on the cloud opportunity 2 • With fast growing subscriber base and declining Average Revenue Per User (ARPU), the Telecom Service Providers (TSPs) are looking at targeting the cloud computing opportunity Internet Infrastructure is increasingly gaining traction in BRICSS 3 • The penetration of broadband and 3G is building a promising opportunity for cloud solutions in the BRICSS nations Large base of cost sensitive small & medium enterprises looking for IT adoption 4 • A large base of SMBs (closed to 100 million in BRICSS nations alone) are looking to enhance the global competitiveness by increasing use of IT ZinnovSource: Zinnov Analysis Confidential
  • 10. Governments in BRICSS are aggressively promoting cloud computing through multiple policies 9and partnerships (1/2) • Huge investments in e-governance initiatives in India; administrators in India are trying to implement cloud computing in e-governance • Government is making headway into the cloud computing space by conducting India various awareness programs for its IT departments • UID Authority is creating a platform (identify, authentication and payment) onto which they would like to get solution providers and startups • Stimulus package of US$ 39 Bn to positively impact the IT spending of various industry verticals China • Specific focus on cloud computing in the 12th five year plan • E-governance spending on a fast pace in China with a strong focus on cloud; 12 large golden shine projects towards e-governance initiatives • The Korean government plans to invest about US$ 540 Mn till 2014 to stimulate the domestic cloud computing market South Korea • 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% • Initiatives across public sector IaaS, cloud computing test beds, facilitating private sector services, and policy regulations/ standards implementation ZinnovSource: Zinnov analysis of Government’s Policy Updates; Official press releases by Ministry of IT Confidential
  • 11. Governments in BRICSS are aggressively promoting cloud computing through multiple policies 10and partnerships (2/2) • 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 • Advanced public service agencies such as SARS are running cloud based South Africa technologies in their environments • The Department of Home Affairs (DHA) has announced that it will spend more than SAR500 Mn on IT projects in the current financial year • 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 Russia research the focal point of the economic agenda • Expansive projects like "Electronic Russia" and "Electronic Government“ • 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 • Huge investments in the national broadband plan to triple access to broadband services by 2014 Brazil • Similar to India’s UID project, the government of Brazil has a civil digital identification project with projected investments of approximately US$800mn • 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 ZinnovSource: Zinnov analysis of Government’s Policy Updates; Official press releases by Ministry of IT Confidential
  • 12. From the demand perspective – Security and Integration are the top concerns with using public 11cloud services Public Cloud Service Concerns of CIOs, 2010 Data security and reliability • The CIO organizations are more cautious about data confidentiality & security • There is a strong skepticism around business continuity for cloud deployments Integration with existing systems and loss of control • The seamless integration is crucial for leveraging cloud technology to the maximum. In the current scenario, the compatibility issues hinder the integration • The loss of control on the business processes is another concern which slows down the cloud adoption Lack of maturity and service level agreements • The cloud computing market is in nascent stage. The ecosystem of academia, enterprises and government is essential to facilitate the cloud adoption • There is lack of service level agreements and guarantees by the providers which adds to the user skepticism Legal or regulatory ambiguity • The regulations and policies are not very well defined. Also, the industry lacks standardization frameworks • More clear regulations are needed to increase service providers’ accountability to gain consumer trust Compliance with legal, regulatory and auditing requirements • 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 ZinnovSource: Zinnov analysis of Interviews with multiple senior stakeholders from the cloud ecosystem Confidential
  • 13. Cloud service providers have adopted unique and differentiating approaches to succeed in 12some of these fast growth BRICSS countries 1 Go Local – Language & Pricing localization for better market penetration – SuccessFactors, 2 Local Infrastructure Presence – To showcase market commitment & remove latency issues –, Amazon AWS 3 Local R&D Presence – For better market understanding & acceptance – IBM, Dell, HP, Microsoft, SuccessFactors 4 Aligning Strategy to Government Policy – For better revenue realization – IBM 5 SMEs Penetration – Extremely critical for scaling in the market – HP, Microsoft, 6 High Touch, Local Field Sales Team Essential – For better market reach – Microsoft, 7 Special Economic Zones/ IT Parks – To enable conducting business easier & market acceptance – Joyent, IBM, Google 8 University Partnerships – For local product innovation & ecosystem development – Google, EMC, IBM 9 Telecom Service Providers – For gaining immediate market foothold– Leading Telecom Providers in BRICSS 10 Increasing Private Cloud Adoption – To leverage legacy investments & mitigate security risk – Dell, IBM, HP 11 Alliances – Critical to operate in the market & reach out to potential customers – IBM, Dell, Oracle, Microsoft ZinnovSource: Zinnov analysis of Interviews with multiple senior stakeholders from the cloud ecosystem Confidential
  • 14. In a market with close to 3 billion population, partnerships – both strategic and operational, are 13extremely critical 1 2 3 4 Re-Branding & Direct Customer/ SMB Access Vertical Access Localization Channel Access Operational Partnerships Strategic Partnerships 5 6 Complimenting Government Capabilities ZinnovSource: Zinnov analysis of Interviews with multiple senior stakeholders from the cloud ecosystem Confidential
  • 15. Thank You 69 "Prathiba Complex", 4th A Cross, Koramangala Ind. Layout 5th Block, Koramangala Bangalore – 560095 Phone: +91-80-41127925/6 Vatika Business Centre, 2nd Floor, Block B, 1st India Place, M.G Road, Gurgaon – 122002 Phone: +91-124- 4028888 575 N. Pastoria Suite J CA – 94085 Phone: +1-408-716-8432 21, Waterway Ave, Suite 300 @zinnov The Woodlands TX – 77380 Phone: +1-281-362-2773
  • 16. Zinnov prides itself on having grown over the last 7 years through acommitment to excellence •Started in 2002 with a focus on helping technology organizations globalize their Evolution operations •HQ’ed out of Bangalore with operations in Delhi, Mumbai, Valley and Houstan R&D Innovation Focus Areas SMB Cloud Global Customer Type Indian IT Firms Government Associations Technology Firms Growth Customer GTM Ecosystem Subscription Service offering Strategy Insights Strategy Connect Services We are a strong team of 60 consultants that have been hired from across top B-Schools and Engineering Colleges in the world Zinnov Management Consulting Pvt. Ltd Zinnov | 3
  • 17. Our indicative client list speaks volumes about our growth Vertical Clientele Enterprise software companiesManufacturing R&D Telecom and NetworkingServer/StorageSemiconductor /CE Zinnov Management Consulting Pvt. Ltd Zinnov | 16
  • 18. Zinnov Management Consulting Pvt. LtdZinnov has been at the forefront of driving thought leadership around‘Cloud Computing’ in Asia Pacific 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 India SaaS Market Report Cloud- The APAC Story Cloud-The way forward Zinnov is currently executing T h o u g h t The way forward report on a syndicated study on the Leadership cloud published by Zinnov has APAC Market for Cloud based been widely acknowledged as solutions and the report will one of the most easy to read be released in the next 2 and well articulated reports on months and will be one of how cloud is a perfect storm only two comprehensive that could dramatically change reports to be published on the business landscape in this market India Zinnov | 17