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Windows Azure Industry "Givebacks"

October 14, 2010


Information Technology enabled Services (ITeS) IaaS/PaaS allows firms to quickly delivery diverse services and improve quality

Industry priorities driving cloud adoption

Industry pain points addressed by IaaS/PaaS

Firms looking to climb value chain, growth drivers aligned with benefits of IaaS/PaaS

Agility: need to quickly provision are re-provision environments for teams working across multiple clients

• Increasing global reach: need global delivery and quality process to ensure service quality and continuous improvement • Increasing competition in BPO: competition from other emerging economies requires Indian firms to continue to innovate and improve services • Cost pressures: firms looking to grow and reduce cost as competition increases driving down margins on commoditized services – Growing geographically within India to tier 2 and even 3-4 cities to keep labor cost low – Historic over-investment in infrastructure, firms looking to increase utilization of existing investments • Niche: firms specializing to address industry specific needs like healthcare and R&D

Cloud value drivers • Improved collaboration with customers and employees around the globe • Reduced time to market for new products and services • Reliability and availability • Scalability

Azure Indian Market Industry Givebacks 09302010.ppt

Global reach: need to deliver reliable IT services to employees and customers around the world Security: need to control data security according to contractually obligations with individual clients Scalability: need ability to scale quickly (up and down) as workloads change Speed: need to reduce time to market

Top workloads w/ cloud potential • Customer engagement management: provisioning client specific images and work platforms • CRM & knowledge management • Service quality management: call monitoring and storage, issue resolution and escalation • Data warehousing and storage: many firms currently using NAS, could move to IaaS/PaaS storage • Disaster recovery / business continuity: large expenditures (10-12% total IT spend) • Training & reviews: providing web-based advanced skill training and employee appraisals

Adoption trends / examples ITeS / BPO has been one of the first industries to experiment with public cloud IaaS & PaaS adoption in India However, the majority of public cloud adoption has been in focused trials with non-mission critical applications: • PaaS for an internal coding competition • Proof of concept for telecom client, application requiring large temporary use of compute and storage • Internal data backup and disaster recovery • PaaS for a web application used to calculate and report infrastructure carbon emissions

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Independent Software Vendors (ISVs) IaaS/PaaS provide low cost platform for developing and delivering SaaS applications Industry priorities driving cloud adoption Software developers in India are looking for ways to provide higher value services to customers while reducing costs • IaaS/PaaS allows smaller and regional firms to reach global customers at significantly lower costs • A growing number of ISVs / SaaS firms are developing applications for customers to be deployed on customer servers and public cloud environments Strong presence of ITeS firms and MNC captive centers driving an increase in the talent pool and number of ISV startups • Trend also driving competition for IT infrastructure talent raising cost for self hosting SaaS becoming the method of choice for software acquisition, especially in the SMB segment where IT penetration is low • SaaS aligned with business economics • Local market nascent; ~ $23M in revenue, however, strong growth expected at a 50% CAGR, reaching over $180M by 2013 • Offerings from MNCs lack localization Azure Indian Market Industry Givebacks 09302010.ppt

Industry pain points addressed by IaaS/PaaS Competition: ISVs facing global competition for local market Global reach: export focused firms already developing software for global firms, offering SaaS would be move up value chain Platform interoperability: need ability to deploy in multiple environments to meet the needs of end customers

Client IP protection: need central control over developer access to client owned code Agility: pace of innovation and competition rewards products brought to market quickly

Cloud value drivers • Ensures customers of infrastructure robustness with co-branding: "powered by Windows Azure" • Provides instant global infrastructure • Reduces time to market for new products and services

Adoption trends / examples Firms seeing the value of IaaS/PaaS in providing an improved end user experience, in particular when serving global customers Examples of ISVs adopting IaaS/PaaS: • e-Government solution built on PaaS, allowing customers to implement unique instance without new infrastructure/staff • Moved internal email, backup and staging to IaaS hosted environment • Deployed custom application on IaaS platform for client • Call center software developer moved application to PaaS in order to provide SaaS

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Telecommunications IaaS/PaaS solutions offer advantages but must work with tightly integrated application stack Industry priorities driving cloud adoption Fierce competition in telecom market with local and international firms vying for customers with low cost offerings • Changing regulation (e.g. MNP) • Push to increase service in rural areas • Growing congestion concerns and need to increase quality of services IT systems need to handle significant data growth, while cutting cost due to low / declining ARPU; • 3G networks rolling out now • Telecoms looking to develop and nurture applications that drive data usage – Entertainment (gaming, music, etc) – Messaging – Banking and payments

Many telecom firms already outsource IT infrastructure, looking for approaches that allow tight integration with current systems • High infrastructure and application complexity • Interconnected systems • Customer facing applications

Azure Indian Market Industry Givebacks 09302010.ppt

Industry pain points addressed by IaaS/PaaS Cost: need to keep costs of service delivery low to match low and declining ARPU Scalability: need ability to handle massive amounts of data and processing as customer base/usage grows and 3G technologies roll out Security: need to keep up with regulatory changes; in particular, handling of customer data (e.g. location) Agility: need to reduce time to market for new applications/services to drive data use and increase willingness to pay

Cloud value drivers • Cost reduction • Reduced time to market for new products and services • Increased elasticity & agility • Scalability

Adoption trends / examples Firms already accustomed to sharing infrastructure (e.g. leasing / shared cell towers) to keep cost low, however, limited public cloud adoption to-date Potential to disrupt IT svcs industry by offering cloud computing svcs: • Offering IT-as-a-Service (ITaaS), with end-to-end infrastructure and software delivered as a service (NetPC based) • IaaS based hosting • Hosted versions of apps delivered as SaaS Examples of Telecoms adopting IaaS/PaaS: • European telecom using PaaS to develop new applications for linking smart meters

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Manufacturing Vertical specific apps and hybrid public/private clouds can help firms grow while reducing costs Industry pain points addressed by IaaS/PaaS

Adoption trends / examples

The Indian manufacturing sector is poised to grow significantly due to low labor costs and the large domestic market

Global competition: need to source supplies and complete with global firms as well as other emerging markets

IT a likely lever to increase sector productivity • Customer / market facing applications: the internet is becoming a stronger distribution channel with firms looking to build their brands and increase reach • Internal collaboration: large, vertically integrated firms can leverage IT to connect employees and increase productivity • Supply chain optimization: improved systems necessary for integrating with global partners as outsourcing increases • Predicting demand: firms looking to leverage data and better understand changes in customer demand

Increased collaboration: increasing collaboration with suppliers, customers and partners (e.g. design, supply chain) as well as backward and forward integration

Due to perceived pain points; core apps may not move to entirely to public IaaS/PaaS • Security / privacy • Reliability, especially in tier 2, 3 & 4 cities

Industry priorities driving cloud adoption

Global slow down tightened access to capital, causing firms to look for ways to do more with less • IaaS/PaaS reduces capital investment and paves way for increased process and system digitization Azure Indian Market Industry Givebacks 09302010.ppt

Digitization of distribution: customers moving online to find information about products (buying still not widespread) Reduced CapEx: allowing firms to increase capabilities without large capital expenditure

Cloud value drivers • Improved collaboration with customers and employees around the globe

• Increased elasticity & agility • Reliability and availability • Cost reduction

Increased integration and collaboration needs will create hybrid IaaS/PaaS demand Examples of manufacturers adopting IaaS/PaaS: • Large Asian auto manufacturer using PaaS for deploying US website for marketing campaign • Manufacturing services firm using PaaS to host energy tracking application and store large amounts of data

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Media and Entertainment IaaS/PaaS reduces barriers to digitization allowing converged creation / distribution of content Industry priorities driving cloud adoption Two mega-trends paving way for IaaS/PaaS adoption Convergence • Traditional media (e.g. cinema, print) converging into new media (e.g. internet, mobile) • Investments to increase new media content underway • Large investments in 3G underway that will accelerate adoption Digitalization of media • >80% of content expected to be digitized by 2012; generating significant storage and computing needs • Media distribution platforms and networks becoming key element of competitive advantage as on-demand develops into a major distribution channel Indian entertainment content gaining global attention; accelerating growth and the need for global distribution

Azure Indian Market Industry Givebacks 09302010.ppt

Industry pain points addressed by IaaS/PaaS Rampant piracy: already a major concern, however will be more important with move to digital distribution Low price points: need to match service delivery cost with low willingness to pay for digital content Long production times: need to reduce time for compute-intensive productions • Expensive infrastructure necessary due to need of sizing for peak use

Cloud value drivers • Reduction in piracy with web delivery • Instant global infrastructure • Scalability • Reliability and availability

Adoption trends / examples IT services spending increasing as technology use becomes strategic • Digitization of content creation and delivery • Lack necessary IT skills • Desire to focus on creative / content Examples of firms adopting IaaS/PaaS: • Indian animation firm used cloud computing to render feature length film • Large US newspaper developed content management application on PaaS, used for both creation and delivery • Media focused software firm built application to handle transcoding on PaaS platform

• Increased elasticity & agility

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Pharmaceuticals Workloads in R&D ripe for IaaS/PaaS adoption, however, regulatory and security issues remain Industry priorities driving cloud adoption As the discovery of new compounds becomes more expensive and time consuming; firms looking for ways to increase R&D productivity • Cost reduction: – Global firms outsourcing clinical trials and R&D to India – IaaS/PaaS allows scaling of infrastructure to quickly serve R&D needs while minimizing CapEx • Improved targeting: using patient info and bio data along with large-scale computing power to improve targeting of research for drug creation – Advanced algorithms to search and analyze multivariable effects on real patient scenarios vs. small samples – Cloud data warehouse of patient data (e.g. genomics, pathology, historical treatments) • Streamlining management and collection of data: IaaS/PaaS based applications ease the burden of collecting research and clinical trial data Azure Indian Market Industry Givebacks 09302010.ppt

Industry pain points addressed by IaaS/PaaS Need for massive On-demand computing power: perform large, complex simulations and analyses, computing needs continue to grow as technology advances Rising cost of discovery: looking for ways to improve return on R&D Data storage: research generates large about of data to be securely stored (e.g. genetic, bio, patient & chemical data) Security: need to keep up with regulatory changes; in particular, handling patient and trial data

Cloud value drivers • Scalability • Reliability and availability • Increased elasticity & agility • CapEx reduction

Adoption trends / examples Due to perceived pain points; core apps may not move entirely to public IaaS/PaaS • Security (privacy & IP protection) • Regulations (HIPPA, CFR Part 11)

Examples of firms adopting IaaS/PaaS: • Global pharma firm using cloud for collaboration with internal and external users • Biotechnology firm using PaaS platform to analyze enzymes and store large amounts of research data • Global pharma firm using cloud based CRM for gathering clinical information in a hospital setting

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BCG Report on Cloud Adoption in Indian Industry