Cloud market in India: It’s raining opportunities

It’s not just large businesses, but over 50 million small and medium enterprises (SMEs) and start-ups in the country that are looking at cloud technology – a virtual infrastructure to store and share data and applications, available through internet – as a game changer in their digital journey

July 3, 2018

Government of India’s thrust towards Digital India is facilitating the cloud boom in the country; Connecting 250,000 gram panchayats in the country with high-speed broadband will open the doors to newer business opportunities

Top technology players like Amazon, Microsoft, Google, and Alibaba are opening data centers in India to reap the growth; For enterprises dependent on sensitive data storage, co-location services are helping address data sovereignty concerns

In 2016, the public cloud services market in India was valued at US$1.3 billion. Within a year, the sector touched US$1.8 billion, says Gartner, a US-based research firm; In the next two years, the number is expected to grow to US$4.1 billion

From investing in cloud services for e-Governance initiatives to delivering on the Government of India’s think-tank Niti Aayog’s vision of an AI-led economy, the thrust towards Digital India is facilitating the cloud boom in the country

It’s not just large businesses, but over 50 million small and medium enterprises (SMEs) and start-ups in the country that are looking at cloud technology – a virtual infrastructure to store and share data and applications, available through internet – as a game changer in their digital transformation journey.

In 2016, the public cloud services market in India was valued at US$1.3 billion. Within a year, the sector touched US$1.8 billion, says Gartner, a US-based research and advisory firm. In the next two years, the number is expected to grow to US$4.1 billion. Thanks to rising literacy rate, improving economy and rapid internet penetration as well as comprehensive e-Governance projects, the Digital India initiative and growing digital transactions across the country, cloud is leading the way to India’s digital success story.

India a strong contender

According to the International Data Corporation (IDC), a US-based market research firm, worldwide public cloud infrastructure revenue has more-than-doubled in the past three years to US$9 billion in the first quarter of 2018. Asia-Pacific witnessed the highest regional growth at 39 per cent.

While India has not yet made it to the top five list, which includes the USA, The UK, Germany, Japan and China, the nation is a strong contender in the regional market. In 2017, India was the third largest contributor in Asia-Pacific excluding Japan (APeJ) Public Cloud market.

The early adopters of the technology in India include telecommunication, banking and discrete manufacturing industries, followed by professional services, security services, investment, and insurance sectors. Recently, even non-conventional sectors like media are embracing cloud computing.

Investment opportunities

Increasingly, traditional on-premises, license-based database models are making way for cloud-based, price-competitive alternatives. More so, with cloud becoming the launchpad for IT innovation – artificial intelligence (AI), big data, blockchain, among others, demand for public cloud in India is steadily getting stronger.

As a result, top global technology players such as Amazon, Microsoft, Google, and Alibaba are stepping up their investments in India and opening data centers in the country. Enterprises in India, driven by the need for business innovation, agility and scalability in a competitive market, are looking at cloud services for more strategic reasons such as collaborative solutions, supply chain management (SCM), customer relationship management (CRM), enterprise risk management (ERM), disaster recovery, among others. Further, the adoption of AI-laden cloud services – for forecasting, analytics and business intelligence – is heralding a new era of cloud computing in India.

From investing in cloud services for e-Governance initiatives to delivering on the Government of India’s think-tank Niti Aayog’s vision of an AI-led economy, the thrust towards Digital India is facilitating the cloud boom in the country

As per a recent IDC forecast, globally, the largest portion of the public cloud networks capital expenditure will be put towards Software as a Service (SaaS), capturing nearly two-thirds of all public cloud spending in 2018. Meanwhile, Infrastructure as a Service (IaaS) will be the second largest category of public cloud spending, followed by Platform as a Service (PaaS).

Systems in place

From investing in cloud services for e-Governance initiatives to delivering on the Government of India’s think-tank Niti Aayog’s vision of an AI-led economy, the thrust towards Digital India is facilitating the cloud boom in the country. Connecting 250,000 gram panchayats in the country with high-speed broadband through the National Optical Fibre Network (NOFN) will open doors to newer business opportunities.

NASSCOM’s flagship report – the IT-BPM Sector in India 2018: Amplify Digital – finds that India is on track to be a trillion-dollar digital economy backed by the Government’s collaborative approach to encourage private sector participation. India’s information technology (IT) – business process management (BPM) industry is set to grow from US$154 billion in 2017 to US$167 billion this year.

The provision of up to 100 per cent Foreign Direct Investment (FDI) in B2B e-commerce and extended tax holidays to the IT sector for software technology parks of India (STPI) and Special Economic Zones (SEZs) are also paving the way for higher investments. The procedural ease and single window clearance for setting up facilities is a definite advantage.

Win-win situation

A recent study among 275 SMEs across 11 Indian cities by Microsoft and the Thought Arbitrage Research Institute (TARI) finds that there is a significant increase in market reach, improvement in employee productivity, operational processes, and work-life balance as a direct correlation of increased cloud usage. Companies can improve cash flows by up to 308 per cent due to the dexterity and flexibility facilitated by the use of cloud services. Further, the adoption of cloud ‘pay-as-you-use’ technologies offers SMEs access to the same IT infrastructure and suite of services that top players have, giving them a competitive edge in the market.

While the early adopters such as the retail/trade, IT/ITeS, education, health and hospitality sectors are already reaping the benefits, the manufacturing SME sector demonstrates the maximum predicted impact within two years of cloud adoption, says the study.

In India, experts concur, hybrid cloud solutions will continue to drive overall cloud adoption. For enterprises dependent on sensitive data storage, such as banking, financial services and insurance, healthcare, and government departments, captive data centres or co-location services are helping address data sovereignty concerns. Hence, there is immense investment potential across industries.

As one of the fastest-growing economies in the world, keen to make its presence felt in the digital space, India is ready to walk the talk. And cloud is the way forward.