Will cloud change India’s IT story?

The recession, with its pressure on client budgets, seems to have forced Indian IT companies to take the concept of shared, or cloud, computing more seriously.

While Wipro Technologies, which traditionally puts more emphasis on creation, has already hit the price-sensitive local market with a cloud-based enterprise offering, HCL Technologies’ Vineet Nayar sees its as the harbinger of impending disruption and shake-out in the Indian IT services industry.

The HCL CEO anticipates a revolution in the industry over the next five years, with the business model and even the definition of ‘IT’ undergoing a dramatic change.

“Whenever there’s an infusion of new technology, it dramatically changes the way services are bought and sold. Before the dotcom revolution, in the year 2000, Indian IT firms were each $100 million or so in size. Nobody could have said that each of us would be $3-$5 billion in 2010,” Nayar says.

Cloud-based services involve shifting the entire IT infrastructure out of the client’s premises and allowing the client access to applications through a web interface such as Gmail.

Such services tend to cost one-hundredth or one-thousandth of what traditional IT infrastructure would have cost the companies, primarily due to the ease of maintaining the IT infrastructure of multiple clients at a single location (cloud). Since both hardware and software are shared among all the clients, capital costs are a fraction of the traditional approach.

The silver lining, however, also comes with a cloud, especially for the Indian IT industry, which has made maintaining customer-premise applications its main means of livelihood. If there is no IT infrastructure at client premises, they would also not need Indian IT engineers to develop or maintain them, a scenario that keeps Vineet up at night.

“The implications are many for many different people. From the vendors’ perspective, there is talk about Chinese vendors, the re-emergence of some of the US vendors. For the next five or ten years, I see dramatic shifts. The shape and size of the industry in 2015 is going to be dramatically different from the shape and size of the industry today,” he predicts.

As an example, he points out out that while Google and Amazon are not reckoned to be traditional IT services companies by many, their products can make traditional IT services players redundant.
Nayar points out that, globally, IT outsourced service providers grew the fastest during 2000 to 2010, providing cheaper services from their India offices thanks to cheap network connectivity.

“So there is going to be a different set of companies which grows at 30-40%. Somebody will grow. Why? A different proposition, a different price-point to what is being offered today. Will it be the same set of vendors?” he asks.

Like HCL, Wipro too has been investing heavily in cloud-based or shared applications, especially for markets like India where companies are averse to spending million of crores on developing internal applications.

Girish Paranjpe, joint CEO of Wipro Technologies, points out that such services are being received well by small and medium customers, but have turned out to be more difficult for large enterprises who have the need for extreme customisation of their software.

“Having said that, there is no denying that there is big value in cloud computing for us both in terms of cost and cycle time,” he points out, adding that the company has already found Indian customers for its three month old offering.

S Gopalakrishnan, CEO of Infosys Technologies, however is more skeptical about an immediate revolution in the enterprise market.

“I feel it will be slow transformation.. There are still issues of security, privacy and reliability at the enterprise level. I would say it is a real opportunity for all of us but it take many years and will not happen immediately,” he said.

Like the others, Infy too has a taken a two-pronged approach to the opportunity - helping cloud operators while also developing an own platform that will help it to become a cloud service provider.

Diptarup Chakraborti, principal research analyst of Gartner India, says Indian firms, while not among the current crop of cloud service providers, are also likely to jump on the bandwagon soon.

“The top 10-15 IT vendors are pursuing opportunity in it and nobody is likely to miss it,” he says.