Informist, Friday, Dec 3, 2021

By Sai Ishwarbharath and Nikita Periwal

CHENNAI/MUMBAI – As more Indian enterprises proactively work to modernise their applications and expand into newer areas like artificial intelligence with the usage of cloud technology, the country’s annual spending on public cloud is set to rise to up to $16 bln by 2025, believes global technology research firm Gartner Inc.

Gartner had earlier estimated India's annual spending on public cloud rising to $12 bln by 2025. In 2022, the end-user spending on cloud is forecast to total $7.3 bln.

This spending will grow 30% when compounded annually over the next five years and will be the fastest growing segment within the Indian technology industry, says Gartner's Senior Director Analyst Naveen Mishra in an exclusive interview to Informist.

India, as a market, has barely begun to scratch the surface in terms of the possibilities of new technology, he says.

Clients have now started to consolidate their IT infrastructure, like servers or storage, and are modernising some of their applications after having some basic cloud-based systems in place already. This phase is where the bulk of the spending is happening within cloud, says Mishra.

Gartner says the industry will not see large technology service companies getting all of their revenues from cloud services but the technology has become a "must-have" component if companies are looking at a digital journey or offerings.

Following are the edited excerpts from the interview with Mishra:

Q. Where are Indian technology service providers on the journey of winning cloud-based deals? Have they reached the midpoint?

A. Gartner has raised India's public cloud spending to $16 bln (from $12 bln pegged earlier) by 2025. This clearly indicates we see concrete plans that Indian enterprises have, to focus on cloud.

India, as a market, has just scratched the surface. We expect more spending on cloud, and expect that the spending will grow at 30% when compounded annually over the next five years, which is the fastest growth within the technology industry. We expect accelerated cloud adoption over the next three to five years.

Q. What are the types of cloud-related deals that are happening in India?

A. Broadly, there are three types of customer journey that we see. First are the customers who are in the early phase of the cloud adoption, and they are focusing on the fundamentals, moving some of their low-hanging fruits like testing or productivity collaboration, infrastructure-led or software as a service-led consumption.

The second is where customers, who have some experience of public cloud, are actually now moving to the second phase of their journey. They either like to consolidate their infrastructure like server or storage on public cloud. They will also look at modernising some of their applications or infrastructure. Another scenario is where customers who actually look into cloud-native investments. They may go for investing into artificial intelligence, machine learning, application programme interfaces which a lot of the banks are doing to expand the digital-payment ecosystem.

If the customer is in the first phase, the deals would be smaller, whereas, if the customer is doing heavy lifting, then those deals become a lot more valuable. That is where a lot of revenues from hyper-scalers and services engagements happen and they become large deals.

Q. In which of these journeys is most of the spending coming in?

A. There are two responses to this. The second phase, where customers are moving to some heavy lifting like cloud modernisation, is where higher spending is seen in India compared with the other phases.

When we look at the cloud spend of $7.3 bln for 2022, we see that infrastructure-as-a-service is going to be the most dominant force driving the spend and over time becoming the biggest contributor in the public cloud spend. A lot of that would be coming in from organisations post-COVID-19 trying to actually focus on redundancy, business resilience and looking at more and more infrastructure as a service engagement.

It will be followed by software-as-a-service because increasingly, when enterprises move their workloads, they will be looking at a broad range of software applications that they can consume in a software-as-a-service model.

This is very different from what we saw three-five years back when software was the most dominant force and every chief information officer wanted to experiment with software-as-a-service as a low-hanging fruit.

Q. Which industries are most advanced in their cloud journey right now?

A. Digital natives are definitely the most advanced ones. I'm seeing that digital natives have actually mastered the art of spending more money and time focusing on where the value is delivered.

Information technology services arms like business process outsourcing, traditional IT services and knowledge process outsourcing have huge investments in public cloud already. Though they are in India, they are actually driven by some of the mature customers around the world who in turn drive their consumption pattern around public cloud.

The third biggest investors are the ones into content creation, such as over-the-top players as they have huge capacity requirements.

Q. Who among the Indian IT services providers have an advantage in terms of winning more cloud-based deals due to better capabilities?

A. Whether it is a large player or a mid-sized player, if they were on the right side of the disruption during COVID-19, and have the talent and skills which are needed, they will have surely scale their business.

But talent is the king. The ability of any services company to rapidly scale on the talent side is one of the biggest contributors to their long-term success.

Q. Is the buzz around hyperscaling still there, as most clients like e-commerce companies or over-the-top platforms may no longer see peak demand?

A. Some of the peaks that we saw during COVID-19 was when we were in a lockdown and digital was the only way. Now, we have moved to a hybrid mode where we are consuming OTT (over-the-top) content and moving into theatres as well. So there is a bit of competition.

Q. How do you see cloud faring within the digital-driven deals that Indian technology companies are focusing on?

A. There are enterprises who have a clear strategy of cloud-first, which means any new IT procurement that they are going to do will be cloud-based. It is a mandated strategy. Cloud first is becoming real now.

Secondly, as more companies think of digital as a fundamental base, cloud is definitely one of the foundational elements. We will not see 100% cloud but if we are looking at digital journey or offerings, cloud is a must-have component. End

US$1 = 75.04 rupees

Edited by Akul Nishant Akhoury

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