Indian IT outsourcing firms, such as TCS and Infosys Technologies, may have to tweak their business plans if Forrester Research’ latest prediction on the evolution of the cloud market turns out true.
While the firm has come out with one of the (if not THE) biggest projection for cloud services, albeit by 2020, it has attributed a minuscule marketshare of just around 6.25% for the segment Indian companies are all focusing on.
While foreign firms — web players like amazon.com and google.com, packaged software makers like Microsoft, Oracle and SAP and hardware vendors like IBM and Dell — are all aiming for the heart of the cloud market, Indian outsourcing firms may be aiming for what may become just a tiny sliver of the whole market.
In many ways, the market that each of the above class of IT companies target has largely been a result of their respective strengths. For example, web firms like Google and Amazon target remotely-accessed software market (or SaaS) because, essentially, they developed the technology.
Packaged software vendors like Microsoft and Oracle also target the remotely-used software (SaaS) market because their existing packaged software industry is threatened by it, while hardware vendors primarily target the cloud platform market. Cloud platform includes the basic software (called Middleware) that is required to join computers together to form a ‘cloud’ or a mega computer.
Big Indian IT brands, which have very little stake in the packaged software market or the hardware (server) market, have, unsurprisingly, been late to the party. But since they have expertise in outsourcing and client-servicing, they are trying to enter the cloud market by integrating cloud-services in their outsourcing contracts.
In other words, they want to turbo-charge their outsourcing services using the flexibility and low cost associated with cloud technology.
Forrester, in its new ‘Sizing The Cloud’ report, has even blessed such ‘cloudified outsourcing services’ with a catchy name — business-process-as-a-service or BPaaS.
Traditionally, the cloud market is divided into three-layers —
1) Infrastructure-as-a-Service (IaaS or the hardware)
2) Platform-as-a-Service (PaaS or the software platform which coders can deploy their cloud applications on) and
3) Software-as-a-Service (SaaS or the cloud-based application such as Gmail or Google Docs used by the end user.)
Each layer is based on and makes use of all the previous layers.
Forrester adds another layer to the pyramid — the BPaaS, the same segment targeted by Indian vendors. So, unlike Software as a Service, which uses the cloud infrastructure and platform to replace ‘ordinary’ software like wordprocessors, accounting software, HR management software etc., the BPaaS will replace entire functions or business units. So, instead of replacing the HR software, it will provide the entire HR department.
While it was supposed to be the pinnacle of ‘cloud achievement’, Forrester’s research predicts a humble role for such services. Against nearly $50 billion of outsourcing that India does every year at present, this market will only be worth around $10 billion in 2020, it predicts.
Instead, it says, the public cloud market will primarily be all about the Software as a Service (SaaS) market in 2020, as indeed, it is at present.
“The SaaS market today represents the largest public cloud market by far, with $21.2 billion in total revenues in 2011 [out of a total of around $25 billion]… the SaaS space will grow significantly over the next five years. By 2016, SaaS will have total revenues of $92.8 billion — accounting for roughly 26% of the total packaged software market,” it predicts.
In comparison, the Infrastructure as a Service (IaaS) market will only be $4.8 billion in 2020, merely doubling from its current size of $2.9 billion. Platforms (PaaS) will be around $12.5 billion, peanuts compared to the $130 billion plus SaaS market (see graphic.)
Interestingly, the firm also points out that it won’t be just cost which pushes up the cloud-model. As more and more of the workforce has a ‘digital upbringing’ and are used to ‘instant satisfaction’ of their needs, they would not be patient enough to lodge a request for a new software or extra storage and wait for the IT guys to deliver it. Pampered by sites like Facebook, which allows users to get what they want themselves, the new generation of workers would be more comfortable with ‘self service’ than waiting for the ‘IT guys’, it points out.
“The Digital Native generation [will] dominate most workforce environments. Members of this generation have very different expectations and needs; they will only be productive and creative if the technologies they need are provided in a flexible, self-service manner.
“Just as web and cloud services already frame the way that employees leverage technology to organize their private lives, corporate IT organizations will increasingly leverage cloud computing solutions to similarly empower their workforce,” the report says, pointing to ‘cloudification’ as inevitable.