Will India Produce Indigenous Cloud Computing Providers

The interest level around cloud computing is already on the rise in India. Several global and local software players have been going all out to get attention, by making the one pitch that everyone wants to hear – lower TCO.  However, it still hasn’t resulted in very high sales numbers for these providers.

The interest level around cloud computing is already on the rise in India. Several global and local software players have been going all out to get attention, by making the one pitch that everyone wants to hear – lower TCO.  However, it still hasn’t resulted in very high sales numbers for these providers.

There may be several reasons for low cloud sales, but I think one of the most important one is pricing. Take any popular desktop software like Microsoft Office or Symantec Antivirus: it always has a different price for the India market which, typically, may be 40-50 percent lower than its price in western markets. Cloud computing services such as Google Apps, Microsoft Azure and Amazon EC2, offer no regional pricing for India. In fact, most of these are priced in US dollars. They also, mostly, accept only credit card payments. In fact, Microsoft recently started accepting Indian rupee cheques for their online services, but only for larger customers.

When it comes to TCO, Indian firms have a different formula for software/hardware depreciation as well as IT manpower costs. Cloud pricing turns out to be too high for them. Moreover, paying thousands of dollars through credit cards is not something that most Indian companies are comfortable with.

So can the cloud pricing ever get lower for Indian markets? For on premise software, offering lower pricing for Indian markets may be easier. All they have to do is to copy the software on a disc and sell it. The only costs are related to packaging and distribution. In the cloud, there are added infrastructure costs that the cloud provider has to bear for every seat sold. If a cloud vendor is maintaining mirrored multitenant infrastructure, with data centers in several continents, there may be no easy way to lower pricing for one country (or one tenant).

What if the cloud vendor’s infrastructure was completely located in India? A homegrown cloud vendor would, arguably, be able to provide better pricing to Indian customers. We would then have CRM, ERP and all kinds of other SaaS solutions made in India, hosted in India and priced for India.

That sounds great – but it also assumes that customers (Indian companies) of these SaaS solutions wouldn’t have to do any business internationally. With global customer bases and supply chains, nowadays, is that really possible? As Indian companies try to compete in the global arena, would they really want to use software that takes them in the opposite direction?

So, “Indian clouds” may be able to solve the pricing issue but may fall short in other areas. However, they may still be able to play an important role – getting the global players to drop their prices.

Of course, in addition to pricing, there are other significant barriers, such as the absence of a cloud ecosystem, high speed connectivity and the general lack of awareness. However, as with most things, if the economics works out, everything else will follow.

What do you think?

Amit Chaudhary