Asian SMB cloud adoption leapfrogs advanced market in US
By Edwin Yapp September 26, 2012
- SMBs in Asia leapfrogging over counterparts in US where public cloud adoption is concerned
- Smaller web hosting and cloud providers in Asia should gear up to take SMBs to the next level
SMALL- and medium-sized businesses (SMBs) in Asia are embracing public cloud computing and its adoption in the region has surpassed that in the United States, according to industry players.
George Karidis, chief strategy officer of SoftLayer Technologies (SoftLayer), said that his company is witnessing a “higher mix of hourly compute service adopted in Asia compared to that in the United States.”
Speaking at a panel at the recently concluded Parallels Summit in Singapore last week, Karidis (pic, left) said, “If you’re talking about public cloud infrastructure that is multi-tenant in nature, we’re definitely seeing a lot more adoption of hourly compute demand here in Asia compared to US."
Headquartered in Dallas, Texas, SoftLayer is global cloud infrastructure provider and claims to be the largest privately-owned hosting company in the world.
Asked why this was so, Karidis said he was not absolutely certain but believed it had to do with the fact that companies here do not have as much legacy computing infrastructure compared to those in the West.
Karidis said this trend could be due to a “leapfrogging effect,” where companies in Asia have gone from the co-location [of data centers] to the public cloud directly, instead of having moved from co-location to their own dedicated in-house IT infrastructure.
A typical scenario for this is when new online businesses – from a mobile developer to a software development company – buys cloud services rather than their own servers from an infrastructure-as-a-service provider, the SoftLayer executive added.
“This is something that we’ve also observed in Europe, as our data centers in Amsterdam are experiencing this as well. And from what we’re seeing, the differences in adoption in [Asia and Europe] compared to that in the US is not just different but exponentially different.”
P. Sridhar Reddy (pic, right), chairman and managing director of CtrlS, concurred with Karidis, noting that many more SMBs in Asia are beginning to realize that public cloud is much more efficient and has the scale that helps SMBs to reduce their operational costs.
The fellow panelist pointed out that in the pre-cloud days, an SMB may only use 20% of the computing power most of the time and that usage may spike only once a year. In this case, it may need to add servers just for this period, which is totally inefficient.
“With the public cloud, SMBs can save costs and the total cost of ownership with a cloud infrastructure would be between 30% and 50% cheaper than owning their own equipment, and this acts as a great driver for adoption,” he said.
Hyderabad-based CtrlS claims to run India’s first and only Tier-4 certified data center operations.
Reddy also noted that SMBs, which are his clients, are adopting the cloud for one of three scenarios: The first is usually in the event of a new service to be deployed; secondly, when when SMBs lack the skills to manage their own IT infrastructure; and thirdly, when there is a challenge of setting up new software applications and/ or IT services.
Parallels’ SMB survey
Observations noted by the aforementioned web hosting and SMB cloud infrastructure providers also seem to tally with a survey conducted by cloud infrastructure enabler Parallels recently.
Culled from interviews conducted with IT decision makers of over 3,000 SMBs in Asia Pacific over the past two years, the Parallels SMB Cloud Insights revealed that the Asia Pacific SMB market for major cloud services including hosted infrastructure, web presence, hosted communication and collaboration, and business applications stood at US$7.6 billion.
This figure is expected to grow to US$19.8 billion by 2015. Parallels defines SMBs as organizations with the number of employees between one and 250.
It further defines hosted infrastructure to include virtual private servers, managed hosting, and utility and elastic computing; web presence includes third-party hosting, blogging services, domain registrations, and e-commerce add-ons and site building tools; hosted communication to include business-class e-mail service, e-mail security, archiving and mobility; and business application as software-as-a-service application that are assessed online.
Of these categories, Parallels noted that hosted infrastructure by 2015 will represent US$7 billion; web presence, US$3.5 billion, hosted communication, US$ 2.7 billion and business applications will double to US$6.6 billion.
The survey also revealed that over the next three years, South-East Asia (SEA) and South Asia will be the fastest growing regions, growing at four times their current market size.
“In SEA, a key reason for this growth is that the governments of these countries are rapidly rolling out high-speed, next-generation networks needed for advanced cloud services and applications,” the survey noted.
SMBs maturing, opportunities for service providers
Jack Zubarev, co-founder and president of Parallels, noted that hosting and cloud service providers have a great opportunity to meet the needs of the many SMBs in the region as the services offered today is far more complex than before.
“Ten years ago, a service provider could just offer a web hosting space for ‘X’ amount of dollars and customers would just have that space, and if they wanted more, customers will be charged for add-ons,” he said in an interview with Digital News Asia (DNA) on the sidelines of the Parallels Summit.
“Today, merely offering space isn’t enough. For the same price, you will need to offer not only web space but bundled services like collaboration and communication tools for free.”
Zubarev said accompanying these bundled offerings must be the simplicity of managing such services for customers who want them. “Service providers will have to continue to innovate and launch new value-add-ons and to do so by making it as simple as possible for their customers. This is what will differentiate one service provider from another in this competitive space.”
Asked how advanced web and cloud service providers in Malaysia were, John Zanni (pic), vice president of service provider marketing and alliances at Parallels, said most SMBs in Malaysia today are not at a mature level.
He added that many of them aren’t using services such as enterprise resource planning or customer relationship management yet.
Zanni said Malaysia is classified as being in the “maturing” state in the Parallel’s Cloud Insights study, which is defined as a country that has Internet usage rates of anywhere from 45% to 75% as compared to matured countries, which have more than 75% of the population using the Internet.
Asked as to what opportunities there were for these service providers, Zanni was bullish, noting that SMBs in Malaysia were already adopting web presence, e-commerce, collaboration, document sharing, and business class e-mail.
“There are ample opportunities for service providers serving the SMB space as after establishing these horizontal services, there is room for more advanced services to grow,” he told DNA.
“My recommendation is to create good offerings for those core services and once these SMBs adopt these services, they can expand to more advanced services. Put simply, take baby steps, do small things well and build on that.”
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