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Cloud: The huge market waiting to be explored - Views on News from Equitymaster
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  • Aug 31, 2011

    Cloud: The huge market waiting to be explored

    Clouds are the fluffy white or grey things floating in the sky that bring rains. And these clouds hold the key to the prosperity of the Indian economy. But that's not what we are going to talk of in this article. We will address a different cloud and that has potential to change the face of the software industry. We are referring to cloud computing. In our previous article we have addressed the questions on what cloud computing is as well as what are the advantages of cloud services. In this article we will try and see just how large is this cloud computing market. Who are the beneficiaries? And are the Indian Information Technology (IT) firms ready to capitalize on the opportunities presented by this new concept.

    According to the study done by leading management consulting firms, the total cloud market in India is estimated to be around US $ 400 m currently. Further, it is expected to reach a market value of US $ 4.5 bn by 2015. So what will drive this spectacular growth?

    There are broadly two types of clients for the cloud services. The first set comprises of companies that do not have legacy IT infrastructure. The latter are mostly small and medium enterprises. These companies can easily migrate to cloud services. The obvious reason for this is the cost effectiveness of cloud. The companies do not need to invest in creating their own IT infrastructure if they adopt cloud services.

    The second type of companies is those that already have their own IT infrastructure, managed internally or by a third party. A good question here is how would cloud help them? The answer is that cloud services can help such companies in a big way. The firms can change their existing IT infrastructure into a private cloud which can then be solely used by the organization. This will help them cut their IT expenses in the form of reduction of software licenses, hardware requirements etc. In fact, as per the study, private cloud will dominate the major part of the whole cloud business. It is expected to account for US $ 3.5 bn by 2015.

    Some companies are also expected to go for the hybrid cloud. In this model, the applications which are very critical to the business would remain in the private cloud. The extra features and functionalities that are not so critical would be migrated to the public cloud.

    So how would this affect the IT vendors?

    Cloud services will demand a change in the traditional IT services offered by the vendors. With this, the clients would not only be interested in the traditional application development or infrastructure management but would also be looking towards more services offered on the cloud. This would in turn help the client companies through cost savings.

    Bigger companies in the industry have already started to develop their capabilities in the area of cloud services. Earlier the focus was entirely on traditional application development and management business. Now the focus has shifted to this emerging business. For instance, the software giant Infosys aim to generate one third of its total revenues from the product and platform services. Interestingly, cloud services are helping out the IT companies as well. They have also started using clouds to service their existing clients. This helps them serve their clients in a better as well as cost effective manner.

    While there is a big market and a good scope for the cloud but there are several drawbacks as well. The first and foremost concern is the security of the data. As the data would be available in the cloud (data centres) which are readily available to the public. This may pose a great threat to privacy issue. In addition to this is the problem of hiring. The industry is still in its nascent stage. As a result, there exists a problem of skilled people who can work on cloud development.

    The new race has now begun. No doubt, everyone is putting their best foot forward with the aim of grabbing the larger share of this growing pie. This is not only important for the future growth of the IT firms but also necessary for retaining the existing clients. As to who will emerge a winner in this race? Only time will tell.



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