Cloud Computing Adoption in India

Cloud adoption in India
Infrastructure as a Service (IaaS) Trends and perceptions in the Indian market
Foreword
The cloud computing Infrastructure as a Service (IaaS) market is at a nascent stage both globally and in India. Across industry segments, the Indian market has shown significant interest in the potential of IaaS services. Virtualization, often seen as the first step in a cloud strategy, has begun to be more widely implemented across Indian data centers. Related markets such as Software as a Service (SaaS) is experiencing increased adoption and this can be expected to contribute to a more rapid implementation of the IaaS concept. However, there are significant barriers to adoption, including the absence of an IaaS ecosystem and the lack of awareness of available services on the part of potential buyers. This report is an attempt to reach out to chief information officers (CIOs) and analyze their expectations from, and perceptions of, the Indian IaaS market and draw relevant inferences for the entire IaaS ecosystem. It intends to define areas that will benefit
Contents
1. Executive summary 2. The Indian IaaS market 2.1 Drivers for cloud IaaS services in the Indian market 2.2 Barriers to adoption in the Indian market 2.2 Familiarity with cloud-computing concepts 2.3 Perception of cloud computing 2.4 Timeframe for adoption 3. Perceived benefits of implementing cloud IaaS services 3.1 Perceived operational and business benefits 3.2 Moving to an OPEX model
04 06 06 07 08 09 10 11 11 13
Appendix A: models of cloud computing Appendix B: the global cloud market Appendix C: IaaS and the enterprise Appendix D: addressing security concerns Appendix E: customizing the cloud
25 26 29 32 34
most from a conversation between emerging cloud IaaS service providers and interested enterprises in the Indian market. The primary data for this report was collected through an Ernst & Young administered survey among leading enterprises and interviews conducted with IaaS ecosystem players. I hope the findings of this research provide you with valuable insights and I encourage you to share with us your comments, questions and suggestions. I look forward to continuing our discussions on this constantly evolving and exciting space.
Milan Sheth August 2010
4. Perceived challenges to cloud IaaS services adoption 4.1 Perceived technical, business and environment challenges 5. Expectation from vendors 5.1 Preferred pricing models 5.2 Preferred channel for cloud services 5.3 Enterprise expectation of security and controls framework 5.4 Vendor assessment criteria 6. Recommendations 6.1 Recommendations for service providers 6.2 Recommendations for enterprises
15 15 19 19 20 20 21 22 22 23
Appendix F: benefits of implementing cloud IaaS services Appendix G: challenges in shifting to a cloud IaaS model Appendix H: cloud enabling technologies: virtualization Appendix I: About the study Sources:
38 40 41 42 43
1. Executive summary
Cloud computing IaaS brings utility computing closer to reality. It has the potential to change the way IT hardware is purchased, designed and used. With its promise of infinite scalability and a pay-as-you-go pricing model, the primary benefit that cloud IaaS services extends to the large enterprise is greater business effectiveness at lower IT costs. For the small and medium business (SMB) segment, cloud IaaS services lower barriers to market growth by lowering technology costs and upfront investments.
What are the primary drivers of cloud adoption in India likely to be?
On the demand side, improving high-speed connectivity, an emerging SMB segment investing in IT infrastructure and increasing enterprise data center expenditure are drivers that are expected to contribute to a growing cloud IaaS market. From the supply perspective, a maturing traditional IT market and an extremely competitive third-party data center market are likely to be primary drivers of cloud IaaS services. Our survey targeted CIOs of enterprises belonging to both the SMB and large enterprises segments. On the buyer side, despite the low visibility of IaaS vendor services in the market, most CIOs surveyed are aware of, and have expressed interest in, the concept and the potential benefits of moving at least part of their applications to servers and storage on the cloud. The following are among the key findings from the survey: Positive perceptions, awareness levels and expected timelines for adoption are indicative of a market that is ready to experiment with cloud IaaS services. Effective communication from service providers at this stage should dispel some of the concerns that enterprises have around ecosystem maturity. The SMB segment is more attuned to the benefits and challenges of the cloud. Furthermore, the maturity of the ecosystem is less of a deterrent to the SMB segment. This makes the SMB segment ideal to approach as an initial adopter of cloud IaaS services. Enterprises perceive data security and privacy as the biggest barrier to adoption. Third-party data service providers and traditional IT service providers are being viewed as the primary channels for enterprises to buy cloud services from. Such providers should play a pivotal role in bringing the ecosystem together.
Both enterprises and service providers are likely to benefit from a consultative approach and in-depth discussions with cloud IaaS service providers in the following areas: The differentiating benefits of cloud IaaS services Pricing structures, financial models and return on investment (ROI) that a cloud adopter can expect from moving to the cloud Guidelines and benchmarks to help enterprises select applications that are most suitable for adopting either the private or the public cloud models Addressing security and data privacy issues satisfactorily Extending customer support to adopters of the technology For the purpose of this report, IaaS includes both computing/processing capacity and the storage capacity available through remote virtual server infrastructure. The cloud services ecosystem is evolving rapidly. Active participation from both service providers and enterprises at this juncture will help create a more robust ecosystem and shorter time to adoption. In this report, we evaluate the opportunities, advantages and challenges for cloud computing infrastructure as a service adoption in India.
2. The Indian IaaS market

At present, the Indian market does not have a mature ecosystem that supports cloud IaaS services. As such, the cloud IaaS market in India is yet to take off. A few players from the service provider segment such as Tata Communications, Wipro and NetMagic have announced services that are likely to evolve into more stable cloud offerings. Tata Communications, for example, offers its customers an advanced virtualized environment with flexible arrangements to enhance capacity. On the consumer side, Airtel is offering Net PCs, low-cost online computers with processing capability accessible over the net. Infrastructure providers of the cloud such as VMWare, NetApp and IBM have crystallized offerings for the private cloud, and have taken proactive steps in educating the consumer on the benefits of cloud IaaS services. Some of the challenges the market currently faces include: Ecosystem maturity Customer awareness of services Connectivity The market is seeing a concerted effort in the related Software as a Service (SaaS) space. The SaaS market is increasingly gaining acceptance in the SMB segment, indicating a shift in the thought process of CIOs and IT decision makers. A recent NASSCOM EmergeOut session, held in August 2009, focused on SaaS and the cloud market. The IaaS market is also likely to benefit from the increasing maturity of these related markets.
2.1 Drivers for cloud IaaS services in the Indian market

While the market is currently at an embryonic stage, the presence of several positive drivers lends to the promise of cloud IaaS services evolving into a fast-growth segment. SMB segment: The size of the Indian SMB market exceeds that of any other country in the Asia-Pacific region. India is also forecasted to achieve the highest SMB IT expenditure growth rates, with more than 50% of the expenditure expected to be dedicated to hardware. Even at its current stage of maturity, cloud IaaS is a viable proposition for most enterprises in the SMB segment. Cloud IaaS services give SMBs access to technologies they would otherwise not be able to afford. The low lead time of cloud IaaS to deployment and scalability also negates technology barriers to growth. For vendors offering IaaS, the Indian SMB market provides a unique opportunity to enter and grow this segment. Low profitability of third-party data center service providers: Third-party data centers currently operate at extremely thin margins. This can be largely attributed to the product mix, which leans toward basic co-location services rather than value-added, high-margin services such as managed hosting. Cloud IaaS services offer service providers the opportunity to leverage their existing IT investments to create a new line of value-added services with more profitable revenues. ISP telecom operators: Moreover, in the Indian context, internet service providers (ISPs) own and operate many of the larger data centers. Telecom ISPs have invested substantially in bandwidth creation, and currently, the market has excess bandwidth capacity. Introducing cloud IaaS services to their current portfolio will help ISPs increase bandwidth usage and increase customers switching costs.
Enterprise data center expenditure: With significant power and electricity overheads, enterprise data centers are a major drain on enterprise IT budgets in India. Ernst & Youngs survey indicates that more than 80% of the enterprises surveyed are considering initiatives to reduce the overall footprint of their data centers. The average size of an enterprise data center in the Indian market is in the range of 1,0001,500 sq. ft. The cost structure of an average data center is illustrated below. As a result of under-utilization, the overhead cost of under-utilized infrastructure tends to be a significant cost driver. Data center cost composition
Equipment Facility Man Bandwidth power costs costs costs costs 12% 12% 10% 7% Power costs 38% Maintenance costs 21%
NetMagic is the first vendor to offer cloud infrastructure services in India. As part of its cloud-computing portfolio, NetMagic offers the following services:
Cloud Serve is targeted at the
Maturing traditional IT market: The growth projection for the domestic IT market is between 2008 and 2013 is expected to be 15.8%, as against the average annual growth of 25% recorded during between 2003 and 2008 (IDC estimates). With slower growth and increasing competition in the traditional IT outsourcing services market, vendors are seeking new business models to increase their revenue streams.
SMB segment and provides disposable servers that are configured on demand depending on business needs. Cloud Net is a service model that provides the customer with the capability to create complete IT infrastructure, including servers, firewalls, load balancers and switches. This service specifically addresses the opportunities of hosting portals, disaster recovery and the testing of mid-sized internet companies and traditional enterprises. PrivateCloud is a dedicated hosted cloud infrastructure service catering to large individual enterprise requirements.
2.2 Barriers to adoption in the Indian market

Ecosystem maturity: While the cloud IaaS space has elicited interest from a number of larger players across both system integrators (SI) and telecom ISP providers, there are very few true cloud offerings at present. This is a major deterrent for a potential cloud IaaS customer. Customer awareness: Most potential customers are knowledgeable about IaaS services. However, they not aware of its overall impact and the return on investment (ROI) that adopting such technologies can yield. They are also not aware of the specific services that vendors in this space offer.
The main drivers of growth in the Indian cloud market are the SMB segment, the current low profitability of Indian data service providers and the enterprises need to reduce data center-related costs. Ecosystem maturity and customer awareness of available services and connectivity are the current barriers to cloud adoption.
Connectivity: Poor connectivity may prove to be a significant barrier to adoption. Low internet and PC penetration (less than1% in urban areas, 31 PCs per 1,000, according to NASSCOMs report, Perspective 2020) are discouraging. However, given the recent regulatory progress in third-generation (3G) and fourth-generation (4G) technologies, the expansion of private players, government initiatives and the declining cost of PCs, India is likely to see considerable progress in broadband and internet connectivity over the next two to four years. While exact price structures are yet to evolve, vendors are looking to reduce prices by at least 2025%. Existing players can expect to see other international and local players enter this space. As compared to the global market, India is yet to see the entry of cloudrelated, value-added software solutions related to billing, provisioning and management. This could be a potential challenge for Indian service providers.
Familiarity with cloud-computing concepts

Which of the following concepts of cloud computing are you highly familiar with?
PaaS
41%
SaaS
67%
IaaS PaaS SaaS IaaS
81%
Key: PaaS: Platform as a Service SaaS: Software as a Service IaaS: Infrastructure as a Service
Source: EY survey Cloud adoption in India, 2010
Gauging from the awareness indicated by 81% of the survey respondents, IaaS awareness is certainly not expected to hinder cloud IaaS service adoption. A related question on areas of adoption indicates that people are equally open to adopting cloud in storage and processing capability. Further, the survey indicates that awareness levels on SaaS are currently lower than that of IaaS. The SaaS market in India has only just begun to enter a phase of realization. SaaS vendors are pushing aggressively in the market for the adoption of their services. As this market grows, a beneficial spillover effect on the IaaS market can be expected.
2.3 Perception of cloud computing

The positive perception of IaaS indicates a significant mainstream market that vendors can target. Of the total respondents surveyed, 68% have a positive mindset toward cloud computing, with 24% regarding it as a driver of the next wave of IT innovation and 44% believing that it will mature in a few years. Around 20% of the respondents were not aware of cloud-computing services in great detail. This section represents a sizeable percentage that is likely to benefit from customer outreach programs, industry events and demonstrations educating them about the concepts as well as the benefits of cloud computing. A minority of 12% believes that cloud IaaS services will not suit their business needs. Which of the following appropriately describes your view on cloud computing Infrastructure as a Service?
20%
44% 24%
12%
Cloud computing is an evolving concept and will mature in some years Cloud computing offerings will not suit my business Cloud computing will drive the next wave of IT innovation Not aware of these services in great detail Source: EY survey Cloud adoption in India, 2010
High awareness levels and the positive perception of cloud indicate a market that will see robust growth rates once the service is available and once enterprises begin adopting the technology.
2.4 Timeframe for adoption

When do you plan to adopt Cloud Computing - Infrastructure as a Service?
12%
8% 20%
16%
44% 0-1 year 1-2 year 2-3 year 3-5 year 5+ year
The survey response indicates that more than 70% of the respondents are looking to adopt the technology in the next three years. The implied pattern of adoption is also indicative of an innovation diffusion curve, with a significant mainstream market developing in the next three to five years. Innovation diffusion curve: IaaS, Indian market
Early majority Early adopters Innovators 8% 20% 44% 16% 12% Late majority Laggards
Mainstream market
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3. Perceived benefits of implementing cloud IaaS services

The potential benefits of a well-designed and well-executed cloud-computing infrastructure services strategy can be significant. The relative importance of each benefit varies considerably with the size of the enterprise. Key benefits include lower costs, an on-demand self-service model, low entry barriers and the elasticity and scalability of resources. This section summarizes the benefits as perceived by potential adopters of the cloud IaaS services in the Indian market.
3.1 Perceived operational and business benefits

We asked respondents to grade a list of operational and business benefits on a four-point scale of extremely significant to not significant. Operational benets
38% 42%
Scalibility 4% High uptime 4% Reduced risk of technology obsolence Improved hardware utilization Improved datacenter efciency
14%
21%
33%
42%
38% 4% 17% 29% 27% 25% 29% 33% 25%
42%
17% 21% 17% 21% 4%
Faster deployment Extremely signicant
50% Signicant Not a driver
Fairly signicant
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Perception of operational benets SMB and large enterprises

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Scalability High uptime Reduced risk of technology obsolence SMB
Improved hardware utilization
data center efciency
Faster speed of deployment
Large enterprsies
Business benets
Ability to focus on core activities 4% Usage-based payment 8% 25% No capital investment 8% 13% Intangible benets 13% 8% Ability to innovate 17% Extremely signicant
29% 29% 29% 29%
38%
33%
25%
42%
33%
42%
33%
42% Not a driver
Fairly signicant
Signicant
12
Perception of extremely signicant business benets SMB and large enterprises

50%
40%
30%
20%
10%
0%
Ability to focus on core activities
Usage based payments SMB segment
No capital investment
Intangible benets
Ability to innovate
Large enterprises
There is a distinct difference in the perceived benefits of cloud by the SMB and enterprise segments. The SMB segment considers cloud IaaS services for true cloud benefits, while the large enterprise perceives benefits on the operational side that are generally derived from an outsourcing model. The SMB segment has cited high uptime as the top operational benefit, while large enterprises regard lower risk of technology obsolescence as the most important operational benefit. The SMB segment regards usage-based payments and low capital investments as extremely significant business benefits, while the large enterprise perceives the ability to focus on core activities as the top business benefit. Cost does not seem to be a factor in driving the decision to adopt cloud IaaS services. Surprisingly, both the SMB and large enterprise segments have given lower priority to other typical cloud benefits such as the ability to innovate and faster deployment. This may be indicative of an awareness gap of the differentiated benefits that cloud IaaS services are capable of delivering.
3.2 Moving to an OPEX model

At 58%, the majority of the respondents favor a model that facilitates the shift of expenditures from a capex to an OPEX model. Of the total respondents surveyed, 38% are neutral to the shift. Only 4% of the respondents do not see any benefit in the shift.
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The SMB segment appears to be more attuned to the total impact of differentiated benefits that can be derived from IaaS. The gap in understanding of the large enterprise indicates an area to be addressed during the initial contact with a potential buyer of this segment.
How do you view a shift to an OPEX model?
4%
38% 58%
Good: Helps IT be more adaptable to business needs in a cost effective way Neutral Not good: Not convinced that I can make the shift in a way that stays benecial to me
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4. Perceived challenges to cloud IaaS services adoption

Implementing cloud computing will not be without challenges. Ernst & Youngs market survey indicates that an overwhelming 72% of the respondents cite potential data privacy and security issues as extremely significant concerns. The other area of concern is around vendor maturity and the capability to provide cloud services. Among the challenges generally associated with a shift to cloud IaaS services are: Data security and privacy Legal and regulatory compliance Control and responsiveness Lack of benchmarking or leading practice experience Ambiguity over how best to quantify, track and communicate the benefits of cloud computing Threat of potential over reliance on a single-source IT provider Lack of interoperability Resistance from datacenter IT personnel The following section summarizes some of the key challenges the Indian market perceives.
4.1 Perceived technical, business and environment challenges

We requested our respondents to grade a list of technical, business and environmental challenges on a four-point scale of extremely significant to not significant. Perceived technical challenges
71%
Data privacy and security
13%
17%
Latency 4%
17%
29%
50%
Resource uptime
25% 8% 8%
29%
46%
Unsure of impact on current IT
54% 29% Fairly signicant Signicant Not a driver
Extremely signicant
15
Perception of technical challenges SMB and large enterprises

100% 80% 60% 40% 20% 0%
Data security
Latency
Resource % uptime Large enterprises
Unsure of impact on current IT architecture
SMB
Data security and privacy is a major concern for enterprises considering implementing cloud IaaS services. Cloud IaaS is a distributed computing model with inherent ambiguity around where the data resides. This distributed model leads to a perception of higher risk and security challenges. A cloud service provider can mitigate these risks by establishing an effective security and controls framework (appendix D) in the following areas: Identity and risk management Compliance and audit Application level security Data backup and recovery Legal Perceived business challenges
Vendor lock-in concerns (inability to switch vendors easily or bring operations back-in) Not sure about the ROI to be expected if I invested in cloud computing Internal resistance to process change 8% Loss of control over IT operations Extremely signicant Fairly signicant 17% 33% 50%
4%
13% 29% 29% 29% 21%
13% 25% 25%
29% 33% 38%
Signicant
Not a driver
Source: EY survey Cloud adoption in India, 2010 16 Cloud adoption in India
Perception of business challenges SMB and large enterprises

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Vendor lock-in Not sure of ROI SMB
Internal resistance Large enterprise
Loss of control
Vendor lock-in is perceived as a significant challenge to the adoption of cloud computing. Vendors can currently mitigate this concern by making their services more transparent so that customers can understand how their resources are being managed. In the long term, as the ecosystem matures and the industry adopts open standards to facilitate interoperability, this concern will likely be mitigated. Efforts need to be made to develop forums such as the Open Cloud Alliance to enable the development of more transparent and interoperable solutions. Enterprises are also unsure of the cost savings that cloud computing can help them achieve. Vendors need to develop comprehensive financial models detailing the comparison of in-house infrastructure with cloud IaaS to help firms estimate the ROI. Usage-based pricing models with monthly or hourly billings can be used to compare costs with the current datacenter costs and estimate the ROI. Perceived environment challenges
Lack of mature service providers 38% 46%
17% 25% 21% 25% 13% 17% 21%
No vendors available with a consolidated value proposition Lack of guidance, leading practice or experience of other companies to draw from Lack of ecosystem that supports adoption of the service
54%
46%
38%
42%
Extremely signicant
Fairly signicant
Signicant
Not a driver
17
The most significant challenges enterprises perceive in adopting cloud IaaS services include data privacy and security, vendor lock-in concerns and ecosystem maturity. Significantly, the SMB segment does not rate ecosystem maturity as a major challenge.
The shortage of mature service providers is the single overwhelming environment-related challenge that enterprises perceive. Vendors need to develop go-to-market strategies to develop customer relationships and retention strategies. Collaboration among all channel partners is required to build a compelling case and visibility for cloud IaaS services. Vendors need to create effective strategies on the value proposition and features (what to sell) for different market segments (whom to sell) and a definitive sales and channel partner strategy (how to sell). Cloud service providers should invest in developing cloud labs that enable customers to use cloud IaaS services on an experimental basis. This is also expected to assist customers in assessing challenges that could arise from integrating enterprise data centers with infrastructure on the cloud. Cloud-computing adoption case studies of customers worldwide should be made available to enterprises to help them clearly understand the areas where cloud IaaS services benefits can be leveraged. Interestingly, the SMB Perception of environment challenges SMB and large enterprises
60% 50% 40% 30% 20% 10% 0% Lack of mature service providers No vendors available SMB
Lack of guidance Large enterprise
Lack of ecosystem support
segment does not perceive environmental challenges to be as critical a barrier to adoption as compared to the large enterprises. The lack of mature service providers, guidance or ecosystem support are rated as less significant concerns by SMBs. Vendors should target the SMB segment as potential early adopters of cloud computing.
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5. Expectation from vendors

This section summarizes the surveys key ndings regarding the enterprise expectation of vendors. It covers areas unique to the cloud IaaS services environment such as the pricing model, service channels, acceptable security and controls framework and key vendor assessment criteria.
5.1 Preferred pricing models

Preferred pricing models
8% 13% 29%
25% 25%
Annual contract based on monthly capped resource requirements with coverage charges Month to month minimum commitment on resource usage with coverage Month to month resource usage based charges without any contract Monthly/Annual charges per user Others
The essence of the cloud IaaS model is a pay-as-you-go nancial model. The high percentage of respondents indicating their preference for annual contract-based pricing indicates lack of clarity on the clouds nancial model. Further analysis indicates that the majority of the respondents opting for an annual contract-based model are the large enterprises, while the majority of the SMB segment prefers the resource-based usage model. At this stage, a single pricing model is unlikely to satisfy all potential customers in the market. Vendors need to have pricing structures that are easily understood, transparent and offer substantial benets in terms of cost savings. Options for alternative pricing models can be as follows: A true pay-as-you-use model based on the use of resources such as per hour usage or CPU cycles consumed will be attractive to the SMB segment. More exible models integrating the features of usage- and contract-based pricing can be developed, where server instances can be charged on a daily or monthly basis instead of hourly. Reserved instances with discounts on hourly rates can be more cost-effective for larger enterprises with visibility on demand. Reserved instances are likely to help large enterprises better estimate and plan their cloud IaaS needs.
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5.2 Preferred channels for cloud services
46%
46%
8% Data center service providers hardware and software vendor IT service providers/system integrators
The stated preference of enterprises to buy cloud IaaS services from IT service providers or data center service providers could mean that the cloud computing idea becomes central to these service providers portfolios. Equipment vendors should recognize and respond to this possibility. For data center providers, cloud IaaS services may prove to be a more profitable source of revenue as compared to their existing service/product mix. IT service providers looking to leverage the cloud IaaS opportunity should form alliances with third-party data center service providers or invest in building their own infrastructure. Data center service providers and IT system integrators also need to play a pivotal role in bringing the ecosystem together to demonstrate commitment to security, service-level agreement (SLA) adherence and complete support at every layer of the cloud service model.
5.3 Enterprise expectations on security and control framework

100% 88% 83% 75%
71%
63%
25% 13% Disaster recovery Business continuity planning Need to have 13% 4% Identity access management Nice to have Data encryption
29%
33%
4% Security certications Third-party audit
Not needed
20
As indicated in the challenges section, data security and privacy constitute the primary challenge of the cloud IaaS model. Consequently, the majority of the respondents have identified that the service provider should address the following areas. Disaster recovery Business continuity planning Identity access management Data encryption Security certification Third-party audits
5.4 Vendor assessment criteria

Vendor evaluation factors
Data security and privacy 4% 88% 8% 21% 58% 75%
SLA compliance
4%
Cost competitiveness Portability and interoperability 4% Vendor support network
13%
29%
13%
25% 46% 42% 42% 46% 38% 38%
58%
13% Pricing models
13%
Past track record 4% Extremely signicant
21% Fairly signicant
Signicant
Not a driver
Data security and privacy again shines through as the top differentiating factor for the enterprise. Providers should refer to Appendix D for an initial guidance on security areas to be considered for cloud adoption. While vendor lock-in and lack of guidance are perceived to be challenges to cloudcomputing adoption, interoperability and vendor support network are not rated very high on the criteria list of vendor assessment. This indicates that both these factors can be expected to be barriers to adoption and associated with the environment rather than as differentiating factors between vendors. With cloud IaaS services being a new business and operational model, a high degree of customer interaction during the sales cycle and a strong support framework will assist customers in adopting the technology seamlessly.
21
6. Recommendations
As the market evolves, economies of scale provided by third-party organizations through cloud computing IaaS can create a viable environment for enterprises to reduce costs and better align limited IT resources with key business goals and initiatives. In a market that is ready to experiment with cloud IaaS services, providers need to begin crystallizing their cloud offerings, while cloud adopters should begin to engage with providers to include cloud IaaS services in their overall IT strategy.
6.1 Recommendations for service providers

1. Develop a cloud IaaS strategy: The market is ready to experiment with cloud IaaS. Cloud providers should incorporate a cloud IaaS strategy in their overall portfolio and initiate communication with potential buyers on the drivers and total value proposition of cloud IaaS services to enterprises. Storage as a Service can serve as an initial service offering, since it is an easier area for enterprises to experiment and integrate with. There is an expressed need-awareness gap on the storage offering in the market, with 55% indicating their readiness to adopt the technology and only 33% indicating awareness of the service. 2. Reach out to the SMB segment: Providers should target the SMB segment for initial adoption. The SMB segment is more attuned to cloud benefits and challenges, thus making the SMB segment the ideal early adopter of the technology. 3. Develop go-to-market strategy focusing on future roadmap for cloud IaaS: Providers go-to-market strategies need to be aggressive in communicating the cloud IaaS services currently on offer as well as the future roadmap of these services. 4. Set up test labs: To allay apprehensions surrounding the actual applicability of cloud IaaS services, vendors should set up test areas, which customers can access on an experimental basis. This will allow enterprises to experience the technology before fullscale adoption. 5. Communicate with buyers on the perception of cloud benefits and challenges: The perception of these benefits and challenges need to be factored into communication strategies, service offerings and SLA structures. 6. Develop pricing models and ROI expectations: Enterprises are expected to benefit from detailed financial models benchmarking in-house data center costs with the investment and running costs associated with the cloud IaaS model, using different pricing models to help estimate the ROI.
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7. Establish collaborative engagements with the enterprise: The cloud IaaS space is evolving. As such, it is necessary for vendors to take a collaborative approach to engaging with enterprises. Providers should focus on the following areas: Differentiating the benefits of cloud IaaS services Discussions with potential buyers on the pricing structure, financial model and ROI that a cloud adopter can expect from moving to the cloud Guidelines and benchmarks to help enterprises select applications that are most suitable for adoption in either the private or the public cloud model profitably Security-related aspects 8. Building the ecosystem: Data center service providers and IT system integrators should also play a pivotal role in bringing the ecosystem together and demonstrating the commitment to security, SLA adherence and complete support at every layer of the cloud service model. 9. Building competitive advantage: Some of the ways in which cloud service providers can build their competitive advantage in this space include: Providing consulting and integration support to customers Providing excellent customer support options Building the SLA framework in collaboration with the enterprise Security and data privacy concerns should be met as a primary hygiene check 10. Addressing security concerns: Cloud computing IaaS services constitute a distributed computing model with inherent difficulties in locating where the data is stored. This leads to a unique set of security challenges and concerns.
6.2 Recommendations for enterprises

Enterprise IT decision makers need to continue monitoring the market in the short term for provider strategies around cloud IaaS services. Enterprises at the forefront of technology adoption should start interacting with service providers to understand current offerings. Although the ecosystem does not appear to be mature enough to extend support to a complete cloud IaaS services portfolio, the economic crisis could well serve as an impetus to both providers and enterprises to opt for the cloud. With providers beginning to invest in infrastructure, the economics and feasibility of cloud services are likely to evolve rapidly.
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Cloud IaaS service providers should look at building out a complete cloud IaaS service portfolio and begin communicating with potential buyers. Enterprise IT decision makers should continue to monitor the market in the short term for provider strategies around cloud IaaS services and actively participate in creating a robust ecosystem.
Companies considering cloud computing need to consider the broad range of business factors and effects that may arise from such an initiative. Among the cloud computingrelated areas companies should consider are: Privacy Enterprise architecture Information security Application controls and security IT effectiveness/transformation The following questions are critical for business leaders to consider when planning a transition to cloud computing: How can my data center be better equipped to function with part of its infrastructure on the cloud? What specific areas are most appropriate for cloud computing? What services are third-party vendors providing? What are the most significant data privacy and security issues that we will likely face? What are the cloud providers key risks and performance indicators, and how will this impact be monitored and measured from an enterprise perspective? How can I deploy IaaS in a way that makes it relatively easy to switch providers, if needed? What are we trying to achieve through cloud computing? What ROI can we expect? What technology needs will be required with cloud computing? How do I assess the actual infrastructure that will be needed to support my applications? How do I benchmark application performance in the provider environment? How does resource pooling and allocation occur within the cloud providers infrastructure setup? Based on the approach, application performance and expected usage patterns, what is the best pricing strategy? How can existing resources, both machines and people, be reallocated for maximum impact? What are the broader cultural and operational implications of this approach?
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Appendix A: models of cloud computing

There are three typical models through which cloud-computing services are offered: Software as a Service (SaaS): Software is offered as an on-demand service, thereby reducing the need for the customer to install, upgrade and maintain applications. Salesforce.com is one of the first enterprise applications to be offered as SaaS. Platform as a Service (PaaS): The development environment is provided as a service that encapsulates a layer of software integrating the operating system (OS), middleware and application software. Customers develop applications with the help of vendor-provided application programming interfaces (APIs) on platforms enabled with automated management and scalability. Commercial examples of PaaS include Google Apps Engine and Microsoft Windows Azure. Infrastructure as a Service (IaaS): Processing, storage and bandwidth are offered on demand with metered billing. A consumer can store data and run an OS, software applications and web or database servers on the rented hardware. Some major commercial examples of IaaS include Amazon, Rackspace and Savvis.
There are three main cloud service models: SaaS, PaaS and IaaS. IaaS provides the capability to execute rent processing and storage over the internet. It is, in many senses, the most commoditized version of cloud services.
CRM
ERP Enterprise web applications
Email
Database
Messaging API and middleware
Queuing
Monitoring
Provisioning Web management console
Scheduling Infrastructure as a Service
Available as a metered, scalable and ubiquitous service Bandwidth Software as a Service Platform as a Service Storage Compute
vStorage
vServer Virtualization
vNetwork
Principal characteristics Abstraction of infrastructure Pooled resources Services oriented architecture Scalable
Storage
Server Hardware
Network
Power
HVAC Facilities
Land
Utility based model of consumption
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Appendix B: the global cloud market

The cloud market is constantly evolving as larger scale adoption creates viable commercial opportunities in this space. The IDC forecasts that by 2013, cloud will form 10% of total IT expenditure across the five major IT product segments (business applications, infrastructure software, application development and deployment software, servers and storage). Worldwide IT cloud services spending: 20082013* 2008 All IT spending** (USD billion) Cloud spending IaaS spending (% of cloud spending) Total IaaS spending (USD billion) 383 16 14% 2.24 2013 460 44 29% 12.8 41% CAGR 2.7% 22.5%
* Source: IDC 2009 **Business application, application development/deployment, system infrastructure software, storage and server
Cloud computing and IaaS growth

50 45 40 35 30 USD billion 25 20 15 10 5 0 2.2 2008 3.7 5.1 6.9 16.2 17.8 12.8 9.4 22.3 28 35.2 44.2
2009 IaaS
2010 Year
2011 Cloud spending
2012
2013
While the market share of cloud services is forecasted to be around 10%, its growth trajectory, at a CAGR of 22.5 %, is four times the growth of traditional IT. IaaS accounted for 14% of the total cloud market in 2008 and is expected to grow to account for approximately 29% of the overall cloud market in 2013. This is expected to position the IaaS market at USD12.8 billion in 2013.
26
Drivers of cloud IaaS services in the global market

Among the major factors contributing to the growth of the IaaS market is a maturing ecosystem. Amazon.com was one of the first to offer cloud IaaS services on a commercial scale, and has successfully established market dominance in this space. Amazon currently has more than 440,000 developers registered with Amazon EC2 and storage services. IBM is also betting heavily on becoming one of the few true utility providers of technology. The company has strategically located IBM cloud labs in both major and emerging markets. IBM is now looking to leverage these cloud labs to address the specific needs of customers experimenting with transitioning IT requirements to the cloud model. Cloud computing timeline
1999 2002 2006 2008 2009
Salesforce.com (SaaS)
Amazon Web Services (AWS)
Verizon CAAS, Amazon EC2 load balancing, monitoring
Google AppEngine, IBM Blue Cloud, Savvis Cloud Hosting
Verizon CAAS, Amazon EC2 load balancing, monitoring
Within a short span of time, other top players such as Google and Microsoft started offering cloud products. A number of niche players are also challenging Amazons marketleading position, including service providers such as Savvis, Verizon, Box.net, GoGrid and Terramark. Support and commitment from large players have also led to a concerted effort to educate customers through conferences, seminars and publicity. Industry forums such as the Open Cloud Alliance are focusing on resolving some of the barriers to cloud adoption, including inter-operability and security. An extremely robust developer community that has taken to developing and deploying applications on the cloud has also helped popularize cloud IaaS services.
27
The cloud ecosystem

Infrastructure services
Storage Amazon S3 Amazon SirnpleDB Microsoft SSDS Nirvanix Rackspace Mosso Cloud FS CTERA Compute Amazon EC2 GoGrid Joyent Accelerators Flexiscale Terramark Flexiscale Appnexus Elastra Savvis Rackspace Storage EMC NetApp 3Par Virtualization VMWare Citrix Zen Microsoft Hyper V
Management
Services management RightScale Cohesive FT Kaavo Scatr CloudStatus Cloud Foundry Cloud management 3Terra Applogic VMWware Ops Cohesive FT Open QRM Enomalism Eucalyptus Open QRM Appistry
Infrastructure providers
Servers IBM HP Dell Operating Systems Microsoft Azure Google Chrome Linux Network Juniper Cisco Akamai Identity Ping Identity Open ID Syrnplified Billing Aria Systems eVapt OpSource Industry Bodies Open Cloud Alliance Open Cloud Manifesto
IaaS has steadily gained ground in the past few years. Support and commitment from a number of large players in the market and well-publicized implementation of the cloud have contributed to its success.
Rising computing demand in the BRIC countries has also opened up new cloud markets. The overriding business need in these countries is for inexpensive and effective solutions. Using cloud computings usage-based pricing models, traditional IT vendors can now leverage cloud to boost growth in these price-sensitive markets. Cloud computing can help vendors shift focus from high-end, large-enterprise buyers of IT resources to the SMBs that constitute the major industry segment in developing countries. Case study: Vendor solutions Source: Amazon Web Services (AWS) website Amazon: The Amazon AWS cloud-computing platform can host business applications on the cloud with resizable compute capacity. The Amazon Elastic compute is a web service that provides a virtual development platform. AWS has recently introduced a limited beta version of its Virtual Private Cloud (VPC). The VPC is intended to be a hybrid solution, extending to enterprises the capability to connect their existing IT infrastructure to an isolated set of resources at the AWS data center through a virtual private network connection. Instances are charged on hourly usage basis, with charges increasing in tandem with compute capacity. There is also a provision to reserve the instance by making a low one-time payment with a significant discount for its hourly usage rate. Limited inbuilt memory for a server instance is free. More volume of data can be stored in Amazon Storage Services (S3), where it is billed at storage rates. Data transfer is billed based on data transferred in and out of Amazon EC2. Elastic IP and elastic load balancing are also charged separately.
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Appendix C: IaaS and the enterprise

IaaS is an operational model in which physical IT resources are delivered as abstracted IT services, both on demand and at scale. IaaS mainly refers to processing and storage capacity available from anywhere, through any connected device. Infrastructure resides in massively scalable provider data centers, where processing capacity and storage can be dynamically provisioned and shared to achieve significant economies of scale. The end user accesses the infrastructure over the internet through a user-centric interface that makes the cloud IaaS transparent. On the buyer side, adding cloud IaaS leads to reduced capital spending on hardware and a progressive shift from a capital to an operational model of IT expenditure. The degree to which an enterprise implements cloud IaaS services can be directly related to the companys growth stage. A start-up company is more likely to use cloud infrastructure for most of its IT needs, as this is expected to drastically reduce entry barriers. Larger enterprises are likely to use public clouds to meet stretch capacity needs, while continuing to use private clouds and existing enterprise data centers for heavier applications that require more uniform resource usage. Integrating in house data centers with cloud infrastructure Enterprise cloud user Access through the internet
High demand variability, non core applications Low demand variability, core applications
Scaling & provisioning
User interface
Monitoring
Billing
Provisioning and management

Virtualized server Virtualized storage Virtualized network
Virtualization
Servers Storage Networks Security
Enterprise data center
Physical infrastructure Cloud provider
Better utilization, lower costs Scalability on demand
Storage as a service: The provider rents out storage hardware on a cost-per-gigabyte-datastored model. Storage as a Service provides a cost-effective method with which to meet the enterprises data-storage needs. Cloud storage offers an alternative solution for particular kinds of unstructured file data, which require batch processing and have low security requirements or large datasets such as rich media files, image files and records, streaming media and secondary/tertiary web accessible storage for data.
Cloud adoption in India 29
Backup and archival are among the traditional uses of cloud storage. However, as it evolves, cloud storage is expected to also power the development of a new breed of applications that leverages service-oriented architecture (SOA), web services, APIs and their advanced services. An example of such an application is a content delivery network (CDN), which is ideal for cloud hosting and the distribution of popular files accessed frequently. Regular cloud storage networks to access such files are not optimal, as they support lower data transfer speed. CDN is a viable alternative for hosting frequently accessed website components and distributing downloadable software and its updates, media audio and video files. Integration with cloud storage is provided through APIs, which support multiple programming languages. Computing as a Service (CaaS) provides the capability to spin up virtual machines and load them with pre-configured or customized images of OS, web and database servers, thus creating a complete virtual environment for application development and deployment. Processing capability is provided as server instances configured with OS and software images acting as units of deployment. The virtualized server instance may be of varying sizes, with different memory, instance storage and virtual core configurations. CaaS is conducive to a variety of processing needs, and has so far been used primarily for the following: Building a virtual test and development environment on the cloud, replicating production environments Applications with unpredictable capacity requirements such as those directed toward marketing campaigns Data mining applications needing high-powered processing over unstructured data Bandwidth that is used to access cloud IaaS services is billed for bandwidth usage on a per-GB-data inbound and outbound transfer. Case study: Customer adoption of IaaS July Systems: July Systems is a leading mobile media company offering feature-rich mobile solutions for live events, updates and advertising on its Mi Channel. July Systems Live Center on Mi faces extremely dynamic requirements due to support extended for multiple devices, dynamic content and the personalization of delivered content. The platform also faces steep hikes during sports events and live news. July Systems uses Amazons cloud computing services to cost-effectively scale its business. British Telecom: British Telecom uses AppLogic to deliver market-leading, on-demand telecom services using only a web browser and basic IT skills. 3Tera offers AppLogic utility computing services through a grid platform that converts commodity servers into scalable grids, on which users can visually operate, deploy and scale transactional web applications without any code modifications. Eli Lilly: To invent a breakthrough drug, Eli Lilly needed 25 servers to crunch large volumes of data. Rather than taking months to become functional, Eli Lilly took the alternate cloud route. Eli Lilly created an account on AWS and had 25 servers operating almost instantaneously. Consequently, transactions were completed within a day at a total cost of USD89.
30
A key aspect of the overall IaaS experience to the end user is the provisioning and management layer that abstracts the hardware. Some of the key functionalities delivered to the user through this layer include: Billing End-user provisioning and scale up capability End-user monitoring and management User access and user management interface Wrapper interfaces such as software backup solutions
Storage as a Service has been primarily implemented to meet storage needs arising from unstructured data and backup needs and to support CDNs. CaaS has been used to primarily build scale into existing infrastructure. number of large players in the market and wellpublicized implementation of the cloud have contributed to its success.
Animoto: Animoto is a good example of leveraging cloud for instant availability and virtually limitless scope. Animotos Facebook application creates videos for consumers and applications. The application is complex, with each subsystem requiring multiple servers. Animoto ramped up from 25,000 to 250,000 users in three days with the help of AWS, thereby provisioning around 4,000 servers simultaneously. CyberGamer: Online gaming company CyberGamer has tapped the Rackspace Cloud to support its growing number of subscribers. CyberGamer has increased its membership from 1,000 users six months after its launch, to 21,000 by the end of the second year. The requirements of a gaming company are dynamic because of the uneven traffic flow and higher computing power needed to process queries round the clock. On implementing virtualization, CyberGamer found that during peak times, it would still hit a threshold that prevented new members from viewing the website content. Subsequently, the company transferred its IT resources to the Rackspace cloud with virtually no downtime and, as a result, experienced a 137% increase in traffic within the first month. This was indicative of the amount of traffic the company was losing previously on account of overloading.
31
Appendix D: addressing security concerns

Cloud computing IaaS is a distributed computing model with inherent difficulties in locating where the data is stored. This leads to a unique set of security challenges and concerns. Data security and privacy is also rated as the top concern of enterprises moving to cloud technology. Listed below are some of these associated concerns as well as suggested guidelines to resolve the concerns:
Security and data privacy guidance principles

Issue Identity and access management
Identity and access management are very important for the strategic use of dynamic cloud computing resources.
Suggested guidance Providers authentication systems should either meet or exceed Enterprises should be encouraged to adopt single-sign on for When resources move to cloud, authorization should be
applications to simplify identity and access management. provided at business-line levels, with policies regulating the provision and release of resources. Encryption and key management policies should be implemented for secure access. enterprise standards.
Compliance and audit

Data location abstraction and multiple copies of data can prove troublesome with respect to compliance. It may be difficult to audit the data in the cloud, because isolating the scope in a cloud environment is challenging.
Metrics for formalizing the audit should be developed. Due diligence of the suitability of existing audit standards to the Cloud providers should try to acquire certifications such as SLA and security-level objectives should be redefined to include
data audit. SAS70. cloud environment should be conducted.
Application-level security
Porting an application on the cloud has implications such as what the security levels are and who controls them. The vendor providing virtual machine images needs security levels similar to those of in-house applications.
Vendors should provide the enterprise with capabilities to Inter-application communication security should be ensured in Additional security and masking sensitive enterprise Application security must be represented as a clearly
information are needed. articulated set of actions and guarantees within the SLA. a distributed cloud environment. create customized virtual machine images.
The growth of cloud computing is expected to increase the type

and occurrence of incidents, such as malware infection, data breach, Man-In-The-Middle discovery, session hijacking and user impersonation. Application-level firewalls and vulnerability detection need to be put in place.
32
Issue
Data backup and disaster recovery
Data backup and disaster recovery are among the most desired security and control framework controls.
Suggested guidance
Vendors need to ensure the redundancy and backup of all
hosted data through replication and storage across multiple zones. Business continuity plan with round-the-clock failover protection are required. The SLA should include terms on data backup and disaster recovery.
Legal Some of the legal risks are similar to those faced in any
outsourcing industry, with the enterprise being held responsible for any acts of its subcontractors. Some customer contracts prohibit trans-border data flow. The adoption of industry standards for security and regulations are mandatory for some types of data. Enterprises may need to know the physical location of their data, which can be dynamic and prone to change. Data residing in the cloud may not be easily accessible for electronic discovery in case of litigation.
Enterprise and vendors need to perform due diligence and
evaluate their own practices, needs and restrictions to identify the legal barriers and compliance requirements associated with a proposed cloud-computing transaction. Cloud vendors need to collaborate with the enterprise to define the key components of the contractual arrangement. The vendor needs to provide business continuity and disaster recovery to prevent outages. The contract should be periodically monitored and reviewed. In case of any change in the vendors business model or the compliance laws, the contract should be updated accordingly. The legal implications of whether the third-party vendor or the enterprise is held responsible in case of a data breach should be examined. The ownership and control of the data in the cloud should be given to the enterprise so that it controls the confidentiality, security or privacy of its databases, or if it wishes to control the entity that has access to its data.
33
Appendix E: customizing the cloud

Like all good things, cloud IaaS services, too, come in many varieties. The nature of the application and the level of control required determine the most suitable deployment and connectivity model. Cloud services can be customized to include the following parameters: Level of investment the enterprise is willing to make for the transition Core vs. non-core applications Expected SLAs and vendor commitment to application uptime Security Data privacy Degree of control the enterprise wants over its infrastructure Differences in cloud models arise from the deployment method and the way in which a customer chooses to access cloud IaaS services.
Deployment models
Cloud services are primarily deployed and managed in three modes: public, private and hybrid. The deployment models differ on two important factors: Service access Service control/ownership Cloud-deployment models
Managed hosting Third party shared Hybrid
Deployment
Offsite
Third party managed dedicated
Public clouds
Managed by organization
Third party Traditional internal IT setup IT team Capital intensive and xed Mixed
On site
Private clouds
Operational expenditure and varibale
Financial model
34
Public clouds: Third-party service providers offer public clouds. They are usually multitenant (shared) operating environments with all the benefits of elasticity, but the thirdparty vendor controls the management of the resource and security. Private clouds: An organization or its designated service provider supplies private cloud services with dedicated firewalls and operating environments. The organization controls the management and security of the cloud IaaS. The challenges to private cloud adoption are primarily around high initial capital investments and less scalability due to the limited availability of resources as compared to a public cloud. Hybrid clouds: Hybrid clouds are a combination of public and private cloud offerings. They enable the organization to retain direct local control over critical data while continuing to offer the advantage of the economies of scale available through a public cloud for services that are not critical. For example, a single application such as email systems can span through both realms by linking an on-premise email infrastructure with a public cloud service for continuity. This can help organizations reduce the total cost of IT operations while still meeting their security and regulatory requirements.
Public-private cloud trade-off

Exclusive Service access Anyone
Private cloud
Service control/ownership Enterprise Third party
Public cloud
35
Features of various cloud-deployment models

Trade-off factors for both public and private clouds Deployment model Managed by
Public Third party
Owner
Third party
Location
offsite
Users
Untrusted users
Most suitable for: Start-ups/SMBs Low level of customization Higher degree of tolerance for SLAs and Access to a wider audience Preference for OPEX IT spends
data security
Private
Organization or third party
Organization or third party
Onsite Offsite
Trusted
Mature enterprises High degree of customization Mission-critical applications with low
level of tolerance for SLAs and data security Sufficient funds to invest in a private cloud Trusted and Untrusted
Hybrid
Both organization and third party
Both organization and third party
Onsite Offsite
Enterprises can adopt a private cloud
to support mission critical applications, data and a public cloud for other applications and data.
Accessing the cloud

A number of network options such as public internet, private dedicated lines or hybrid solutions (VPN) should be evaluated to select the best-access option for the service. Performance and cost are among the parameters that are used to judge the network. Indian ISPs currently provide high-speed broadband ranging from 100Mbps for public internet to Ethernet-based WAN 10Gig-Ethernet of dedicated internet access for enterprise customers. Network options such as VPN provide enterprises with the same capability that private leased lines traditionally deliver, but with cost savings enabled through the use of shared networks. Virtual private cloud is built on the concepts of VPN, providing enterprise-level security to resources deployed on the vendors public cloud platform.
36
Internet access methodologies and features

Public internet
Advantages
Leased lines Ensured levels of data security Access to better bandwidth and
VPN Security is comparable to leased More cost-effective solution as Scales easily Accessible High quality of service and
compared to leased lines lines.
Cost-effective solution Highly accessible due to
ubiquitous nature Greater customer market
speed End-to-end SLA ensuring guaranteed quality of service and features Almost error-free data exchange
performance contractually ensured through SLA Predictable support for businesscritical applications sensitive to network congestion
Disadvantages
Security concerns Quality of service not guaranteed Lack of enterprise-level SLA Use of less secure protocols such as HTTP Prone to disruption due to routing issues and cable cuts
Not - cost-effective Not easily scalable Expensive to build Expensive to maintain
Dependency on a single provider Investment in some hardware Quality of service not as high as Less cost-effective than public
internet that of leased lines equipment to implement VPN
Suitable for
Startups, SMBs Non-critical applications
Not a cost-effective solution in
most scenarios; can be evaluated for private cloud
Large enterprises Critical applications and data
37
Appendix F: benefits of implementing cloud IaaS services

The potential benefits of a well-designed and well-executed cloud-computing infrastructure services strategy can be significant. The relative importance of each benefit varies considerably with the size of the enterprise. Key benefits include: Lower costs: The combination of reduced capex with a pay-as-you-use model effectively changes the profile of IT expenses from capex to OPEX. Data centers currently account for around 3045% of enterprise IT costs. Data center capacity is usually provisioned for close to peak-capacity utilization, while actual utilization varies between 1545%. Apart from the direct costs of setting up the data center, the actual running costs almost double the actual cost on a per server basis. This is primarily due to high overheads arising from power and cooling requirements. The cloud model eliminates the overheads with the pay-as-you-use model and the dynamic allocation of resources based on actual demand. Public clouds are also most likely to have infrastructure with higher processing capacity, which translates to lesser time to run compute-intensive applications. Provisioning and utilizing data centers
100% 100% utilization Planned utilization 80% Overheads that can be eliminated using cloud
60%
40% Actual utilization 20% 0% 5 years
38
On-demand self-service model: The on-demand self-service model of cloud IaaS services essentially implies that a consumer can unilaterally become self-sufficient in provisioning computing capabilities such as server time and network storage without requiring human interaction. This ease of deployment is a major advantage to a line of business that faces roadblocks from the IT department in taking innovations to market. Access to resources in traditional IT involves hierarchical channels, which results in lower speed and ease of deployment as compared to the cloud, where hardware capabilities are offered as transparent, on-demand self services. The end impact is IT infrastructure that is extremely responsive to business and an increased pace of innovation. Low entry barriers: Cloud computing reduces the barriers to entry because infrastructure is rented rather than purchased. With minimum upfront capital investment, even firms with lower IT hardware budgets can leverage the scale and capability of the cloud provider to build applications on the latest technologies. To the SMB enterprise, cloud IaaS services extend the benefit of minimizing start-up costs by making available much of the required computing capacity easily. For the SMB segment, this becomes the primary driver for the adoption of cloud IaaS services. Elasticity and scalability of resources: The capabilities available for rent appear to be infinite and can be purchased in any quantity at any time an application never goes down due to the inability of infrastructure to scale up to demand. Computing resources can be rapidly and elastically provisioned to quickly scale up and rapidly released to swiftly scale down. The capability to provide and use multiple systems simultaneously for highprocess computing needs also has the potential to significantly reduce overall time to complete operations.
39
Appendix G: challenges in shifting to a cloud IaaS model

Data security and privacy is the most often cited area of concern around the implementation of cloud computing. Security issues arise mainly due to the dependence on an external service provider and sending potentially sensitive data out of the enterprise data center. Some of the anticipated challenges are generic to any outsourcing scenario, while others are unique to the cloud services provider. Overall, the challenges that enterprises anticipate when transitioning to cloud include: Data security and privacy issues: As compared to a more traditional IT outsourcing arrangement, cloud-computing clients do not have dedicated servers. This raises concerns around where exactly client data exists and under whose jurisdiction it resides at any single given point. Legal and regulatory compliance: Many companies have to follow a number of regulatory compliance laws. Some firms have regulations, which do not allow their data to cross national boundaries. The data-handling regulations require the ability to track changes and follow audit trails. In cloud, there is a perceived compliance and operational risk of dependence on the vendor. A well-developed compliance and risk mitigation strategy by the service provider will help mitigate this risk. Control and responsiveness: With in-house IT functions and employees reporting directly to in-house executives, there is little question about who should be doing what and when. However, when employees and servers are separated, the providers and executives priorities may not be aligned. Lack of benchmarking or leading practice experience: Because the use of off-site computing capability is relatively new, there is insufficient experience from which to draw guidance for companies looking to build an effective cloud computing strategy. For example, there is some uncertainty on how to plan cloud capacity to meet the existing performance requirements of current applications, or how to factor in current architecture into cloud servers. Ambiguity over how best to quantify, track and communicate the benefits of cloud computing Threat of potential over reliance on a single-source IT provider: The relatively easy turnkey nature of cloud computing and its subsequent attraction of cost reduction may promote a companys gradual overdependence on a particular third-party service provider. Lack of interoperability: There are no prevalent standards for vendor interoperability. This gives rise to fears of vendor lock-in among the enterprise. Resistance from datacenter IT personnel: Current datacenter operations personnel may resist the adoption of cloud computing at present, owing to the fear of losing their jobs. The adoption of any new technology requires a change in mindset and culture of the organization.
40
Appendix H: cloud enabling technologies: virtualization

Virtualization is the technology that makes cloud computing a reality. Shared resources are made available on demand through memory, storage and network abstraction enabled by virtualization, thereby allowing multiple operating systems to run on a single physical system. The virtualization of servers and storage helps improve hardware utilization dramatically, from 1520% to 7580%. An added advantage is reduced expenditure on cooling and power. Virtualization and the dynamic data center
Automation Application Management Virtualized infrastructure Hypervisor Port test and development environment Hypervisor Save capital expenses Virtualized infrastructure Hypervisor Capacity on demand Management Virtualized infrastructure Hypervisor Save OPEX expenses Application Cloud computing Management Virtualized infrastructure Hypervisor Dynamic datacenter
Survey response: is virtualization a key enabler of cloud technologies?
Survey highlights: Of the total respondents surveyed, 84% perceive virtualization to be a key technology in enabling public or private-cloud creation. Out of the 84% who believe virtualization is a key enabler, 12% are currently using virtualization, 20% plan to adopt virtualization within a year, while 40% are looking to adopt virtualization in the next one to three years. Perception of virtualization as a key enabler of cloud services
48% No 16% 84%
Yes
14% 5% 10% 24%
Currently using
In the next one to three years
In the next three to ve years
In the next year
Not sure
41
Appendix I: About the study

This report is an outcome of a primary survey Ernst & Young conducted in January - March 2010. The primary respondents were CIOs belonging to both large enterprises and the SMB segment. Participant profile, awareness and perception of cloud IaaS services, expected benefits and challenges of adoption and outlook were among the areas the survey covered. The respondents were representative of all industry sectors.
42
Sources
Perspective 2020, NASSCOM report, May 2009. About us, NetMagic website, http://us.netmagicsolutions.com/company/corp_overview.html, accessed September 2009. Mi Platform, July Systems website, http://www.julysystems.com/mi_channel/mi_platform.html, accessed September 2009. BT selects 3Tera AppLogic, 3Tera website, http://www.3tera.com/News/Press-Releases/Archive/BT-Selects-3Tera-AppLogic.php, accessed September 2009. Eli Lilly on whats next in Cloud Computing, InformationWeek website, http://www.informationweek.com/cloud-computing/blog/archives/2009/01/whats_next_in_t.html, accessed September 2009. What you need to know about Cloud Computing, A Real-World Example: Animoto, PCMag website, http://www.pcmag.com/article2/0,2817,2330239,00.asp# , accessed September 2009. CyberGamer Beats the Boss and Conquers the Cloud, Rackspace website, http://www.rackspacecloud.com/blog/2009/07/02/cybergamer-beats-the-boss-and-conquers-the-cloud/, accessed September 2009. About AWS, Amazon Web Services website, http://aws.amazon.com, accessed September 2009.
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Ernst & Young Pvt. Ltd. Assurance | Tax | Transactions | Advisory About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 144,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. For more information, please visit www.ey.com/india Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Ernst & Young Private Limited is one of the Indian client serving member firms of Ernst & Young Global Limited.
Ernst & Young Pvt. Ltd. is a company registered under the Companies Act, 1956 having its registered office at 22 Camac Street, 3rd Floor, Block C, Kolkata- 700016
2010 Ernst & Young Pvt. Ltd. All Rights Reserved.

Information in this publication is intended to provide only a general outline of the subjects covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. Ernst & Young Pvt. Ltd. and CII accept no responsibility for any loss arising from any action taken or not taken by anyone using this material. EYIN0911-154 cloud adoption.indd (India). Artwork by Mukul Dhingra.

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Cloud adoption in India

Infrastructure as a Service (IaaS) Trends and perceptions in the Indian market

Cloud adoption in India

Milan Sheth August 2010

Cloud adoption in India

Cloud adoption in India

Cloud adoption in India

2. The Indian IaaS market

2.1 Drivers for cloud IaaS services in the Indian market

Cloud adoption in India

2.2 Barriers to adoption in the Indian market

Cloud adoption in India

Familiarity with cloud-computing concepts

IaaS PaaS SaaS IaaS

Source: EY survey Cloud adoption in India, 2010

Cloud adoption in India

2.3 Perception of cloud computing

Cloud adoption in India

2.4 Timeframe for adoption

Source: EY survey Cloud adoption in India, 2010

Source: EY survey Cloud adoption in India, 2010

Cloud adoption in India

3. Perceived benefits of implementing cloud IaaS services

3.1 Perceived operational and business benefits

38% 4% 17% 29% 27% 25% 29% 33% 25%

17% 21% 17% 21% 4%

Faster deployment Extremely signicant

50% Signicant Not a driver

Source: EY survey Cloud adoption in India, 2010

Cloud adoption in India

Perception of operational benets SMB and large enterprises

Improved hardware utilization

data center efciency

Faster speed of deployment

29% 29% 29% 29%

42% Not a driver

Cloud adoption in India

Perception of extremely signicant business benets SMB and large enterprises

Ability to focus on core activities

Usage based payments SMB segment

Source: EY survey Cloud adoption in India, 2010

3.2 Moving to an OPEX model

Cloud adoption in India

How do you view a shift to an OPEX model?

Cloud adoption in India

4. Perceived challenges to cloud IaaS services adoption

4.1 Perceived technical, business and environment challenges

Data privacy and security

Unsure of impact on current IT

54% 29% Fairly signicant Signicant Not a driver

Source: EY survey Cloud adoption in India, 2010

Cloud adoption in India

Perception of technical challenges SMB and large enterprises

Resource % uptime Large enterprises

Unsure of impact on current IT architecture

13% 29% 29% 29% 21%

13% 25% 25%

29% 33% 38%

Source: EY survey Cloud adoption in India, 2010 16 Cloud adoption in India

Perception of business challenges SMB and large enterprises

Internal resistance Large enterprise

17% 25% 21% 25% 13% 17% 21%

Source: EY survey Cloud adoption in India, 2010