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India’s public cloud market gains momentum

By GovernanceToday
In Technology
May 12, 2017
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cloudHigh rates of spending on cloud services in India to continue through 2019 when  the market is expected to reach USD1.9 billion, according to a report.

The revenues are expected to be driven by high growth rates in key market segments like cloud infrastructure as a service (IaaS), cloud management and security services and software as a service (SaaS), it added.

“The forecast for cloud services vary based on local factors, including supply and demand within the local markets, countryspecific economic conditions, currency exchange rates, and other global market factors,” said the report.

The explosive growth of IaaS and SaaS in the India market is  an indication that enterprises in India are moving away from building their own on-premises infrastructure, as well as migrating from the traditional software licensing model, to a SaaS model served up by cloud providers.

The public cloud services market in India is projected to grow 38 percent in 2017 to total USD1.81 billion. The highest growth will continue to be driven by infrastructure as a service (IaaS) which is projected to grow at 49.2 percent in 2017, followed by 33 percent in software as a service (SaaS) and 32.1 percent in platform as a service (PaaS). The increase of SaaS and PaaS are indicators that the migration of application and workloads from on premises data centers to the cloud, as well as the development of cloud ready and cloud native  applications, are fueling the growth in the cloud space.

According to experts, this has been predicted for a while, and the momentum continues to sustain in 2017 eventually plateauing through 2020 as the market further matures. As buyers intensify and increase IaaS activity, they will be getting more for their investment: ongoing enhancement of performance, more memory, more storage for the same money (which will drive increases in consumptions) and increased automation in traditional IT outsourcing (ITO) delivery.

The major players holding the global cloud computing market share include Amazon, Akamai Technologies, Hewlett Packet, VMWare, Yahoo, CA Technologies, Caspio and Dell among others. Major competitors for PaaS include Microsoft, Google and IBM among others. Key SaaS players are Google, Cisco, Demandware, Adobe and Hotmail among others. IaaS providers include Akamai, Joyent and GoGrid among others.

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Despite optimistic predictions and clear interest from global players, a variety of challenges have shown that India’s cloud potential continues to persist. These have contributed to a situation in which, regardless of significant awareness, most large Indian enterprises host less than 15 percent of their ICT processes  in the cloud. For example, while analysts have long predicted a boom in the country’s cloud market, in 2013, growth slowed likely due to a flagging currency (which effectively shrank budgets  for foreign ICT services) and pregeneral election reluctance among government departments to make new ICT-related investments.  A lingering problem is the country’s insufficient Internet infrastructure (e.g., bandwidth constraints and fiber optic weaknesses) and the inconsistency of its power supply in some areas.

According to the United Nations, India meets the minimum Internet infrastructure standards necessary for only basic cloud services, with bottlenecks impacting download speeds, upload speeds and network latency.  Further, the World Economic Forum ranked India a dismal 113 out of 142 countries with the availability of international Internet bandwidth, a measure  of the amount of Internet traffic that can be exchanged between countries. Various other rankings and indicators focused on Internet penetration, cloud readiness and other factors confirm a sub optimal state of affairs. When combined with ongoing shortfalls in the steady electricity supply needed for data center operations, it is likely to continue to limit cloud growth. Fortunately, the government is acutely aware of these challenges. India’s ambitious Digital India programme aims to address some of the weaknesses in its infrastructure, though it remains to be seen if this will lead to significant improvements.

cloud-2Moreover, the interest expressed by major cloud providers in establishing Indian data centers suggests that their electrical infrastructure is either improving or they are becoming better at managing it. For example, some firms have implemented redundant power equipment setups and even rooftop solar panels to ensure an adequate supply of electricity.   Another possible step to curb the challenges is placing data centers in areas with more consistent power capacity and better Internet infrastructure.  Another key issue is concerned with security, especially around the use of foreign providers. While there is great interest in cloud based solutions, apprehensions remain about whether cloud services (and particularly public cloud) can ensure adequate protection of sensitive information.  Industry participants report that current adoption focuses on noncritical business workloads and SaaS applications, which are unlikely to host particularly sensitive data, although “people are not as hesitant as they used to be” when it comes to cloud deployments overall, according to one industry expert.  In some sectors with traditionally large IT budgets  (e.g., financial services and telecommunications), an especially strong emphasis on data security or regulations mandating domestic storage of customer data limits interest in cloud usage, especially with a foreign provider. India also presents an ambiguous policy setting for cloud services. Some elements of the environment remain undefined (e.g., India lacks a formal data breach notification rule), while others are clearly positive (e.g., there do not appear to be tariffs on software downloads) and some negative (e.g., government procurement, which though a major source of IT spending is reportedly a complex, multifarious process).

Citing the need to monitor domestic Internet traffic for national security reasons, concerns over foreign surveillance and a desire to ensure that data is subject to local laws, the Indian government has for years supported the idea of foreign firms storing data within the country. One clear example of the push for data localization is in the Department of Telecommunications’ study from January 2015, “National  Telecom M2M Roadmap” (referring to machine to machine data transmission of the sort expected to increase substantially as Internet-connected devices become more common).  The guidelines call for “all M2M gateways and application servers” used in providing services to individuals in India to be physically located within the country. Although, cloud vendors would not be the main focus of this provision, its inclusion points to the acceptance of data localization policies among some in the Indian government.

Conclusion

With new dispensation at the centre to ensure  that Internet companies adhere to Indian laws and cultural expectations,  Indian ISPs have cited privacy concerns in lobbying the government to require data localization. But the government, it seems likely to introduce those additional rules. These measures would address policies on domestic data routing proposed by India in other forums and with the Modi government’s recent moves to exert greater control over online content.

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