The ‘cloud’ they say is slowly but surely descending on companies, but do we know where we are heading as a result? The possibilities for mankind in general are both enormous and exciting as we are transiting towards an ‘As-a-Service’ global economy.
What Studies Say about Cloud
According to Forrester, the cloud computing market is expected to grow to $241 bn by 2020. Gartner research shows that low-cost cloud services will cannibalize up to 15% of the top outsourcing players’ revenue by 2015. Although 2011 has proved to be a good year for most of the IT vendors providing cloud computing services with aggregate quarterly revenue growth (in US dollars) between 9-14% during the year. Though 2012 is forecasted to be a bit slow with projection of 7-9% annual revenue growth.
This means more and more companies are finding value in availing computing services off the internet, instead of owning them as the case had been till not very long ago. What is significant about this new wave of technology is that companies have now moved beyond the hitherto accepted Software-as-a-Service (SaaS) model to avail every possible aspect of IT infrastructure off the internet. This is giving them the desired flexibility and scalability to ensure growth in a tough economy where capital is at a premium.
A study by 8 countries commissioned by CSC in association with independent research company TNS across 3,500 plus IT decision makers in organizations which had already adopted the cloud and had some interesting insights. Nearly half of those surveyed had already experienced increased data center efficiency and utilization as well as witnessed lower operating costs in their day-to-day processes depending on how long they had been a consumer off the cloud.
Nearly 80% reported overall improvement in IT performance of their organizations within 6 months of cloud adoption. Besides, nearly 3 in 5 surveyed said that the cloud has helped in reducing waste and has lowered energy consumption. The latter is a key area of concern among present day organizations with increasing compliance pressures for greening their organizations.
Efficiency and cost optimization may be right up there among the reasons for cloud adoption, but there are more compelling reasons for the transition taking place. Widespread adoption can accelerate inclusive growth. India, for example, is often seen as a hub of entrepreneurship. In the earlier days, the country was called as a ‘nation of shopkeepers’. But what it actually meant was that, Indian citizens had a nose for business. Earlier, they excelled in commodities and capital goods and today is the age of entrepreneurship in IT products and services.
IT-as-a-Service will definitely boost this spirit of entrepreneurship further, leading to the next wave of growth in the country. With growth in the scale of business, IT needs will evolve from basic to complex and simpler solutions will need to make way for enterprise class platforms.
Given the ability of IT to make or break a modern business and the importance of choosing and managing IT effectively is seldom overemphasized. Yet, young businesses in high growth mode have many strategic challenges to address and they can live very well without the burden of owning and managing highly complex IT infrastructure.
Entrepreneurs need not now to invest energies in areas beyond their area of focus or expertise. This includes activities like server room management and managing resources to manage and plan IT resources. They can now focus on improving their products and services and finding more innovative ways of driving sales and business performance. When businesses have access to IT as a utility or on a subscription basis, ie, as-a-service, they can preserve their capital and management bandwidth instead of focusing on managing their business effectively.
Boon for the Small Business
The IT-as-a-Service economy will foster entrepreneurship by cutting IT costs and bringing it within the reach of businesses with even very small budgets making it truly accessible. Another market driver for cloud computing is its ability to give access to applications and information from any device anywhere. This will again benefit small and medium enterprises in India as they will be able to improve their operation efficiencies. The benefits accrued will therefore surely drive better lives for Indian citizens as a whole.
Take the retail sector for example. Irrespective of its size, all retailers are deeply entrenched into their respective supply chains. However apart from a handful of large retail chains, not many have been able to grow their geographic footprint. Ambition or drive has never been the hurdle, but managing and sustaining the process of expansion profitably are the more likely culprits. Access to efficient billing and inventory management solutions ‘As-a-Service’ may just be the fillip they are looking for. In turn, this drives greater competition even at local levels, and who will argue that competition is not good for the consumer?
Private healthcare presents another case. The ability to place patient and other clinical records on the cloud presents a ray of light on how improvement can be done in healthcare. Private healthcare providers now don’t need heavy infrastructure investments in providing basic and quality healthcare services. Likewise, mobile application developers, online travel players, e-commerce websites, and a host of other entrepreneurial ventures coming up in the country can derive greater agility and avail faster time to market options, once they adopt the technology.
Cloud: Making a Difference
The most significant difference that the cloud can bring towards delivering the next phase of economic growth to India will be in the area of governance. As cloud is eliminating the cost of capital investment in IT infrastructure, the government in the country can use it to spread the reach of their services to far-flung areas as well as monitor them effectively, thereby reducing leakage, which has been the scourge of inclusive growth in the country.
The much-publicized citizen service centers can expand faster across the length and breadth of the country if IT-as-a-Service is adopted. For example, tax collections have gone up manifold since the Income Tax department of the union government have operationalized e-filing of taxes. This means more revenue to invest back into growth projects. Such initiatives should be lauded, however the need is for much more and leveraging ‘IT-as-a-Service’ solution.
Adoption of this technology can bring a new hope for India. But it is also the end of a journey?where the beginning lies with the cloud service providers. Their deep-seated experience in managing and providing large scale solutions and sizeable infrastructural assets will enable them to provide not just a hosting service but also an end-to-end IT solution and infrastructure to the customer.
The need then is to have a logical structured approach. At CSC, we do this through our in house – Shape, Transform, and Manage methodology. Shape builds the roadmap towards the transition to ‘IT-as-a-Service’ architecture through assessment, strategy, architecture, estimation, and building an implementation plan. Transform deals with governance, design, implementation, and organizational change movement while the last methodology manage entails running and maintenance of services within the financial and performance SLAs.
Challenges in achieving such ends lie primarily in achieving last mile internet connectivity and availability of power. The union government’s latest draft on National IT policy however talks about overcoming these challenges. The IT industry also needs to come together (supported by a body like Nasscom) to create an ecosystem and a platform that will enable different types of organizations to accelerate economic growth of India.
Once the IT infrastructure is available as-a-service without much capital investment and need for specialists to manage it, SMEs in India will have an opportunity to increase the use of IT for their businesses. It will also enable small IT software companies to develop industry specific applications (supply chain for electrical equipment manufacturers may have their own unique requirements) and make them available as SaaS.
Further, with the availability of IaaS and SaaS, there will be new opportunities for entrepreneurs to offer few non-core business processes as-a-service to large enterprises. Clearly, only when there is a convergence of synergies between the government and the industry, will the benefits of an ‘As-a-Service’ economy be fully realized.