Executive Summary: Cloud Computing Landscape in India

Executive Summary: Cloud Computing Landscape in India

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India IT & Cloud Market Landscape: Snapshot

1

Software Market in India, FY2010-FY2015E On-Premise, USD billion

The Indian Cloud Computing & Cloud Services Market holds a potential of USD 1 Billion by 2012

Key Players in SaaS Market India

SaaS, USD million

5.7 2.7 FY2010

3.5

FY2013E

FY2015E

FY2010

FY2013E

14

Key Players in PaaS/ IaaS Market India IaaS, USD million

13.0 11.2

12 10

PaaS, USD million

9.0

8 6 4 2 0 FY2010

FY2013E

FY2015E

FY2010

FY2013E

FY2015E

Citrix Google Microsoft Netsuite Oracle Ramco Rightnow Salesforce.com TCS Webex Zoho

FY2015E

Hardware Market in India, FY2010-FY2015E Hardware* Sales, USD billion

• • • • • • • • • • •

FY2010

FY2013E

Note: *Hardware Includes Desktops, Notebooks, Printers, Servers, Storage & Security, Networking Equipments & Other Peripherals Source: NASSCOM Strategic Review, 2009-10 & 2010-11; IDC, Zinnov Analysis

FY2015E

• • • • • • • • • • • • •

Amazon Web Services Cynapse Google App Engine Force.com IBM Netmagic Solutions Orangescape Rackspace Reliance Data Center VMWare Windows Azure Wolf Frameworks Zenith Infotech

Zinnov Confidential

SaaS: Landscape Snapshot

The domestic market for SaaS is estimated to be about USD 50 million and is currently dominated by Collaborative Applications and CRM workloads

2

Indian SaaS Market: Customer & User Segmentation, 2009

Workload-wise Distribution of SaaS Market in India, 2009 Total Market: USD 50 - 56 million

100% Customers

77%

80%

69%

Users

60% 40% 18% 19%

20%

4%

1% 2%

11%

0% Micro Share of Competitors in the Indian SaaS market, 2009

XXX 30% XXX 2% XXX 5%

XXX 5%

XXX 4%

XXX 2%

XXX 16%

XXX 3%

XXX 4% for confidentiality reasons. Information masked

CMM

Enterprise

Drivers & Constraints to SaaS Adoption in Indian Market

x

XXX 29%

SMB

Data Security Concerns Reliability Issue Lack of Customization Resistance to Change Lack of Brand recognition for new players  Lack of market reach  Lack of training & tech support  Broadband Penetration     



   

Improving IT & Communication Infrastructure Increasing need for cost optimization Pricing & Support Innovation Development of Support Ecosystem Increasingly leveraging reseller channel



Please contact Zinnov for more information Note: Confidence Level for Market Size is 85 – 90 percent, * Collab. Applications – Collaborative Applications include web conferencing, productivity suites etc. Source: Zinnov analysis

Zinnov Confidential

India contributes only a small fraction of global revenues for Google, but offers one of the fastest growing markets

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Headcount • Google India is the largest outside of the US headquarters for Google (10.1%) • Hiring standards in India are same as that of the US and engineers in Bangalore have the freedom to move 2000

Google India Google HQ

19,835

to other Google R&D centers worldwide • Google engineers can rise to the level of a vice president based on technical accomplishments without even owning a management degree

For other case studies and insights, please

Google India Revenues contact Zinnov for complete report • Google India makes approx. USD XX million, less than 1% of the global revenues . But the revenues have been tripled over the last 2 years • Majority of Google India revenues come from online advertising, whose market in India is about INR 1,250 Crore (5% of the total ad-spend in India) and 80% of that market is drawn by Google • The country is a top priority market at the board level, no significant revenue impact but the India business is regularly reviewed by the board • 4/5 top leading web properties in India are controlled by Google (Orkut, Google search page, YouTube and Gmail) • The 5th seat is captured by Rediff in India • Average Indian users spend about 30% of their online time on Google sites – 3 times the world average Category

Google Products

Google India Share of Time Spent

Search

Google Sites

88.4%

Social Networking

Orkut

68.2%

Maps

Google Maps

63.9%

Photos

Picasa Network

16.2%

Blogs

Blogger

47.6%

Multimedia

YouTube

82.8%

Email

Gmail

46.8%

Source: Zinnov Interviews

Google SMB Focus Product • Lead product for Google in the SB segment is Google ad words. Not focusing on pushing apps and believe that driven ad words adoption is the key to long term success

Marketing • Google marketing the offering by providing Rs.2500/- worth of free ad words vouchers for SB customers. Being distributed through multiple marketing channels like HSBC Bank, DELL, Airtel, TradeIndia. • Exploring marketing partnerships with Tally, Utilities services providers and India Post. They have also looked to leverage DHL as a possible partner.

Sales • Currently just one product marketing manager supported by a 50 Member tele-sales team from partner site. Tele-sales team does account training, activation and proactive support. Reactive support is driven by Google Hyderabad office • Google has been trying to leverage the VAP channel to bundle ad words and sell the same to their customers along with websites they develop. Channel partners are given 5% commission for this.

Payment options • Google currently provides INR billing with internet banking, credit card and cheque payments

Zinnov Confidential

Over the years Google India has driven several localized initiatives targeted specifically for the Indian user

Entertainment

Key India Investments

Local Language Opportunity

New Growth Verticals

SMB Focus

4

 Through YouTube, Google has also ventured into the entertainment business. The IPL on YouTube was a key moment. Not only was it a global board level decision, but also elevated the level of dialogue. It went to 200 countries and is already the most viewed live event Google has done  The premium sponsors for the live online streaming of IPL matches are Royal Challengers, HSBC Bank and Hewlett-Packard. Airtel, Coca-Cola and Samsung are also participating. Google has also struck up lucrative deals with UTV, Rajshri Productions etc. for the YouTube

 Google is planning to launch a “mini” version of the Nexus One phone in India that may not have all the features but it would certainly be less-expensive than the US model

 Google India’s R&D chief, Prasad Ram, claims that no more than 7% Indians are proficient in English. Google looks at the Indian language market as a huge opportunity and offers search in 9 local languages

 Google India’s biggest revenue contributor have been in search advertising in verticals like airlines, travel and banks. However, education and auto has started to show signs of growth for Google. Google expects to grow in verticals such as FMCG, education and Government in 2010

 Internet penetration is increasing in small and medium enterprises that do not advertise in general. However, the internet is a natural cost-effective way of connecting and partnering with these SMEs in small towns  Partnered with firms such as TradeIndia.com to offer Rs. 2,500 worth Google Ad campaign free for subscribers

Source: Zinnov Interviews with Google Ex-Employees, Partners, Industry Analysts

Zinnov Confidential

Zoho has been focusing on providing free subscriptions with a limited number of users, to reach a critical mass of user base Solution

Zoho

India SaaS Revenues

5

Market Share

Product : Zoho CRM, Zoho Meeting, Zoho Project Management, Zoho Business Suite (email and office CRM USD XX Mn XX% suites) Business Suite USD X Mn For other case studies and insights, please contact Zinnov for complete report

Sales Strategy : • Zoho offers free versions of its applications to induce usage • Zoho has also run innovative advertising campaigns using auto rickshaws as mobile billboards, having Zoho posters on them, showcasing the different features available

Customer & User Base Distribution

Channel Partners : • 4 active channel partners; Pegasys, Bennett, KVP Business Solutions and SNR Technologies

Channel Partner Sales Strategy : • Current focus on Zoho CRM Incentives : Revenue Share/ margin

Technical Support & Training : • Cost of support is included in the pricing • Training costs are additional; negotiated on a case to case basis

Price Points: CRM (Rs/User/Month)

Min: xxx

Max: xxx

Business Suite (Rs/User/Month)

Min: xxx

Max: xxx

SaaS Product Sales Team :

xxx

Indian Customers (Users) CRM: Indian Customers (Users) Business Suite :

XX (XX)

Direct

Zoho has not yet been able to capture a paid userbase in a large quantum

SEO

Web Marketing

Channel Partners

Datacenter : Own Payment Modes

Source: Primary interviews with stakeholders; company website, Zinnov analysis

XX (XX) Delivery Platforms Weak

Strong

Online

Zinnov Confidential

Market: Vertical focus for Cloud Opportunity

Telecom, IT-BPO and Retail have the highest spending on IT as a percentage of revenues, however…

6

IT Purchasing budgets in 2010 vis-à-vis 2009

IT Spend as percentage of Revenue Across Verticals

2.2% 2.0%

Telecom 1.7% 1.5%

IT-BPO

40% and above

1.4% 1.3%

Retail

Spend Substantially less

0.6% 0.7%

BFSI

5% 10%

Spend slightly less

0.9% 0.9%

Healthcare/ Pharma

38%

15%

1.2% 1.3%

Transport/ Logistics

20% to 40%

Spend nearly the same 32%

Survey of 120 CIOs/ IT heads

0.6% 0.6%

Automotive

0.8% 0.6%

Manufacturing

FY 2010 FY 2009

0.4% 0.4%

Energy 0%

1%

2%

3%

Zinnov Confidential

Market: Vertical focus for Cloud Opportunity

…Government, Telecom and BFSI are highly mature with their IT adoption and show higher potential towards cloud adoption going forward IT Maturity of various verticals in India FY2009

7

Potential for Adoption of Emerging Technologies

Cloud/ SOA/ Virtualization

Telecom: New pricing changes, number portability, per second billing, new entrants and expansion of circle by existing players Government: Estimated spend of $ 9 billion on Government to consumer (G2C) projects (state/ central level) including hardware infrastructure and public services (Department of posts, railways etc.) Banking: Implementing and maintaining core banking solutions (esp. by public sector banks, mobile/ net banking, reduce transaction cost, compliance Insurance: Claims management, policy administration, underwriting and sales/ CRM, premium payments/ renewals Retail: Supply chain automation/ management, warehouse management, inventory audit/ loss prevention, online retailing, BI and networking Healthcare/ Pharma: Servers and Data center for hospital upgrades, HIS, Electronic records, image archiving, data storage/ mining, telemedicine, remote diagnostics, etc

Based on the IT Maturity, Vertical-wise IT spend and Adoption Potential Government, Telecom, BFSI and Manufacturing emerge as the top verticals for further analysis Note: Public Sector Enterprises are spread across verticals other than Government Source: NASSCOM Strategic Review 2010, Zinnov Analysis

Zinnov Confidential

India Landscape

Macro trends suggest a significant increase in overall IT adoption is impending in India (1/2)

8

PC and Mobile Penetration in India, Millions 1,000

PC install base

800

Absence of legacy systems will allow market to jump technology curve and results in first mover advantage

826.9

Mobile subscribers

Million Subscribers

520.6

600 400

600 • ~15 million mobile subscribers

200

added per month in India, 8 million new mobile shipments per month

42.1

100.1

500

0 2009

• App store • Access to 3G • Low cost smart phones

• ~25% of all phones sold in India are smart phones

2015E 400

Internet and 3G Subscribers in India, Millions 400

2009

Mobile (US)

200 Wireline (US)

200 100

Wireline (India)

2015E

292.3

300

Mobile (India)

• MVAS related revenues to account for 20% of operator revenue, a 2 fold increase since 300 2006 in India

129.5

100

66.4

58.1 8.0

0

1.5 0

Active Internet Users*

Broadband Subscribers**

3G Subscribers

2001

2003

2005

2007

2009

Note: *Includes all devices; **Bandwidth of 256+ Kbps, includes Broadband Wireless Access; ***Micro, Small, and Medium Enterprises Source: Telecom Regulatory Authority of India (TRAI); Union Budget FY2010-11Transcript; IDC; FICCI BDA Report “3G and BWA”; Gartner; Data monitor; NASSCOM Strategic Review, 200910 & 2010-11; Zinnov Analysis

2010

Zinnov Confidential

India Landscape

India witnessed a surge of almost 40 percent in its mobile internet traffic from Q4 2009 to Q1 2010, leading to the highest mobile internet traffic in Asia Active Mobile Internet Users Mobile Subscriber Base

Ad Requests** by Country, 1Q 2010, In millions

3000

In March 2010, Asia contributed to 25% of the total mobile internet traffic globally

2,838

2500 471 Million*

1,872

2000 1500 1000

Mobile Phones Capable of Accessing Internet

655

650 404

500

298

185

161

133

Indonesia Australia Philippines Vietnam Singapore Hong Kong Malaysia

Thailand

Wireless data subscribers in India increased from 101 million in QE Dec 2008 to 149 million in QE Dec 2009

27% of Total = 127 Million

Operating System Share of Smartphones in India

~ 12 Million

The top 3 countries, India, Indonesia and Australia generated over 74% of traffic in the region in Q1 2010

0 India

Used Mobile Internet in Last one Year

9

100% 80% 60% 40%

91%

89%

91%

93%

Surged by the total number of additions in mobile subscribers in India over the quarter the mobile internet traffic is soaring

20% Active Users = ~2 million

0% Dec-09 Symbian OS

Jan-10 iPhone OS

Feb-10

Mar-10

Windows Mobile OS

Other

Note: *As of Sep 09; **AdMob serves ads for more than 18,000 mobile Web sites and applications around the world and provides metrics based on this data Source: AdMob, TRAI, I-cube

In March 2010, smartphone traffic share of mobile internet traffic in India was 26%

Zinnov Confidential

India Landscape

In order to leverage on the huge telecom subscriber base and to compensate for the low rates of basic call tariffs, telecom players in India are increasing focused on the applications space Telecom Service Providers App Stores

Indian App Companies

• Bharti Airtel launched their own app store, Airtel App Central earlier this year • Airtel App Central provides 1250 applications across 25 different categories including games, business, social networking etc as well as India-specific religious applications • The cost of the applications is either added to the subscriber’s bill or deducted from the available talk-time, with the applications costs starting as low as INR 5

• It has entered into a deal with GetJar to provide access of 65,000+ free applications to all its 100 million subscribers via its VAS platform R-World • GetJar offers applications that work with almost all handsets and OS’ including Symbian, Blackberry, Windows Mobile, Java & Android

• The paid applications have been reasonably priced between INR 5 and INR 30

Note: *Assuming 1 USD = 50 INR Source: Company Websites and News releases, Zinnov Analysis

• Sourcebits is one of the most successful Indian companies in the space, having developed over a 100 applications for the iPhone, iPad, Android, Blackberry etc and nets USD 3 million* per annum • iRemedi is also a major player in the market having sold more than 200 Amar Chitra Katha comics for the iPhone and the iPad • Robosoft Technologies, a software company, sells its game apps as well as utility & productivity apps for iPhone, Android and Nokia phones. The company which sells apps under the brand name Global Delight hopes to make USD 9 million from the apps alone.

• Reliance Communications has a total subscriber base of 100 million across its GSM & CDMA networks

• Vodafone has launched its application store for Indian customers with 800 applications available currently, of which 25 percent are free

10

There are an estimated 50 Indian companies employing 1000 developers engaged in applications development across platforms

• Rocke Talk a free app that allows users to create their own voice, photo, video content and share it, has a subscriber base of 1.5 million users • Rapidsoft, Spiel Studio, Interchain solutions and Nexmoo are some of the other Indian companies

Zinnov Confidential

Drivers for Adoption of Cloud Services

Flexibility in terms of on-Demand scale up/ down with no upfront capital investment makes the cloud offering highly attractive for the enterprises Drivers for Cloud Solutions in India

11

“ This will help to meet customer expectation very effectively” Sukanta K Nayak, AVP, IT, Usha International

“ Easy Exit for customers in case of failures” Vikas Prabhu, CIO, The MobileStore

Top 5 CIO’s Investment Priorities for 2009-10*

90% 69%

68%

64% 45%

Softwareas-aService (SaaS)

Business Intelligence and Datawarehousing

Unified Communications

Virtualisation

Open Source

“It has potential. As the capex dollars are diminished, IT management is going to look for on-demand models for keeping the costs down”

“Its an innovative business technology with significant benefits coming from the absence of the client/server software installation or maintenance”

Prashant Cherukuri, CIO, Aditya Birla Minacs

N. Varadarajan, GM, IT, Madras Cement

Source: *IDC India’s “Identifying Opportunities in the Current Economic Scenario” report (March 2009), dqindia.ciol.com, BizTech2.com, expresscomputers.com, networkcomputing.com, Zinnov Analysis

Zinnov Confidential

Constraints to Adoption of Cloud Services

Data Security and Lack of customization are reported as the biggest challenge in the adoption of Cloud computing in India

12

“We faced challenges in terms of training the users to the new technology”

"Security is the biggest concern. Barring core applications, other productivity applications such as CRM and email can take advantage of this technology,“

Venkat Iyer, director, business technology, Pfizer India Ajay M Patil, the vice president of IT at Bharti AXALife

Top 4 Challenges with Cloud Computing* Challenges Reported by CIO’s with Cloud Computing

Compliance & Governance Concerns on Data Security Apprehensions on SLAs and Reliability Lack of Customization

Risk of Vendor Lock in

Need for Internal Training

25%

20%

Costlier in longer run

Poor Connectivity

18%

14%

Data Performance Data Transfer Data Lock-in confidentiality Unpredictability Bottlenecks and auditability

Existing Legacy Systems “For large organizations, the Value for Price model is yet to emerge” Upal Chakraborty, CIO, DLF

“CIOs need to keep in mind levels of complexities of his business processes as well as customization required, since the SaaS model may not permit too much customization”

“Security, uptime and SLA will be the important aspects of the deliverables” J Ramesh, CIO, MIRC Electronics

N. Varadarajan, GM, IT, Madras Cements

Source: *Saltmarch survey of 1100 Indian Business Technology professionals ‘2009, dqindia.ciol.com , BizTech2.com, expresscomputers.com, networkcomputing.com, Zinnov Analysis

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