The Cloud Chasers

IBM was the pioneer of cloud computing and as a technology it has been around

for nearly a decade now. While the West has become one of the early adopters of

cloud-based computing, the market in India is yet to take off on a full-fledged

scale. "We are still in the early days of cloud computing and from the India

market perspective, clients are in the earlier stages of understanding the

benefits of cloud computing. Every business is a potential user and can benefit

from the cloud," said Anil Menon, VP Channels, Software Group, IBM India and

South Asia.

While things are still nascent, vendors like Microsoft and Google are talking

about cloud computing big time. "Cloud is the new era of computing and it is

here to stay for at least for the next 10 years. Microsoft has always led the

industry in the software space. With businesses looking to the cloud, to bring

higher efficiencies, it is natural for us to extend our strength and expertise

of the past 15 years in the cloud space and offer the value of our experience to

customers," said Rajan Anandan, MD, Microsoft India.

Cloud computing has been touted as the next big thing and by all means it is,

but as far as the Indian market is concerned while there is a lot of hype and

interest generated around this technology the ground realities reflect a more

sobering truth: that SMBs in India are still some way off from shifting to the

cloud in a big way and that the initial vendor push is more oriented to the

enterprise customer.

Diptarup Chakraborti, Principal Research Analyst, Gartner said, "The

penetration of cloud computing in India is negligible at the moment and there

have been very few deployments that have actually happened. Cloud computing

involves a paradigm shift because from a situation where one was buying IT

infrastructure for the last 30 years, one has to now think of taking IT assets

on rent and therefore it is still at a stage where a lot of vendors are trying

to build awareness around it. It is only in the last six months that cloud as a

technology has gotten a push from vendors in a major way. It is all about

creating awareness and tapping the latent market demand. In my view, it is the

vendors who are not ready to address the SMB segment at the moment. Right now

they are more interested in showing proof of concept models to large private

enterprises because that is where they can potentially make money and so their

concern as of now does not extend to the SMB customer."

Cloud for SMBs?



Most channel partners across the country are seeing increasing demand for

cloud computing solutions from enterprise customers and are not very bullish in

their outlook for the SMB segment. Pune-based Shro Systems recently entered this

business and is confident that they will see some cloud computing deals this

year. CEO Anirudh Shrotriya said, "A lot of inquiries that we have been getting

are from bigger enterprises looking to migrate to a private internal cloud setup

and so we have been only addressing the top layer of our customer accounts. The

key verticals for cloud include manufacturing, IT/ITeS and BFSI. This is because

their setup is huge and they typically have multiple projects with multi-user

groups. There is a need for elastic infrastructure to be available as per the

peak and dip in demand patterns. This is best offered by a cloud based

environment and hence a lot of customers from these verticals are opting for the

cloud." Bimal Raj, CEO, Allied Digital Services, an SI based out of Mumbai said,

"We are just a year old in this business and while today cloud computing may be

just a single digit percentage of our revenue but we see this business growing

at an aggressive rate in the years to come. We are predominantly seeing traction

for cloud-based solutions from the upper mid-market to large enterprise

customers and



not SMBs as of now. These would be customers from manufacturing and
distribution, BFSI among other verticals. We recently tied up with a large core

banking solution provider and we have been managing the cloud setup for their

customers. We have four of such customers in the US and two in India."

Devendra Taneja, PC Solutions, Delhi talks about private and public clouds.

"There are two types of cloud services, private and public cloud. The former

normally deals with large enterprises at one location and the other is more

useful for a company with multi-geographic locations. Cloud here in this country

is definitely a buzzword but there is still time left before we see a mass shift

of companies to the cloud environment. In India, I feel private cloud will gain

more momentum than public cloud. This is our first year on cloud business and we

hope to do 10 percent of our total business on cloud by the end of this year. In

the coming three to five years I see around 60 percent of my business coming

from cloud services which is quite substantial."

KV Jagannath, CEO of Hyderabad-based Choice Solutions feels that cloud is

more relevant for the enterprise because it can help them save on licensing

cost. "Cloud computing can help enterprise customers deliver better value, as it

helps them save on the licensing cost on enterprise applications like ERP, which

can be quite substantial over a period of time. The requirement of an SMB

customer on the other hand is more primitive with mailing applications being one

of the most used and so they do not feel the need for cloud at the moment. SMBs

are not initiators, they are followers and in my opinion it will take at least

three years to educate the customer fully on the benefits accrued due to cloud,"

he said. Choice Solutions has opportunities in the pipeline and hopes to get

some wins very soon and currently operate where enterprise application providers

hold a monopoly. "I offer GIS, CAD/CAM applications on the cloud to my customers

and also testing apps which can typically cost around Rs 30-40 lakh," said

Jagannath.

There are those that believe that computing is future but there is still some

time before it comes through. Sudhir Kothari, Embee Software, a Kolkata-based SP

said, "The business of cloud is nil in the East as of now and it is very

minuscule in the West as well. There is no doubt that cloud is very much the

future of computing, but it is still some good two years before it actually

happens. At present we have no clients on cloud. However, we are talking to few

clients and are likely to close some business in March."

There are some partners who believe that SMBs are ready for cloud already.

Ranjan Chopra of Delhi-based Team Computers is one of them. "I feel SMBs are

ready to be on cloud right away as it makes perfect commercial sense. Currently,

we are seeing both enterprise and SMBs adopting cloud because of lower costs per

transaction. I think the key factors which will drive growth especially in the

SMB sector would be lower costs and innovation and lower risks," he said. Team

Computers is expecting to make around Rs 5 crore in its first year from selling

cloud solutions. "As far as cost saving on cloud over premise is concerned, I

think the delivery costs are much lower. In my view, in the coming year about 20

percent of the infrastructure business will move to cloud and this will only

pick in the times to come. In fact, for most new businesses which will be set up

in the future, cloud makes a lot of sense," added Chopra. Agreed Anil Lanba, EVP,

Pyramid Consulting, a Fortune 500 company, "I feel in the coming years

everything would be on cloud and I foresee good growth potential from cloud

solutions. For instance, Microsoft has started offering e-mail on the cloud at a

fee of Rs 100. Similarly Microsoft BPOS which is essentially MS Exchange is also

offered on the cloud. Being an MS partner, this is a business opportunity for

us."

Delhi-based ACPL makes around eight percent of its business from offering

security solutions via the cloud and the business has grown well over 100

percent. "Of this eight percent, five percent comes from SMB customers and the

rest is enterprise. I feel SMBs are ready for cloud computing and I expect a lot

of adoption from that segment going forward," said Vishal Bindra, CEO, ACPL.

Chennai-based crmOrbit has been a Salesforce.com partner in India since 2007 and

has seen 200 percent growth in business from cloud computing. Lakshmi Sunder,

CEO, crmOrbit said, "Around 70 percent of our customers are SMBs and compared to

enterprise it is easier to sell to SMBs because the decision makers are few in

an SMB company while in an enterprise customer, the decision makers are many and

so while the turnaround time with an SMB is anywhere between one-three weeks,

for an enterprise customer it can take months."

Benefits of cloud for SMBs



On the benefits that cloud offers for SMBs, Vijay Mukhi, Cloud Evangelist,

Aptech India, said, "SMBs are a target market for the cloud as it helps them use

technology at lower costs. With cloud, there are no upfront capital expenditures

needed and the running costs of technology are also lower. You do not have to

hire expensive administration staff and problems like upgradation and patching

of software and viruses are taken care of by the cloud service provider. The

adoption costs are also lower as you do not have to maintain a network

infrastructure. The only problem is the availability of a network service

provider that can provide reliable uptime." Quoting from data, Sunder of

crmOrbit said, "With the Salesforce.com cloud solution, an SMB can realize the

following tangible benefits: A 30 percent increase in lead conversion rates; a

35 percent increase in sales team productivity; a 27 percent increase in sales

closure; and a 34 percent increase in sales revenues. Also for an SMB customer,

our offering begins from $780/user per year and the implementation cost is

typically 70 percent of the license cost and there is no other hidden cost being

a subscription model. Scalability is more easily achieved when you are on the

cloud."

PC Solutions' Taneja said, "With cloud, the cost saving factor for SMBs is

that they can go from capex mode to opex mode. Also it provides them with a

ready concept of optimum utilization of resources." Bindra of ACPL said that

there are straight savings with cloud. "Customers with multiple office presence

across the country can see direct savings from going the cloud way and these

savings are not only on the infrastructure but also on the manpower cost

required to manage the infrastructure. For instance with on premise computing of

every Rs 1,000 you spend, 30 percent is on hardware and also a major chunk goes

into paying the salaries of the manpower required to maintain the hardware. The

savings on cloud can therefore be as much as 30-40 percent," said Bindra.

Barriers to SMB adoption



"The low adoption of core applications like ERP among SMBs, coupled with the

fact that not many software applications for SMBs are offered on SaaS has made

me of the opinion that SMBs are not ready for cloud computing yet. However, we

believe that our business model should include cloud-based offerings as that is

the way to go ahead. The biggest concern for any customer and not just an SMB is

the question of trust and security surrounding their data on the cloud," said

Vasudev Rao, Director, SK International.

Raj of Allied Digital said, "Some of the barriers that prevent SMBs from

adopting cloud computing currently are a lack of clarity and awareness. There is

still ambiguity over the concept of cloud computing and most SMBs do not have a

high-end IT department to educate their senior management about it. Most SMBs do

not use core applications but instead use applications like Tally or Quickbooks.

When it comes to putting their data on the cloud, they then become more wary of

this technology as they question if their data can be kept from reaching the

wrong hands." Echoing on the security concern, Shrotriya of Shro Systems said,

"I feel smaller customers are ready albeit not fully for cloud especially since

they have applications like ERP systems, mailbox and Sharepoint Server in place

and the realization of the benefits of migrating to cloud is dawning upon them.

What they are not yet confident is about moving to a public cloud where they are

unsure of the level of security that they can get."

Kothari offers a variety of reasons why SMBs are not ready for the cloud.

"Firstly, they are still not aware of the concept. Secondly, the recurring cost

phenomena to be acceptable to the Indian mentality shall take some time.

Thirdly, the apprehension on the data security on cloud is always going to be a

concern. And finally, the apprehension that the customers would be tied to a

vendor with high level of dependence on it, would make them think multiple times

before they would like to embark on the journey to cloud. In addition to this,

some have already invested on Infra so they would like to wait before going

ahead with cloud," said Kothari.

Gartner's Chakraborti believes that SMBs would have the least roadblocks

adopting a cloud-based infrastructure. "SMBs would be the one segment with the

least roadblocks and would find it easier to migrate to a cloud computing

scenario. The reason for this is that most SMBs are under invested in IT in

terms of spending on system applications. The other aspect is that SMBs do not

have huge IT teams. Most of them have small teams of three-four members so it is

easier to use the team optimally even after shifting to cloud, unlike

enterprises where there may be more job redundancy because of the shift to

cloud," explained Chakraborti.

Way forward



Allied's Raj feels that SMBs need a push to start adopting. "The initial
momentum is needed to spur on the SMBs and once there is a client base that can

be referenced in addition to demonstrate the benefits then they would be more

willing to shift to cloud," said Raj. Lanba of Pyramid said, "As of now SMBs are

not investing on cloud computing, but if the RoI is communicated through proper

guidance and the advantages elucidated explicitly, they would move towards the

same. The government and the banking segment would also need to contribute

towards the same by offering soft loans for its initiation." Shro Systems is

training its employees and doing events to build awareness. "We are training our

employees to address this new business opportunity and we are also conducting

some events centered around cloud for our certain customers," said Shrotriya.

Bindra is of the belief that seeing is believing. "Once SMB customers see around

four-five of their peers who have gone in for cloud computing, then they also

want to go for it. Building a base of case study references becomes important

when selling to them," said Bindra.

Kothari is of the opinion that SMBs need to increase their adoption of

applications. "In India SMB usage of IT is limited to mail, MS Office, Tally and

ERP for their business. They need to move forward by adopting things like

workflow applications, proper e-mail solutions, document management solutions,

online backup solutions, security etc. Once they understand that doing all this

is a business need which brings in efficiency, they might be attracted to cloud

since it gives ready infrastructure without self maintenance. The other critical

aspect is the awareness factor and that needs to be taken care of by the

vendors. They need to invest on marketing heavily to make it a success. Not many

people know about it as of now," he stated.

Finally IBM's Menon highlights key issues that need to be addressed for cloud

computing to take off. "Like any other emerging paradigm, cloud computing has

challenges that are around interoperability across different clouds which would

need standardization efforts. When data has to be accessible outside enterprise

environments, concerns about security/data privacy come



up and those need to be addressed. The ability to manage heterogeneous server
environments and client devices so that services are interconnected and

available where and when needed, should be addressed in a seamless way. Also how

'public cloud' could interact and interoperate with 'private cloud' needs to

evolve as well," said Menon signing off.

John Jacob and Bharat Sharma



johnj@cybermedia.co.in,

bharats@cybermedia.co.in