Emerging cloud providers in India face complex challenges

Arup Roy

MUMBAI, INDIA: Although cloud is high on the technology priority list for many Indian CIOs, the maturity of public cloud remains relatively low. The market is also witnessing a rapid increase in the number of new entrants in an already-crowded market. Some of the emerging domestic public cloud providers include Netmagic, NxtGen, Nxtra Data, Sify, CtrlS, Tata Communications and Wipro.

Opportunities:

Gartner believes that high-growth Indian companies are seeking Infrastructure-as-a-Service (IaaS). Their drivers are to avoid upfront capital investments in new projects to enable faster solution rollout, and for situations where there is a temporary need for additional capacity, such as tests or pilots.

Other drivers are to overcome a lack of highly skilled and experienced IT staff for on-going management of increasingly complex data center solutions.

What do the large enterprises want?

Large enterprises have a preference for hybrid cloud consumption where they have a private cloud for sensitive and mission-critical workloads, public cloud for test- and development-type non-sensitive areas and cloud-enabled managed hosting services for their data center requirements.

The SMB angle:

Small or midsize businesses (SMBs) such as Internet companies, retail chain stores, education segment and technology firms are early users because they are reluctant to build their own data centers to support a highly scalable business.

Amid these developments in buying behavior, the provider landscape in the cloud has also evolved and is dynamically changing and reacting to market requirements.

Challenges:

That is not to say that cloud adoption in India is without its issues. Seamless and reliable connectivity across all parts of India is still a big challenge, especially when it comes to remote corners and less developed cities.

Businesses are reluctant to adopt the cloud until they are completely satisfied of reliable connectivity. With the provider landscape being patchy in its coverage and at various stages of evolution, it is also a big impediment in cloud adoption.

Businesses have yet to gain full trust and confidence in pan country coverage and support, security, availability, reliability and service capabilities to support enterprise-grade workloads.

At the same time, lack of clarity in regulatory policies and compliance with regard to data residency, ownership of assets and taxation-related complexities prohibit large enterprises from adopting cloud in a big way.

Lack of requisite skills, mistrust of cloud providers, vendor viability, repatriation concerns and resistance from corporate leadership are some of the other barriers to cloud adoption in India.

Given these challenges, delivering superior performance, reliability, price and trustworthy managed services are the key selling propositions across all cloud service providers in India.

The competitive edge:

Undoubtedly competition will intensify in what is already a packed market. Maturity in cloud adoption in India will likely attract many new players and, of course, new buyers. We can expect both local domestic players to crop up and expand, as well as foreign players moving into India.

Latency and data residency requirements will force foreign or multinational corporation (MNC) cloud providers to either set up their data center infrastructure in India, or partner with a data center infrastructure provider to have a direct presence in India in order to compete effectively.

Domestic investments:

Strong evidence that this is already starting to happen is the recent announcement by Amazon Web Services that it will set up its local infrastructure in India in 2016. Players such as Microsoft Azure (which is already in the process of setting up in-country infrastructure) and Amazon Web Services will seriously intensify the competition.

Longer-term, the provider landscape is likely to split into two poles with different focuses and offerings – with providers focused on a standardized, volume business, versus those willing to cater to the specific needs of enterprises and/or industries.

Ultimately the capital and engineering-intensity required to compete with Amazon, Azure and Google will probably be far more than most domestic providers can really contend with. Most of those local providers will be forced to bring their services on top of third-party clouds.

Conclusion:

Not all new players to this market will be able to sustain profitably in the longer run. Providers often underestimate the difficulties and technicalities of building a robust IaaS offering and the price pressure from the market.

Vendors frequently underestimate the integration effort necessary to adopt tools, and the development they must do to supply functionality that can't be bought off the shelf. As a result, wider consolidation of the market will be inevitable.

The article is authored by Arup Roy is a Research Director, Technology and Service Provider, Gartner