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