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For A Slice Of The Cloud
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Prasanna Gogwekar has bet his future on the cloud. The managing director of the six- year-old Pune-based startup, QID Solutions, is building an application that allows restaurant owners to track the movement of stock into their outlets. The solution will be delivered via a virtual centre, which will allow his clients to keep track of their inventory without having to invest heavily in their own hardware. Gogwekar's company is a pioneer in offering RFID or radio-frequency identification solutions via the cloud and he has built similar solutions for other clients and industries too. Gogwekar charges his clients on a pay-as-you-go model. And he hosts his solutions on the Microsoft Azure platform — a pay-as-you-go service that the Seattle-based giant offers for independent software vendors (ISVs).
In Mumbai, Sumeet Vaid, CEO of Ffreedom Financial Planners, has also adopted cloud computing wholeheartedly to cut his IT costs without compromising the service his 70-odd financial managers provide to the firm's 600 clients. Vaid has not chosen any of the Microsoft services though — he swears by the rival platform provided by the $2-billion cloud services company, Salesforce.com. Meanwhile, Prakash Bhaskaran, CEO of the Bangalore-based security applications company Pawaa Software, has built his new solutions using the Google App Engine. He believes that Google offers him the best platform for development of his services.
India is slowly moving to the cloud. And even as that movement gathers momentum, a number of heavyweights — from Microsoft and Salesforce to Google and Amazon, and from IBM to HP — jostle to become market leaders in different segments of the cloud market. Others such as SAP and Oracle, who are late to the party, are drawing up aggressive plans to carve out spheres of influence in the fledgling market.
In terms of size, the Indian market is still quite small — barely $900 million or maybe just a bit more currently, compared to the global market of $109 billion, according to Zinnov Management Consulting. It also estimates that the Indian market will be worth about $3-4 billion by 2015. On the other hand, IT industry body Nasscom and consultancy firm Deloitte conducted a study recently, which said the Indian market could grow to as large as $16 billion by 2020.
Despite being a minuscule market at the moment, India is considered a huge potential market largely because there are millions of small and medium businesses who cannot afford to invest in expensive hardware and software solutions and are, therefore, customers ripe for the cloud computing movement. Also, as competitive pressures force chief information officers of enterprises to cut costs without losing out on performance, the enterprise market for cloud is expected to grow exponentially. "About 60 per cent of enterprise workloads will be on the cloud in five years, from the current nonexistent levels," says Vishnu Bhat, head of cloud services at Infosys.
Finally, there is the hope that many of the government's IT-based services will move to the cloud. Add all those up, and you have a market rich with promise. One of the startups banking on the government for giving a boost to business is Inube Solutions in Bangalore. It makes browser-based apps for insurance agents, which will help them record premium, sales and settle claims on mobile devices. "The government has a plan to reach 40 million below-poverty-line families in four years and we are helping insurance firms use the cloud to reach these people," says Vinod Iyer, CEO of Inube Solutions. He adds that the cloud can capture any amount of data and solve its complexity, especially when the government aims to reach 40 million people. No wonder all the big guns of the cloud world want to play in India, though even market leaders are making little money currently.
"Globally speaking, India is a greenfield nation for cloud services," says Praveen Bhadada, director of market expansion at Zinnov. He says the market for education, financial services and mobile banking was going to lead the cloud revolution in India. "The primary driver of the cloud is to keep costs low and to drive manager productivity," says Dharanibalan Gurunathan, vice-president, offerings management and development, global technology services, IBM India. He adds that globally, cities are moving their IT onto the cloud and that all the data needs real-time analytics. "The cloud makes all this possible," says Gurunathan.
Though the cloud market potential is huge, it is hardly a homogeneous market. In fact, you could look at it as a group of overlapping markets, all of which have only one thing in common — the fact that the services are delivered to end users, largely on a pay-as-you-go model, and probably via the Net. (Though, there are also parts of the cloud business like private clouds, which follow neither of these rules.) The services could include apps, storage space or even things such as enterprise resource planning services.
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Currently, there are four different types of market opportunities that have cropped up — though more are likely to come up in the future. Roughly 25 per cent of the market in India is in what is called the "private cloud" business though a survey showed that 75 per cent of CIOs of big firms preferred the private cloud because of security reasons. The private cloud involves helping organisations move their physical infrastructure, IT services and networking to a cloud or cluster of servers, which are dedicated to that organisation alone. The private cloud can either be managed by the organisation itself or a third party. Microsoft, IBM, HP, Oracle and several others are vying for this market, as are several Indian players such as Infosys and Wipro who, in turn, build their solutions around hardware and software provided by the US giants.
The other three opportunities lie in the "public cloud". These are SaaS (software as a service), PaaS (platform as a service) and IaaS (infrastructure as a service). SaaS includes both big corporate offerings such as Microsoft's Office 365 and Google Docs, as well as smaller, more specialised offerings of the kind QID Solutions develops for clients. The ERP solutions that SAP expects to deliver also fall in the category of SaaS. PaaS is aimed largely at independent software vendors, who use these platforms to build their own software services. The Microsoft Azure and the Salesforce platform fall in this category. The last one — IaaS — involves offering storage space and taking care of other infrastructure needs of corporate clients. Here, Amazon Web Services and others such as Oracle, Hitachi and HP are competing.
Over a period of time, the public cloud market is expected to become an even bigger opportunity — largely because millions of small and medium firms will use the public cloud, and not private clouds, to keep costs low as they go for more software services.
Both Microsoft and Salesforce, by far the most aggressive players in India, plan to tap the small and medium businesses, both directly and indirectly. The former involves offering solutions directly without any intermediaries. But given the sheer size of the potential client base, Microsoft and Salesforce are also tying up with hundreds of ISVs (think Infosys, Wipro as well as Indian startups), which in turn reach out to small clients. The business model, roughly, is a tripartite or dual agreement between the user, the ISV and the platform provider. On an industry average, the entire cost is borne by the user, the ISV makes 20-30 per cent of this charge or there is a revenue share.
But companies such as HP and SAP also depend on ISVs to tap the market. "Our road map is to help ISVs build applications that can enable customers to participate in the converged cloud. The converged cloud will include IaaS, PaaS and SaaS solutions which will be managed by HP," says Santanu Ghose, country head for converge infrastructure solutions for HP India.
There are some 3,000 ISVs in India, and Microsoft has tie-ups with 450 of them while Salesforce has joined hands with around 400. Microsoft and Salesforce are, in some ways, a study in contrast. The Microsoft platform is proprietary, but holds great appeal to most enterprises, simply because its legacy systems have been built around Microsoft enterprise software.
The logic also attracts ISVs, who know that building on top of the Microsoft platform gives them greater acceptability with clients who have been using various Microsoft solutions for many years. "About 80 per cent of the world's businesses use Microsoft software. On an enterprise level Microsoft has the ability to move large customers to the cloud," says Sameer Bordas, founder and CEO of Icertis in Washington. "Microsoft ensures interaction between on-premise core data and data on the cloud seamlessly, while other cloud providers only move processes of enterprises to the cloud," says Bordas.
The Seattle-based giant is also going after the start-up market, and is willing to make little or no profits in the present, provided it gets big revenues in the future. Currently, Microsoft has deployed the platform among 1,000 startups for free in India and a 1,000 more companies are using it on a pay-as-you-go basis for computing power and storage of data.
"This is just the tip of the iceberg. We focus on solving the IT adoption problem with SMBs," says Srikanth Karnakota, director of ISV and platform strategy at Microsoft India. Of the millions of small and medium businesses (SMB) in India, he says, only 800,000 have broadband and 1 million have computers. "Any cloud service for an enterprise should be integrated into mobile devices too," he says. Microsoft is pushing Azure as the ideal platform to build solutions for different industries.
This Microsoft platform is being used in the garment industry in Tamil Nadu's textile city of Tirupur, where a bunch of 15-odd companies is using ERP systems on the cloud. The Azure platform is also bought in bulk by the ISVs and integrated across various industry verticals, where the payment is based on a pay-as-you-go model and the storage used. Globally, Azure costs $280 a month for computing, data management up to 10 GB and 1 TB of storage.
The government of India, too, became one of Microsoft's big wins recently. [email protected] is the leading cloud suite for education, with more than 22 million people using the service worldwide and it recently got picked up by the All India Council for Technical Education (AICTE), which is part of the HRD ministry. At 7.5 million users, the AICTE deployment is one of the largest cloud deployments ever.
Microsoft also has other household names which are using solutions built on its Azure platform. In the last six months, 300 diabetes clinics of Apollo Hospitals moved to the cloud. Idhasoft, a company that makes cloud-based applications on Azure, has transferred all transactions and patients' health records of the hospital to the cloud. "Chains of hospitals and clinics have many insurance claims. With data being virtual, it can be pulled in quickly to settle a case," says Satya Adari, head of the healthcare division at Idhasoft, a $100-million ISV.
Salesforce, which had started with its own proprietary platform initially, has moved to offer a platform based on the Open Source movement, after it took over Heroku in the US. There are plenty of software vendors who swear by the Salesforce platform.
Many ISVs prefer Salesforce to Amazon primarily because it is an Open Source platform, which many people consider more flexible. NationWide Primary Healthcare has built services on the cloud; it uses Salesforce's Force platform to run and analyse transactions. This chain of nine health centres moved to the cloud 18 months ago and all the transactional data of patients are on the cloud. "The cloud helps us ramp up the number of clinics and all we have to do is pay for the extra number of users in each centre," says Anuj Pandit, head of technology at NationWide Primary Healthcare.
Salesforce says it has 104,000 firms using its platforms and services globally. The company did not want to divulge its India plans, but close to 1,000 firms have subscribed to Salesforce over the past year or so and the number is growing. "India has been one of the fastest growing cloud computing markets for a few years now," says Lee Thompson, senior vice-president for corporate sales for A-Pac at Salesforce. The service cloud in Salesforce charges $260 per month for 11 GB of storage, for unlimited customisation and development of custom applications.
Though Amazon and Google are not nearly as aggressive in India as Microsoft and Salesforce, they have their own loyalists. The action in the SaaS space is also hotting up as a few global leaders have jumped into the market. SAP, which has started offering ERP and other solutions via the cloud, admits it has moved into India late. "We need to build more channel partners to push our cloud-based products. Our competition in India has more partners and is really out there capturing the market," Bernd Leukert, executive vice-president and head of application continuous innovation at SAP. Currently, SAP has 200 partners in India and has 3,900 SMBs using its legacy applications.
And just this week, Oracle said it was getting serious about India in the cloud sphere. Currently, Oracle has one household name as a client — Flipkart. The e-tailer has shifted its entire CRM operations to a cloud solution provided by Oracle. "Our strategy is to help clients move to the private, public and hybrid cloud. Secondly, also help companies to use our own platforms and applications in the cloud," says Dhruv Singhal, cloud lead, Oracle India.
In this war for India's SMBs, Google cannot be ignored. It claims that there are 4 million users of the Google App Engine globally. As it runs free applications, its penetration among individuals is the highest. Google, too, did not divulge its India plans. "It is clear that legacy systems are moving to the cloud. We have to find the early adaptors," says Vinay Goel, head of products in Google. He adds that firms are moving to Google to run their email and office solutions. "We moved to Google apps to consolidate and share reports within the organisation, instead of them being isolated on desktops," says Gautam Mishra, director at Indus Valley Partners. He says even their New York office was not left out of the cloud. Google charges $130 for 1 TB of data on a pay-as-you-go basis.
There are other competitors to Microsoft, Google and Salesforce. Wolf Networks and OrangeScape are still small firms, but have built up a sizeable reputation here with more than 100 customers each and are rapidly growing. Citrix Systems is very active in the desktop virtualisation space as well as in mobility and collaboration solutions. Gordon Payne, senior vice-president and general manager, desktop and cloud division, Citrix Systems says: "Imagine in a banking industry where companies have to invest in servers because of thousands of applications that need to be maintained, sometimes many of these applications are not used by the entire workforce. With our mobility solutions in private and public clouds, we can give access to certain applications for specific individuals and this allows companies to save on maintaining and running their own hardware."
"We have seen a massive shift in cloud computing over the last few years," says Thompson of Salesforce. He says this shift is witnessed by a rising social media revolution that has changed the way billions of people around the world communicate with each other. What he means is that mobility has unleashed the need for real-time collaboration within enterprises. Increasingly, businesses are using applications to create employee social networks so that their workforce can collaborate in a private and secure way.
Even Microsoft and Google have already put big money behind this, as sales of mobile devices such as the iPhone, the iPad, Android-based smartphones outstrip those of personal computers. "We see a developer revolution under way," says Karnakota of Microsoft. Thompson agrees. Developers have fallen in love with real-time, multi-tenant app development platforms.
A report by Springboard Research says that India's enterprise mobile workforce is expected to grow from 134 million in 2011 to 205 million in 2015. Nearly two-thirds of India's mobile workforce is likely to own a smart mobile device by 2015.
According to a Nielsen report, Facebook has more than 32 million active users in India alone. In 2010, India was the fifth largest country for Facebook and in 2012, it will be the second largest. The small battles are now taking centrestage. Perhaps, there will be no single winner. The cloud will allow new entrepreneurs to question old processes, and the race will be won not by the largest force, but those with the most nimble ideas.
(This story was published in Businessworld Issue Dated 06-08-2012)