Hurdles notwithstanding, India's cloud services market set to grow

India's cloud service market is growing at an amazing pace, but issues like data security and internet infrastructure are causing concern among companies, particularly startups.

According to research firm Gartner, public cloud service market in India is estimated to grow by 300%, from $632 million in 2014 to $1.9 billion in 2019. This will be driven by high growth in key market segments such as cloud Infrastructure as a Service (IaaS), cloud management and security service, and Business process as a Service (BPaaS).

As of June 2015, more than 354 million people have been actively using the internet and with the introduction of 4G services by the majority of the internet service providers in the next few months, numbers are expected to increase further in the country.

But with an average connection speed of 2.4 Mbps, India is ranked 117th globally, according to Akamai Technologies' State of the Internet report ending June 2015. Other countries in the Asia-Pacific region such as Sri Lanka (ranking 65th), Vietnam (95th) and Philippines (101st) are placed better than India (see chart).

Global rank CountryQ2 2015 average MbpsQoQ change (%)YoY change (%)
1South Korea23.1-2.1-11
2Hong Kong17.01.51.3
3Japan16.47.87.4
14Singapore12.76.822
26Taiwan10.61.16.5
42Thailand8.61728
43New Zealand8.40.818
46Australia7.84.88.0
65Sri Lanka5.31050
70Malaysia5.01817
92China3.4-7.1-8.6
95Vietnam3.33.029
101Philippines3.11323
116Indonesia2.411-24
117India2.45.822

(Source: Akamai State of Internet report Q2 2015).

Founder and CEO of Kolkata-based Indus Net Technologies, Abhishek Rungta, however, is optimistic about the industry's prospects in the country. "Public cloud services like Amazon AWS, Microsoft Azure, IBM SoftLayer and Google Cloud are making an aggressive push in the Indian market. After the operating system (OS), browser and search engines, it's another war for dominance. And it goes without saying that India will be a big battleground for this, as it hides within a big potential user base," he said.

According to Rungta, most of the enterprises in India are looking at private or hybrid cloud setup as they can afford the same. When it comes to public cloud, it is driven by consumers at large. This gives numbers, but not major revenues.

Private cloud adoption for businesses will bring in scale and revenue, and it will be driven by mid- to small-sized enterprises, startups and tech companies. "Many technology-driven startups are extensively using public cloud, and with further adoption of IT in SME sector, public cloud is set to grow exponentially in years to come in India," Rungta added.

Serial entrepreneur and startup specialist Rajesh Butta also said that one of the major advantages of cloud technology is savings in costs in terms of software licences and compliances. "The cost of setting up and maintaining an in-house platform is pretty huge. Hence cloud-based automation is the way to go for most businesses," he said.

But seamless and reliable internet connectivity is a problem in remote and less developed towns in India and this is a major deterrent for many companies to switch over to cloud. Once the operations get completely automated in cloud mode, the dependency on internet connectivity goes through the roof. If the net connectivity is poor, it will affect the businesses as the whole work comes to a standstill.

The other issue has been the security of data, as only one out of 10 cloud apps are secure enough for enterprise use. Most cloud-based solutions work on a SaaS (Software as a Service)-based pricing model. This is where the clients have to mandatorily be on the service providers' cloud.

"Data protection, in most cases, becomes difficult to explain to the client organisation. In that case, they usually demand the solution to be hosted on their private cloud, which is more a factor of pricing-model," Butta said.