Global SaaS Market 2014 – 2018 – Continues to drive growth in Cloud Computing Market

Global Software as Service market is expected US$53 billion by 2018, or 59 per cent of the enterprise public cloud computing market from the current 2013 revenues of US$23.2 billion, according to Juniper Research and also expects the overall enterprise cloud computing market to reach US$90.7 billion by 2018. According to Forrester Research, the total public cloud services market revenues were US$58 billion in 2013, is expected to grow to $72 billion in 2014 and expected to reach US$191 billion by 2020. Software as a Service (SaaS) solutions accounted for $36 billion in revenue in 2013. SaaS market has reached significant maturity levels and well established in several application categories like sales force automation, customer relationship management, human resource management, eProcurement and ePurchasing, replacement of existing licensed software. Cloud platforms, led by Amazon Web Services LLC, with revenues of $4.7 billion in 2013 but traditional IT partners IBM, HP and Microsoft are fast catching up with their own set of offerings and market is becoming highly competitive. The other two segments of cloud computing Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) are also expected to continue growth. But these two segments face certain critical issues in terms of data security, compliance and portability. “Both PaaS and IaaS will experience significant growth over the forecast period as new applications, developed specifically for the cloud to harness workloads such as big data analysis, benefit from the PaaS ‘fast-track’ model,” Juniper says.

According to San Diego-based investment firm Software Equity Group, SaaS software revenues will contribute around 25% of the overall software market in the next five years. Research firm Gartner estimated that global spending on SaaS will reach $22.1 billion by 2015. Some software vendors are converting their software delivery and revenue models to SaaS, while others acquire SaaS companies to gain access to this market. SaaS offerings are predominantly based on subscription models where enterprise customers access the software in the cloud by paying monthly subscriptions which is totally different from the traditional software license and maintenance models where customers have to pay large upfront perpetual license fee. With the emergence and development of networking equipment, platforms and access devices like smartphones and handheld devices, SaaS based on subscription model is picking up and customers can easily access data and applications form anywhere, at any time, on any device. Despite this there are certain concerns for CIOs who are not totally adopting the SaaS model as there are security concerns, switching costs, regulatory concerns and also cloud outages and failures too. Adoption of cloud based models is further expected to grow in the next five years as the technologies mature and more applications and services are offered on the cloud. Companies too need to rethink their IT investment strategy as Cloud Computing offers a significant level of cost savings in terms of IT infrastructure investments.

Global Healthcare IT Outsourcing Market growth fuelled by Cloud Computing till 2018

Global Healthcare IT Outsourcing market is expected to grow at a CAGR of 7.6%, to reach $50.4 billion by 2018 from $35 billion in 2013 according to a report provided by MarketsandMarkets, a global market research and consulting company. US Healthcare companies accounts for the largest share - 72% - of this market and is expected to reach $36 billion by 2018 from $25 billion in 2013. Asia-Pacific and Rest of the World are expected to register CAGRs of 8.1% and 7.8% (2013 to 2018) respectively, followed by North America (7.6%), and Europe (7.2%). Health insurance companies, healthcare services providing companies, healthcare systems and equipment companies are part of this market segment that have to reduce their operational costs, administrative costs, focus on core processes, implement information technology to run processes and also manage risks and develop new product offerings. Particularly information technology has become a core component for running the companies and offer product and services to customers and in some instances IT has become the competitive advantage. There is a huge demand for Healthcare IT professionals both on the medical and the process front and highly skilled professionals like actuaries, medical coders, medical writers, biostatisticians, physiotherapists, nurses, general physicians, ayurvedic and homeopathic practitioners are needed for healthcare IT industry to offer services like medical coding, medical writing, bio-statics, healthcare and data analytics. Some of the healthcare companies have completely outsourced their IT systems and some have outsourced only key applications like electronic medical records, medical transcription, billing services, claims processing, data analytics.

Availability of low cost highly skilled IT professionals, implementation of new technologies, government regulations like Obama Care, ICD 10 coding and integration of different technologies already being used with the new technologies like cloud computing, mobility and analytics have presented a big opportunity for the Indian IT service vendors like TCS, Infosys, Cognizant, Wipro, HCL Tech, etc. Cloud Computing is being widely adopted by healthcare companies across the globe as there are significant cost benefits associated with this technology as the companies need not invest heavily on hardware like servers, datacenters, etc. Cloud computing is highly flexible, can be accessed from everywhere, uninterrupted service and also helps to scale up the operations at a faster pace but there are certain disadvantages like data security and reliability issues like downtime. Despite these disadvantages the need for reduction in costs, operation times and efficient back office management is must for the success of healthcare companies. Healthcare IT outsourcing vertical has been dominated by Cognizant Technology Solutions, but other players in the Indian IT Services industry like TCS, Infosys, Wipro, HCL Tech have built up significant capabilities and acquired the much needed technical expertise and skills through mergers and acquisitions and also captured some big deals in this segment. All the Indian vendors both the ITO and BPO vendors have exclusive focus on the healthcare IT outsourcing segment and have even referred to this segment as a key growth driver for the industry in terms of both revenues and profits.  

Finance & Accounting Outsourcing market maturing & seeing stable growth in 2013

According to Everest Group, Financing and Accounting Outsourcing: Annual report 2013, the global multi-process FAO market grew at the rate of 10% to reach ACV of US$4.3 billion which highlights the fact the market is matured and stabilizing and is further substantiated by the fact that over 65% of the ACV growth in 2012 was contributed by contract extensions/renewals. Cost reduction and process improvement are the primary drivers for adoption but standardization, scalability and flexibility drove FAO adoption further, emphasizing a cost+ value proposition highlights the Everest Group report. As the traditional markets matured the vendors are forced to move to under-penetrated markets but Europe led the market increased FAO adoption and mid-market and small buyer segments also increased their adoptions significantly in 2012 led to moderate growth in 2012. Competition in the FAO market is intensifying as the share of the top three service providers declined from 68% in 2002 to ~50% in 2012. Some of the key players in the FAO market are Accenture, Aditya Birla Minacs, Aegis, Capgemini, Cognizant, Datamatics, EXL Services, Genpact, HCL, HP, IBM, iGATE, Infosys, IQ BackOffice, NCO, Quatrro, Serco, Steria, Sutherland Global Services, TCS, Wipro, WNS, Xchanging, and Xerox. ( Data Source: Everest Group)

One of the significant trends is the rise in Adoption of end-to-end process but buyers continue to remain cautious and adopt a phased approach to F&A outsourcing. Some of the new focus areas that are emerging are Analytics, risk management & compliance and F&A services are increasingly getting industry-specific. The Everest report also highlights buyers are increasingly adopting non-advisor-led competitive bidding route for sourcing F&A services. India continues to be the predominant hub of offshore delivery and most of the vendors both global and Indian are striving to build a balanced onshore-nearshore-offshore model. Technology augmentation model is becoming the predominant approach where in the vendors are developing technology infrastructure and also adopting emerging technologies like cloud computing, mobility, social media and big data analytics to offer innovative service offerings to clients. Outcome based pricing model and platform-based solutions are also gaining traction. Service provider performance is up-to-the-mark against the metrics important to FAO buyers, resulting in high satisfaction levels. However, buyer organizations have highlighted some areas of improvements for service providers to work upon. Vendors are shifting their focus to building technologies and service offerings through adoption of emerging technologies like cloud computing and offer cloud-enabled F&A technology that can be delivered as a BPaaS solution.

Global Platform as a Service (PaaS) Market 2013 & forecast 2018 market growing

PaaS provides a cloud computing platform and a solution stack that allows developers to create applications and software and test them by utilizing tools and libraries from the cloud services provider. Compared to Software as a Service (SaaS) and Infrastructure as a Service (IaaS), PaaS market is small and slowly picking up and the reason being complexity in adaption and building a standardized PaaS platform from the scratch is very difficult for organizations. According to Markets and Markets, Global Platform-as-a-Service market is estimated to grow from $1.28 billion in 2013 to $6.94 billion in 2018 at a compound annual growth rate (CAGR) of 32.54% in this period. In terms of geographies, North America continues to be the biggest market for PaaS solutions. Worldwide platform as a service (PaaS) revenue is on pace to reach $1.2 billion in 2012, up from $900 million in 2011, according to Gartner, Inc. The market will experience consistent growth with worldwide PaaS revenue totaling 1.5 billion in 2013, and growing to $2.9 billion in 2016.

Along with the large players like Amazon, Google, IBM, etc., small players also emerged in this segment that made the market more competitive and vibrant with new products and services are being offered by the cloud services providers. The need for the businesses to develop new applications, tools and technologies at a low cost have increased the demand for the developers and also for PaaS offerings as most of the developers are looking to PaaS to develop and test new apps and software. Application Development and Maintenance PaaS (ADM PaaS), Business Process Management PaaS (BPM PaaS), Application PaaS (aPaaS), Integration PaaS (iPaaS) and Other PaaS are the segments categorized based on Applications.

According to Gartner, the largest segments within the PaaS market are cloud application platform services (aPaaS), accounting for 34.4 percent of total PaaS spending in 2012; cloud application life cycle management (ALM) services (almPaaS) at 12 percent; cloud BPM platform services (bpmPaaS) at 11.6 percent; and cloud integration services (iPaaS) at 11.4 percent. Gartner predicts that the potential spending in PaaS technologies is an average of $360 million per year from 2011 through 2016.  "The fundamental appeal of PaaS is the opportunity for ISVs (independent software vendors) and IT organizations to create new software solutions with minimal capital expense and without the hassle of provisioning and configuring the underlying infrastructure," said Yefim Natis, distinguished analyst at Gartner. "Too many SMBs (small or midsize businesses), in addition, PaaS offers the chance to take advantage of some state of the art enabling technologies, they otherwise could not afford. Finally, the popularity of SaaS also drives adoption of PaaS for customization, extension and integration of the cloud-based applications."

IDC expects 2013 will see an explosion in industry PaaS (public platform as a service) offerings as the market moves up the software stack and "horizontal" PaaS becomes commoditized by platforms built on open source-based infrastructure. In industry PaaS, cloud-based shared services environments are being tailored to the needs of a specific industry, while additional industry-focused solution developers are developing and deploying a range of industry-targeted value-added solutions and services on these platforms. Examples of emerging industry PaaS include: NYSE Capital Markets Community Platform in financial services; numerous health information exchanges in healthcare; and Johnson Controls' Panoptix App Marketplace in smart energy. (Source: IDC predictions 2013: competing on 3^rd Platform) 

Global SaaS Market growth will continue & drive software sales growth in 2013

Worldwide Software as a Service (SaaS) Market is expected to continue its growth in 2013 as more and more businesses are adopting SaaS and most of the Independent Software Vendors (ISV) including the big vendors like IBM, Oracle, SAP, Salesforce.com, etc. have increased their product offerings in the SaaS segment. There has also been a spate of acquisitions in the SaaS segment where ISVs acquired specialist small and medium SaaS vendors and product developers and integrated acquired software and product offerings into their core products. The SaaS software market will increase 25 percent in 2013 to $59 billion, a 25 percent increase. In 2014, the market is expected to total $75 billion, according to Forrester Research. Gartner predicts the size of the SaaS market will grow from $16 billion in 2012 to more than $21 billion in 2015. Mark Hurd, President of Oracle has said that cloud computing services will reach $72.5 billion over the next five years from 2010 levels of $21.5 billion and estimates that by 2014 around 14 million more jobs will be created due to cloud computing.

In June and July of 2012, Gartner conducted a survey of 556 organizations across 10 countries and within four regions (North and South America, Europe and Asia/Pacific) which highlighted 71 percent of organizations have been using SaaS for less than three years. According to the survey, investments in SaaS are expected to increase across all regions. Seventy-seven percent of respondents expected to increase spending on SaaS, while 17 percent plan to keep spending the same. More than 80 percent of respondents in Brazil and Asia/Pacific indicated more spending on SaaS applications over the next two years. The U.S. and European countries were not far behind with 73 percent of U.S. respondents and 71 percent of European respondents intending to increase spending on SaaS. Gartner Research vice president Charles Eschinger said despite the fact that adoption of on-demand deployment model by business organizations has begun more than a decade ago, but SaaS popularity has increased significantly within the past five years. This rise in adoption in the past few years is because the development of the SaaS technology and maturity of the SaaS business and computing models that led to diminishing of business concerns related to security, response time and service availability.

Gartner survey also highlighted that customer relationship management (CRM) and enterprise content management (ECM) as the applications most often being newly deployed. Supply chain management (SCM), Web conferencing, teaming platforms and social were the applications picked most as replacements for on-premises solutions. But the business decision to migrate to SaaS depends on business criticality of the application/solution along with other critical factors like geography, business agility, usage scenario and IT architecture and few organizations will completely migrate to SaaS but with a mix of SaaS and traditional on-premises application deployment models, according to Gartner’s Eschinger. Another fact is that integrating SaaS tools to existing IT infrastructure is both costly and complex and IT departments have to work closely with SaaS vendors in terms of planning and migration to SaaS platforms. But overall SaaS adoption by business organization even by large organizations will continue to rise and is one of the key revenue generators for Independent Software Vendors for the next few years.  

India Data Center Market 2012 – Significant growth forecasted, Future Outlook 2017

India Data Center market is expected to see significant growth in the next five years as there has been increased adoption by Indian companies of the third party data center services and the government has also increased its cloud computing initiatives where it is directly setting up data centers and also using the services of the third party data center service providers. Reliance Communications has announced the multiple orders bagged from Central and State Government of India as the company has signed long term contract with The Department of Post, Municipal Corporation of Greater Mumbai (BMC), Madhya Pradesh Border Checkpost Development Company Limited along with Karnataka DISCOM and Chattisgarh DISCOM. McKinsey has estimated that the third party outsourced data centre market in India is expected to grow at a CAGR of 32% to Rs 5,500 crore by the year 2017 with verticals such as banking and financial services, media and entertainment service, manufacturing, international telecom providers and retail accounting for 70% of this growth. TechNavio's analysts forecast the Data Center Equipment market in India to grow at a CAGR of 10.4% over the period 2011-2015.

The Indian IT infrastructure market comprising of servers, storage and networking equipment will reach US$2.05 billion in 2012, a 10.3% increase over 2011, according to Gartner, Inc. The IT infrastructure market is expected to reach $3.01 billion by 2016. Revenue growth will be primarily driven by ongoing data center modernization, as well as new data center build outs. Servers are the largest segment of the Indian IT infrastructure market, with revenue forecast to reach $754.5 million in 2012, and grow to $967.2 million in 2016. The external controller-based storage disk market in India is expected to grow from $439.4 million in end-user spending to $842 million in 2016. The enterprise network equipment market in India, which includes enterprise LAN and WAN equipment, is expected to grow from $861 million in 2012 to $1.2 billion in 2016. Gartner Analysts predict that Indian businesses are looking to focus on optimizing the IT Infrastructure and strategy by implementing virtualization and ongoing investment in large captive data centers mixed with the capacity growth initiated by the data center service providers are the key drivers for growth. Mobility, social media and cloud computing adoption will have significant influence on the way data centers are designed, operated and managed their by the data center services providers.

Dimension Data estimates data centre market in India is growing at a CAGR of 22% and will touch Rs 6,500 crore by 2016. BSNL offers managed co-location, managed hosting and cloud services through the Internet Data Centers (IDC), which have been built by Dimension Data for BSNL. This public-private initiative will leverage the strength of BSNL in telecom infrastructure and vacant buildings and that of Dimension Data in providing data center and cloud computing," Communications and IT Minister Kapil Sibal said while inaugurating BSNL IDC services. Dimension Data operates and manages IDC centers, which are located in Mumbai, Faridabad, Ahmedabad, Jaipur, Ludhiana and Ghaziabad. Each of these is run at a Tier III level and all make use of vacant space BSNL has at its telephone exchanges. According to Reji Thomas Cherian, VP, Telecom, Media & Entertainment, Capgemini India, the Cloud Computing market including PaaS, IaaS and SaaS was worth $400 mn for India alone. Data center services revenue is projected to touch $2.6bn in 2012. The managed security market in India was worth $321 mn in 2011 and is expected to see rapid growth. Moreover, managed third party data center services generated revenues to the tune of $662 mn in 2011 and this too is on a high growth trajectory.

Global BPaaS Market 2012- Future Outlook: Growth driver for Indian IT vendors

Everest Group defines Business-Process-as-a-Service (BPaaS) as a model in which buyers receive standardized business processes on a pay-as-you-go basis by accessing a shared set of resources – people, application, and infrastructure – from a single provider. Advantages of BPaaS model includes potential cost reductions, efficiency in operations, access to best expertise, processes and technologies, and also allows the businesses to focus on the core processes by outsourcing the support functions and this is particularly benefit for SMBs and also Large organizations. According to Everest Group research, BPaaS delivers 35-40% cost savings for small businesses, 25-30% cost savings for medium size businesses and 10% cost savings for large enterprises over the traditional IT+BPO model. Many times there is confusion between SaaS and BPaaS, Gartner clarifies SaaS is an offering that enables a business process and it delivers a fully managed application that client uses to deliver a business outcome whereas BPaaS is a cloud service that delivers a business process and it delivers the business outcome for the client. Forrester is predicting BPaaS will grow from $0.53 B in 2011 to $10.02 B in 2020.

According to Gartner report “Forecast: Public Cloud Services, Worldwide, 2010-2016, 2Q12 Update (ID:G00234814)”, Gartner predicted that BPaaS will grow from $84.1B in 2012 to $144.7B in 2016, generating a global CAGR of 15%. Of the eight subsegments Gartner is tracking in the BPaaS forecast, Cloud Payments (17.8%) Cloud Advertising (17.1%) and Industry Operations (15.1%) are expected to have the greatest CAGR in revenues generated by 2016. In terms of revenue generated, Cloud Advertising is projected to grow from $43.1B in 2011 to $95B in 2016, generating 17.1% CAGR in revenue growth through 2016. Cloud Payments are forecast to grow from $4.7B in 2011 to $10.6B in 2016, generating a CAGR of 17.8% worldwide. E-Commerce Enablement using BPaaS-based platforms is expected to grow from $4.7B in 2011 to $9B in 2016, generating a 13.6% CAGR in revenue globally. Gartner 2011 Annual Survey of 610 Organizations highlights the fact that organizations are currently using or planning to use business process utility (BPU) or BPaaS for BPO exceed 60%.

Most of the Indian IT Vendors including BPO Vendors have developed their own BPaaS offerings and are actively offering them to their clients as these offerings fall under the nonlinear revenue model category that will allow vendors to charge premium pricing leading to higher margins and also fueled by economic slowdown, manpower issues and changing client needs wherein they are looking at outsourcing vendors as business partners who will help them improve both Topline and bottom line. TCS, Infosys, Cognizant Technology, Wipro, HCL Technologies, Genpact, WNS, etc. are all offering BPaaS services or Platform BPO offerings. These services have been developed for the past ten years and Indian IT Vendors are branding these offerings and successfully offering them to their clients. Platform BPO is a win-win offering for both the clients and vendors as they improve their process and service delivery and they will earn more from their clients on outcome basis. There has been significant demand from the Small & Medium Business segment but slowly the large business organizations too are significantly increasing their adoption of the BPaaS.

Global IaaS Industry 2011& Forecast 2014-2016 – Slow adoption by large Enterprises

Infrastructure as a Service is a cloud computing model in which the service provider owns the equipment (Hardware like Storage, Servers, Networking Equipment, etc.  & Software) and is responsible for housing, running and maintaining it and the client typically pays on a per-use basis.  Major players in the IaaS market include Leaders like Amazon Wen Services, Savvis, CSC, Terremark, Bluelock; Challengers like Navisite, Opsource, IBM, GoGrid; Visionaries like Rackspace, Joyent and Niche players like Hosting.com, Tier3, AT&T, Tata Communications, SoftLayer, iland, Carpathia Hosting, Datapipe and Virtacore Systems, according to Gartner Magic Quadrant December 2011. Gartner predicts IaaS is a fast growing market as players like Google & Microsoft entered this market and in future this market will be 1/3^rd of the hosting market. Gartner also forecasts the IaaS market will generate $24.4B in revenue in 2016 from $5.6B in revenue in 2011 and IaaS is expected to grow by over $20B with a CAGR of 41.7% in the forecast period globally. The Compute sub segment is expected to see the greatest revenue growth globally, growing from $3.3B in 2011 to $20.2B in 2016, generating a 43.2% CAGR and other two sub segments CAGR growth - Storage (36.6%) and Print (16%).

Forrester predicts that IaaS market will initially grow for next few years but the market is expected to decline in the long term. Forrester’s report, “Sizing the Cloud”, highlights that IaaS is the second largest public cloud category with a $2.9 billion market size and “IaaS will reach a peak of $5.9 billion in global revenues in 2014 and will then enter a period of significant commoditization, price deterioration and margin pressure and between 2014 and 2020, as a result, the IaaS market will first stagnate and then decline, with total market revenues of $4.8 billion in 2020,” according to Forrester analysts Stefan Ried and Holger Kisker. Yankee Group analysts suggest IaaS might represent $2 billion to $3 billion, globally. IDC also estimates IaaS will decline to $15 billion in 2014 and most of the analysts believe the IaaS market will be larger than the PaaS market and IaaS is one of the most talked about in the cloud space, which saw several important improvements, such as changes in pricing strategies, the appearance of new smaller players, and the entrance of some technology heavyweights.

Enterprise Strategy Group survey published in January 2012 highlights that of more than 600 enterprise and mid-market companies globally; only 27% said they were using public cloud IaaS services. That's up 10% from a similar survey published in early 2011. But 28% of respondents said they have no immediate plans to jump into the cloud, and another 24% said they haven't pulled the trigger on a cloud deployment yet, but plan to at some point in 2012. SMBs are at the forefront of IaaS adoption totally for IT infrastructure needs but large enterprises are selective in adoption and using public IaaS primarily for these specific use cases: R&D projects, load testing, move non critical legacy applications from expensive on premise to off premise, build & deploy new apps and as part of SaaS or PaaS usage. With some of the large enterprises that selectively adopted IaaS couple of years back and who effectively utilized it are becoming test cases for more large enterprises to adopt IaaS within their organizations. There are also concerns that the pricing has not fallen for some time till now but with the entry of more players particularly Large IT players, businesses can expect more choice of offerings and reduction in prices.

Global SaaS Market 2012 – Emerging Markets will drive growth till 2015

Software as a Service also known as on-demand software is a delivery model in which software and its associated data are hosted centrally and are accessed by users using a web browser. After more than a decade of use and vast improvements in the cloud computing technologies and many players like Amazon, Google, Saleforce.com, etc, major software vendors, developers and independent software vendors too invested significant resources both in terms of monetary, human and infrastructure to further develop the cloud computing. Initially IBM kick started the trend towards cloud computing with its On Demand computing initiative in 2003 and later in 2005 Amazon took the market forward with its cloud offerings like the Elastic Cloud 2 (EC2).  Even Indian IT Services Vendors and other small & medium players too are focused on cloud computing and particularly in Software as a Service offerings (SaaS). SaaS growth is an alternative to the on premises software and also Cloud-based licensing is different from traditional on-premises licensing and the market growth is only possible by cannibalizing the traditional software market. SaaS was expected to capture significant market share as its adoption benefits range from significant reduction in costs as buyers need not invest on the IT infrastructure on their premises, pay as you use model, easy to scale and upgrade, tighter IT budgets due to economic volatility in recent years and mobility i.e. access from anywhere and with any device.

According to Gartner, worldwide software-as-a-service (SaaS) revenue is expected to reach US$ 22.1 billion by 2015 as many companies are investing in cloud technology and is expected to grow healthily by 17.9% to reach USD 14.5 billion in 2012 from USD 12.3 billion in 2011. North America revenue is forecast to be US$ 9.1 bn in 2012 compared to US$ 7.8 bn in 2011, Western Europe revenue 2012 forecast US$ 3,2 bn compared to US$ 2.7 bn (2011), Eastern Europe (2012) US$ 169.4 million compared to US$ 135.5 million (2011), Asia Pacific (2012) US$ 934.1 mn compared to US$ 730.9 mn (2011), Japan (2012) US$ 495.2 mn compared to US$ 427 mn (2011) and Latin America (2012) US$ 419.7mn compared to  US$ 331.1 mn (2011). According to IDC, SaaS market revenue which includes cloud applications, application development and deployment, and system infrastructure software sales will rise to $53.6 billion by 2015 at a CAGR of about 26%. IDC also asserts that SaaS will grow faster than traditional software and will comprise 80% of the software delivered by new ISVs. By 2015, nearly $1 of every $6 spent on packaged software, and $1 of every $5 spent on applications, will be consumed via the SaaS model. According to Forrester, the public cloud market for SaaS is the biggest and fastest-growing of all of the cloud markets ($33 billion in 2012, growing to $78 billion by the end of 2015). According to market research firm Global Industry Analysts, the global SaaS market will reach $26.5 billion by 2015, as more companies will seek low-cost enterprise software solutions to accommodate limited IT budget growth, which could slow due to the global economic recession.

SaaS market growth is different in different geographies and compared to mature North America market that contributes 2/3^rd of the total SaaS market revenues is expected to grow by 16.7% and Western Europe the second best market expected to grow by 18.5% YoY, which is less when compared to 28% YoY growth for Asia Pacific excluding Japan, 27% growth for Latin America, 25% growth for Eastern Europe and Japan too is expected too see low YoY growth of 16% like in the other mature markets. Data highlights that SaaS market growth lies in the emerging markets as the countries in those markets are improving their IT infrastructure and looking to adopt SaaS technologies aggressively. Small and Medium Enterprises (SMBs) are driving the growth when compared to large enterprises that find it difficult to migrate to cloud computing from their existing on premise software and hardware systems as they have made significant investments in building these systems for years and due to other concerns like data security integrity, privacy, skilled man power, pricing and contracting issues, regulations, etc.  SaaS has become a common delivery model for most business applications, including accounting like expense management, financials, collaboration, customer relationship management (CRM), management information systems (MIS), enterprise resource planning (ERP), invoicing, human resource management (HRM), content management (CM) and service desk management.

Asia Pacific is high growth market for SaaS and this is driven by increased adoption in India, China driven by adoption of financial applications like accounting. ERP functions like Expense management and Employee Performance management, along with office suites, email and CRM sales are the other applications that are being deployed by companies in this region. Mature economic countries in this region like Australia, New Zealand, Hong Kong, Singapore, South Korea and Taiwan are driving SaaS adoption as they have good IT infrastructure that encourages increased adoption. Emerging countries in this region like Malaysia, Thailand, Indonesia, Philippines, and Vietnam where IT infrastructure is developing fast are also expected to increase SaaS adoption. Japan was affected by the 2011 earthquake and Tsunami but SaaS market is gaining traction as Japanese companies are looking at SaaS as a defense against future power outages and disasters but there are concerns in terms of security, costs, and integration. Despite Japan economic problems and tighter IT budgets the demand for SaaS solutions is increasing due to their lower implementation costs and faster deployment times. SMBs too are driving growth and according to AMI Partners, SMB focused market research firm, forecast that the SaaS market in Asia/Pacific (excluding Japan) will reach $1.5 billion by the end of 2012 and expects the market to more than double by 2015.

Expense management, financials, email and office suites are the business apps deployed through SaaS and Web conferencing is also highly used as most of the American companies have global operations situated across the world but the market is also facing problems in terms of limited flexibility of customization and limited integration to existing systems according to Gartner. Gartner analysts said in Western Europe, the most developed sub region, SaaS Market is rapidly increasing as North America-based SaaS vendors further penetrate the region and the number of local European SaaS vendors increases. In Eastern Europe and the Middle East and Africa, which are small and emerging markets overall, the potential opportunity for SaaS is more in the medium to long term due to ongoing infrastructure challenges that vendors need to overcome if they are to be successful in these regions. In Latin America, SaaS has been deployed in the areas of email, financial management (accounting), sales force automation and customer service, and expense management. While regional adoption will be positive, it is fully expected that Brazil and Mexico will drive a majority of adoption and revenue opportunities.

Procurement Outsourcing (PO) Service Providers/Vendors - 2012 Growth Opportunities & 2011 Challenges

Major Procurement Challenges 2011

Natural Disasters: 2011 was the most challenging year for the procurement departments; first it was earthquake measuring 8.9 in Japan (March 2011) and tsunami which wiped out towns, ports and damaged manufacturing facilities, nuclear reactors and infrastructure. The shutting down of the Japan's manufacturing industry led to electronic component shortages and prices of microchips rose, supply of cars to US consumers also affected as automobile manufacturing was shutdown and the affect was felt globally.  In late July 2011, major flooding occurred due to monsoons in Thailand that submerged not only manufacturing facilities that produced Hard Disk drives, electronic components, etc but also agricultural lands and also affected the tourism industry. Both the natural disasters have wrecked havoc with manufacturing faculties and led to shortages of critical components supply which subsequently led to the rise in the prices (10% to 40%) of the products like Personal Computers and Cars. Natural Disasters forced businesses to cut their revenue forecasts, increase prices of their products, due to supply shortages as businesses could not source from alternative production locations and were unable to relocate their manufacturing facilities to new locations. Natural Disasters have also highlighted the critical issues in global supply chains, lack of alternative sourcing strategies and how businesses overlooked this risk in their overall business strategy. Earthquakes in Japan and Flooding in Thailand are not new risks and these risks existed for the past hundreds of years.

Currency Volatility: In the calendar year 2011, the rupee has crashed by 18.79% vs. US Dollar and the fall is attributed to euro zone debt crisis as investors preferred dollar as a safe investment. Euro was worst performer among 10 developed-nation currencies in 2011, declining 1.7%, according to Bloomberg Correlation-Weighted Currency Indexes due to the sovereign debt crisis in the euro zone. Japanese Yen and China Yuan appreciated about 5% in 2011 against the dollar. Singapore dollar and South Korean won slipped against the US Dollar in 2011. The Japan Yen and US Dollar strengthened against most of their major currencies despite the earthquake and tsunami in Japan and US Economic slowdown, as demand increased for safer currencies. Japan and China Governments have been intervening to keep their respective currencies under control.

Euro Zone Sovereign Debt Crisis is having global effect with no solution in sight. Greece, Italy, Spain, Portugal, Ireland have huge debts which they cannot pay that led to credit ratings downgrade. The deficits in these countries are also high that forced the governments of these countries to adopt severe austerity measures and drastically reduce their public spending and increased taxes. Most of the nations in the Euro zone have seen their credit ratings downgraded by rating agencies which increased the cost of borrowings for these nations. Euro Zone nations have set up a bailout fund for the distressed nations and provided the troubled nations billions of Euros with little or no affect but has weakened Euro currency. After US, UK, France and Germany businesses outsource procurement operations. The crisis is also affecting the currencies world wide and businesses in Europe are also drastically affected which will force them to look for cost reductions and use procurement outsourcing for this purpose. The worsening euro zone debt crisis is a major concern but provides the PO Service providers opportunity for reducing costs through streamlining the procurement costs of the businesses and governments and helps them during the crisis.  

Other challenges in 2011 were wage inflation and talent retention issues in countries like India and China where suppliers and PO Service providers have operations, rising input and component costs, political uprising in Arab nations like Egypt, Libya, Tunisia, Yemen, Syria, Bahrain that has affected the crude oil prices and subsequent political uncertainty in Arab nations which is still ongoing as Egypt, Libya, Tunisia do not have democratically elected governments. Some of the clients who have outsourced their procurement operations in early-2000s and enjoyed cost savings and other benefits are asking the PO Service Providers move up and provide them with services that provide more benefits and take the procurement process to the next level. PO Service providers are seeing the PO process mature and they are looking to innovate and provide more unique services to keep the existing clients satisfied and attract new clients. Technology adoption has increased as cloud computing, real time data analytics, ERP related software products, reporting tools and applications are being used by small and niche procurement service providers to develop innovative service offerings. Large players are facing stiff competition from such small players and are partnering with small players and use their tools or acquire them and integrate their technologies.

Opportunities for PO Service Providers/Vendors 2012

There has not been much recovery in the global economic climate as the euro zone crisis is still going on with the European nations are struggling to find the solution. Currency volatility is expected to continue in 2012 and most of the businesses are well equipped to face the scenario. Japan is still having earthquakes but the manufacturing has resumed and in Thailand the floodwaters has not receded yet and manufacturing facilities are still under water and it will take time for clean up and restarting the production. The supply shortages are expected to continue in the first half of this year and production will recover in second half and supply will improve. With this backdrop the Procurement Outsourcing market is expected to see 20% YoY growth. Everest predicts the global PO market will reach an ACV of $1.8 billion in 2012, representing managed spends of US$250 billion. Since mid-2000s, PO has seen good growth as businesses were looking for cost savings and PO helped them achieve cost savings that had direct impact on bottom line. Manufacturing, CPG, retail, high tech, telecom, energy and utility verticals are driving the PO market. US followed by UK and Continental Europe dominate PO adoption but Asia Pacific and Latin America are seeing rise in adoption. . Major players in PO market are Accenture, IBM, ICG Commerce, Global eProcure, Xchanging, CapGemini, Corbus, Genpact, Infosys, etc.

Technology based: Most of the large PO Service Providers have significant IT capabilities and they are offering the clients cloud based platform offerings. Cloud based platform offerings not only provide cost savings but also drive compliance in the organizations and increase collaboration. Large PO providers are also collaborating with niche and specialized procurement solution providers and offering advanced procurement technology solutions which makes outsourcing process easier and substantially increases procurement efficiency, effectiveness and ROI. Technology also helps in tracking the suppliers, maintain relationship with them and make sure they are complying with the agreed benchmarks. Another area where technology is going to play a critical role is the Data Analytics as data that is collected has to be analyzed and provided to the procurement team in the form intelligence and reports. There are most advanced real time data analytics, spend management tools are available that provide procurement executives the necessary information needed to make decisions and reduce costs. Clients are looking for single IT platform that provides end to end solution focused on either procure to pay or source to pay and provide process efficiency, improve compliance and maintain relationship with suppliers. With the rise in use of high end smart phones like Apple iPhone, RIM BlackBerry, and Android Smart phones by the executives in the organizations applications that help them in tracking the spends, suppliers and real-time data  are being developed.

Focus shift to Direct Spend: Since Past year Chief Procurement Officers and Procurement executives are forced to focus on core direct procurement such as sourcing raw materials, components. Non core direct procurement spend related to maintenance, repairs, etc can be outsourced to PO service providers as procurement executives want to focus on the core direct spend that has more direct impact on the company profitability, more complex process and involve long term procurement cycles. Till now most of the indirect spend like IT, HR, Marketing, Facilities related spend is only outsourced. Most the PO services providers deal with this indirect spend as these spend categories are easy to outsource and involve short term procurement cycles with less complexity and this market has matured. Some of the companies that has outsourced their indirect procurement spend are moving a level up and are looking to outsource their direct procurement spend and this trend of outsourcing more direct procurement spend will pick up this year. Supplier risk has considerably increased for businesses due to the natural disasters, economic uncertainty, inflation and currency volatility, etc which provide the PO service providers an opportunity to work with clients on their direct spends. In early 2000s, the initial days of PO focus was only on direct spends (80%) but the focus shifted to indirect spend as buyers and service providers could not implement sourcing & procurement strategies in direct spends due to high volatility in raw material prices and long procurement cycles.

Business Organizations are expanding globally and setting up manufacturing facilities in various part of the world. They are finding difficult to manage the centralized procurement department alone at the company headquarters and they need to have specific expertise to manage their procurement operations in those geographies. PO service providers can be used and their specific expertise will definitely help in managing the procurement operations smoothly and the necessary cost savings can be achieved.

M&A in PO Service Providers Market: Past couple of years saw some M&A happening in this market as the source-to-contract and procure-to-pay focused providers are collaborating and other players like FAO service providers, sourcing advisory firms, supply chain management firms, and procurement shared services organizations are entering the PO market. Some of the recent M&A deals in 2011 are Infosys acquisition of Australia’s Portland group, IBM acquisition of Emptoris and Cap Gemini acquisition of IBX in 2010. Consolidation is expected to continue in 2012 where the large PO service providers looking to acquire small, niche and specialized procurement solution providers and integrate their offerings into the core offerings. Collaboration partnerships between the large and small players in terms of large PO service providers are using tools and technologies developed smaller niche players and offering them to their clients. Some of the partnerships include ICGC-Genpact, HP-GlobaleProcure, TCS-Denali, and Steria-HPI. With demand for PO increasing this year outsourcing vendors who do not have a proper sourcing and procurement offerings are looking to acquire smaller players and jumpstart revenues, acquire new clients and offer services to their existing clients.

Invest in People, Process and Platforms: PO Service providers have to acquire and retain the experienced talents that are critical for the sourcing and procurement process. Good quality people with sourcing and procurement experience particularly in niche areas like negotiations, experience in sourcing and spend analytics tools, etc are hard to find. Necessary training should be provided to the employees in the specific tools and technologies. PO Service providers have to invest in technologies and build platforms that provide clients an attractive solution for outsourcing their sourcing and procurement operations. Cloud based platform offerings are being offered by all the major vendors and clients are adopting this platform as evident from the increase in the number of deals signed in the last year. Standardization of the process and offering the same service to multiple clients is another option and Genpact Smart Enterprise Process is one example. Some of the Indian Vendors like Infosys and TCS are focusing more on the procurement outsourcing and Infosys has set up a Joint Innovation Board and TCS is offering platform based procurement outsourcing services.

Procurement has transformed from a mere functional role to a more strategic role and Chief Procurement Officers have gained prominence in the organizations and are working closely with the Chief Financial Officers in PO decisions as there is direct impact on bottom line. CFOs are actively involving in PO negotiations, leading to deals with FAO-PO bundling around procure-to-pay. Some of the businesses that have strong internal procurement organizations are also looking to outsource certain procurement operations to third party service providers in low cost countries as there are cost benefits. Procurement executives want to focus more on the core direct spending that involves buying the raw materials etc and source them at low cost and maintain a relationship with suppliers that ensure sustained availability of resources. All the indirect spending and some non core direct spending can be outsourced to PO service providers who have the necessary capabilities to streamline the processes and generate immediate cost savings. PO services providers are looking to offer buyers’ innovative services, tools and platforms that will help them reduce cost and improve bottom lines and with uncertain global economic and business climate clients have increased their focus on the global sourcing management and consolidation initiatives and are looking to profit from their existing sourcing channels. Businesses have realized that there are significant benefits in outsourcing the procurement as evident from the many success stories of businesses that profited from PO and this will lead to increased adoption of Procurement Outsourcing in 2012.

Global IT Spending 2012 – Key Trends

IDC predicts that worldwide IT spending will grow 6.9% YoY to $1.8 trillion in 2012 and  20% of this total spending will be driven by smartphones, media tablets, mobile networks, social networking and Big Data analytics. Forrester research says IT purchases will be $2.042 billion in 2011 and $2.154 billion in 2012, with the growth driven mostly by underlying economic growth and adoption of newer technology. Gartner forecasts IT spending will be $3.7 trillion (7.6% YoY) in 2011 and expects the IT spending to reach $3.9 trillion (4.6% YoY) in 2012. Gartner IT spending includes Telecom spend and without telecom spend, total IT spend is $1.53 trillion (8.4% YoY) in 2011 and $1.62 trillion (6% YoY) in 2012.

IT spending and budgets did not see any cuts in 2011 but there will be cuts in spending in 2012. There will not be any drastic cuts as IT spending is critical for ongoing business success, but spend scrutiny and conservative plans are expected. The worst case scenario of the total unraveling of the Euro crisis is that the IT spending will increase by 1-2% YoY. This growth will be driven by the emerging economies like India, China, etc. Due to the Euro zone crisis and US Economic slow down IT spending is expected to grow by 4- 6% YoY way below the current levels of 7-10% YoY. Europe will be most affected market compared to US market.

Hardware, Software, IT Services will see single digit growth in 2012. Spends on these categories will be slow as companies will try to cut down spend and will not go for up gradations aggressively. Only business critical spend will be made. Mobile devices such as notebooks, tablets, and smartphones will overtake the PCs. Mobile applications and operating systems revenues will grow and will even surpass the mainframes revenues and the competition is expected to intensify with major vendors like Microsoft, Amazon, Apple and Google coming into market with new offerings.

Cloud Computing will become more competitive as all the major vendors like Amazon, IBM, Microsoft, Google, etc are focusing on creating application platforms and ecosystems. Not only these major vendors but also Indian Outsourcing vendors are developing the cloud based offerings and platforms and are aggressively marketing these to the clients. According to IBM, the demand for cloud computing is on the rise as organizations look to expand the impact of IT to deliver innovative services while realizing significant economies of scale. IDC analysts expect that cloud spending will be $36 billion next year. M&A is also expected in cloud space where the major vendors look to buy smaller and medium players looking to add more applications and content.

Social media is on the rise and it is expected to be critical for the consumers as well as businesses. Businesses are looking for social media tools that help them reach their customers, track their reputation and feedback of the customer and use it internally in the organization to interact with employees. Social media analytics is expected to be a big business as the businesses look for tools and gain critical insights from these tools to determine the effectiveness of their marketing programs, call center performance and cross-selling initiatives. There have been acquisitions in this segment where larger vendors are buying out smaller niche players with good product and platform and integrate it in their core offerings.

According to IDC, Big Data is critical in 2012 as the volume of digital content grows to 2.7 zettabytes (ZB), up 48% from 2011. More than 90% of this information will be unstructured (such as images, videos, MP3 files and files based on social media and Web-enabled workloads) -- full of rich information, but challenging to understand and analyze. 2012 is likely to be a busy year for Big Data-driven mergers and acquisitions as large IT vendors seek to acquire additional functionality. Business Intelligence and analytics key to unlock the data and use the data in organizational decision making and strategy formulations. Analyzing in real time is the future of analytics.

IT and BPO will also see growth in 2012. Clients will look for offerings from vendors that will have significant impact on their businesses. Vendors are adopting cloud computing and also offering end to end platform offerings and are increasingly looking for outcome based offerings that will increase their margins. Indian Outsourcing vendors are forecasting and preparing for the volatile economic situation and are actively interacting with clients on regular basis. As of now vendors are positive but they are expecting definite headwinds in 2012 and are confident to tackle such scenario.

App stores with lot of new applications, intelligent devices with sensors, tablets, and smart phones are being launched and these devices and apps are creating new businesses and are adding more functionality and are being actively integrated by the large vendors in their core product offerings. 2012 will see many new offerings in terms of hardware, software and services and despite the tough and volatile economic environment, vendors will launch them.

2012 will be a tough year and businesses and clients both are cautious about the way that things will turn. The second half of 2011 was supposed to be slow and budget/spending cuts were expected but there were not any drastic cuts. There is a least possibility of a deep recession like the one in 2008 but the down grades and the economic issues will take time for resolving and this volatile economic situation is expected to continue in 2012. Businesses are having strong balance sheets and financially strong but the overall consumer confidence is low due to high unemployment rates and fall in incomes. Emerging markets play a critical role for keeping up the growth and how much these economies are affected by the Euro Zone debt crisis and US economic slow down is also critical fact and these economies can always look for their domestic market as the governments and businesses in these markets are investing in IT for good governance and citizen services.

India Outsourcing Industry - Cloud based Platform offerings by Top Vendors

Indian IT-BPO vendors had realized that there would be demand for cloud services and had started building their own capabilities in order to survive the shift in demand and create innovative new models. Indian vendors moved a step ahead and started building platform based offerings that will be delivered by cloud. This means that cloud computing is standardizing the IT-BPO offerings by the Indian vendors and they have realized the cost and productivity benefits of standardizing processes. Clients too are interested in the standardized offerings and since such offerings are more outcome-based offerings that influence their business values. These cloud based platform BPO offerings are delivered through either public or private clouds or through the data centers.

Traditionally Indian vendors get nearly all of their revenues from the installation, customization and maintenance of software that is branded and created by mostly foreign software companies. There is huge cost and technology expertise involved in development of packaged software hence Indian vendors were more involved in migrating and maintenance. The cloud presents a different scenario for the Indian vendors where they can build their own platform and products and evolve from just migrating and maintenance to running the services for the customers. In cloud computing there is very little scope for continued services in a Cloud market. Cloud based BPO platform offerings present an opportunity for the Indian vendors to develop their own offerings and also helps in increasing the non linear and outcome based revenues that have more margins.

TCS focuses on owning the platform and the services, instead of simply being ‘helpers’ for other cloud brands and wanted to own the brand, the solution and the customer. TCS started wanted its cloud computing offerings generate nearly 10% of its new business together with product revenues over the next few years and planned  to offer standardized solutions across the areas of insurance and banking to multiple customers using same resources. TCS started its platform BPO unit in April 2008 and since then “had seen good traction in human resource outsourcing platform, and had created new platforms in select areas of finance and accounting procurement and analytics. TCS platform offerings have been successful and have seen good traction since last two years and it has seen good success in UK market. With over 30 customers, TCS currently has seven platform-based offering in its BPO unit and 25% of revenues come from platform offerings.

TCS iON - a cloud-based integrated IT solution for Small and Medium Business (SMB) and has already gained over 240 SMB customers who have benefited from increased efficiencies. TCS has already realized the traction for its 'bank-in-a-box' solution among smaller cooperative and rural banks. The solution, which helps these banks automate and integrate their processes of deposits and loans for a fixed monthly rental fee for each branch, already serves nearly 2,000 bank branches. Cooperative banks, including Andhra Grameen Vikas Bank, Uttaranchal Grameen Bank and Purvanchal Grameen Bank, are using TCS' 'bank-in-a-box' solution. Already, smaller organisations, such as Kaya Skincare, Oxford Book Store and Ryan International School, are paying TCS on per transaction basis as they seek to lower their costs of operation further. Non SMB cloud revenues are still at very low levels.

Infosys is banking on innovative cloud-based platform to facilitate client's customized needs and its BPO arm is aiming for $1 billion revenue by 2014. At Infosys Connect, the company introduced 15 Business Platforms under a newly created brand Infosys Edge, a family of platforms that enable customers to buy software on a pay-as-you-go model and offerings range from helping clients with e-commerce businesses to managing human resources and procurement processes. In second quarter of 2011 Infosys Edge signed ten strategic deals. Of these, four were from EMEA, four were from Americas and two were from the APAC region.  Some of the edge platforms are Infosys SocialEdge, Infosys CommerceEdge, Flypp (mobile application marketplace), TalentEdge, etc.

Infosys has about 2000 engineers dedicated to the Cloud products and platforms. Infosys is also building its own data centers in Australia and US and it is exploring the establishment of another in Europe to host new Business Platforms. The company is expecting about 50%-60% of workloads to shift on cloud in next five years, which may yield significant revenues for it. Infosys continues to see strong momentum with its Cloud practice having delivered over 125 engagements till date and The company is building concepts on edge platforms like for mobile banking, medical tourism, etc. It is offering also managing through the cloud the Aircel's Pocket Internet Store. Infosys tied up with Microsoft to provide cloud-based services to clients and will offer Microsoft Private Cloud solutions such as Windows Server Hyper-V and Microsoft System Center, and solutions on Windows Azure to clients.

Wipro is launched cloud computing services through its arm Wipro Infotech and it has around 25 customers. Wipro Infotech is selling two cloud offerings to SMBs – software as a service (SaaS) and infrastructure as a Service (IaaS). Customers are charged per user monthly price model and it has been selling the service directly so far and may start selling through channel partners from next year. Wipro Infotech has applications such as ERP, mail and messaging, human resources management system, dealer management system, hospital information system, vendor portal and learning systems on the public cloud offering and is targeting verticals such as manufacturing, automobiles, healthcare, the microfinance industry, textiles, and education. Wipro has gone in for a mix of self-developed and third party software. The dealer management system and vendor portal, for instance, is Wipro's IP.

Wipro has also offerings in other layers of Cloud including Business Process as a Service (e.g. loan origination as a service), Software as a Service (e.g. bank in a box with leading software vendors, implementation partner to leading SaaS vendors) and Platform as a Service (PaaS). Wipro leverages its Global Command Center (GCC) to provide a unified monitoring and management platform for private, public and hybrid Cloud environments. Wipro Technologies has built a private Cloud for OnStream Utility Metering Services Limited. Wipro is also partnering with other players like Microsoft, Oracle, Amazon, Citrix, etc and offering various platform based services to their clients on the partner’s platforms since 2009.

HCL Technologies announced in 2010 end that new technologies such as cloud computing will become nearly $300 million business over next five years, as part of the company's new initiative to incubate next big opportunities. It had formed a unit called 'ecosystem and business incubation organization', which had already identified five new ideas. HCL Infosystems launched  cloud computing based services branded ‘HCL O’Zone’ with an aim to offer end-to-end cloud based computing solution services to
its customers.HCL’s IaaS services are concentrated on the European and North American markets, with data centers in Sweden and New Jersey. The target market is HCL’s existing enterprise customer base, including a small number of industry-sector clients. Its offering includes standardized platforms for management, integration within a hybrid cloud environment, and a self-service portal and dashboard.  

HCL offers competency based services such as Cloud assessment, migration, implementation and maintenance. HCL has strategic partnerships & collaborations with leading players in the cloud ecosystem. HP has recognized HCL Technologies as the “AllianceONE Partner of the Year” in the category of HP Cloud Computing – Service Provider. Some of these include: Technology/OEM's Partnerships with Cisco, EMC, Vmware, Sun, Microsoft; IaaS: Amazon Web Services; PaaS: Salesforce.com, Microsoft Azure, Tibco; Cloud Management: BMC, CA.

Indian Vendors have realized cloud computing is essential for future growth and are investing in developing the various cloud offerings for the clients. Interesting fact is that instead of restricting themselves to the role of migration and maintenance they are more focused on developing their own brand of offerings and for this they are investing in data centers and technologies. They might be using the platforms, technologies and software of major vendors but they are developing service offerings use them but selling to the clients on their own brand name. Cloud product and services can be developed at a very low cost compared to packaged software and since cloud computing industry is at an evolutionary phase will definitely provide an opportunity for Indian vendors. All the vendors have created separate business units equipped with financial and thousands of human resources focused on creating products and platforms based on cloud. All of the vendors have developed their own IP product and platforms based on cloud and are aggressively marketing them to the clients.

Standardized offerings through cloud are also what clients are looking for as this comes with significant cost savings and no upfront technology investments. But clients have to be careful as there are some issues like data security, outages, contract complications and technology understanding. Cloud computing is expected to be a key offering for the Indian Outsourcing vendors for the non linear and outcome based revenues that have high margins and help these vendors move up the value chain. Platform BPO offerings is another segment where the vendors had been investing in development of platforms since past five years and they have been seeing success in terms of signing of platform deals since last two years. Vendors are also aggressively marketing the platform offerings to their clients and they are aiming for thirty percent of revenues from cloud and platform based offerings in next three to five years.

Global SaaS, PaaS, IaaS and BPaaS Market 2011 and Forecast

Cloud computing includes Software as a Service (SaaS), Platform as a Service (PaaS), Infrastructure as a Service (IaaS) and Business Process as a Service (BPaaS). SaaS is the highest level of the cloud and includes actual cloud applications. SaaS segment is the largest segment in the overall Cloud Computing Market. Customer relationship management (CRM), Content, communications and collaboration (CCC) market and Enterprise resource planning (ERP) revenue are the key sub segments respectively. North America, followed by Europe is the key markets for SaaS. Asia Pacific and Latin America are key growth markets too. Adoption is being driven by availability of on demand software, understanding of the model, increasing interest and pressure on IT managers to reduce costs. Data security concerns, outages, lack of understanding of the cloud and infrastructure, and integration with existing infrastructure are concerns. According to Gartner SaaS market is expected to reach $ 21.5 billion in 2015 from $12.1 billion in 2011. IDC estimates it to reach $ 40.5billion in 2014 from $ 21.8 billion in 2011 and Forrester estimates it to reach $78.4 billion from $21.2 billion in 2011. Google, Citrix, Salesforce.com, NetSuite are key players.

PaaS is the middle level and builds upon the IaaS layer and provides an application development platform for the cloud. Gartner says, PaaS products primarily supported application server capability, but the market has expanded to other middleware capabilities as a service, such as integration, process management, and portal and managed file transfers (MFTs). Gartner analysts said PaaS offerings are likely to expand the application integration and middleware (AIM) market by bringing in a new range of organizations that otherwise would have been packaged application and office software users. Vendors in this space include Windows Azure, Heroku and SalesForce’s Force.com. Salesforce.com has the most mature PaaS. According to Gartner PaaS market is expected to reach $ 1.8 billion in 2015 from $707.4 million in 2011. Forester estimates it to reach $9.8 billion in 2015 from $820 million in 2011.

IaaS is the lowest level of the cloud technology stack. It provides operating system support, storage and processing. Vendors in this sector include Google App Engine and of course Amazon’s (news,site) latest whipping boy AWS EC2. Infrastructure-as-a-service (IaaS) will shift from public clouds to virtual private clouds, Forrester Research projects. While adoption remains high, the size of the market will shrink and public cloud services will cost less in the future because the cost of inputs will continue to decline. According to Gartner IaaS market is expected to reach $ 22 billion in 2015 from $5.6 billion in 2011. IDC estimates it to reach $ 15 billion in 2014 from $ 3.4 billion in 2011 and Forrester estimates it to reach $78.4 billion from $21.2 billion in 2011.

BPaaS is even higher up than SaaS and it includes technology, people, process and smart analytics wrapped in a simple "pay-as-you-go" commercial model. It allows companies to minimize or eliminate substantial upfront costs.  BPO outsourcing providers such as India, China and Latin America will likely make a play in this area. Traditional BPO providers are setting up data centers to offer cloud computing services to their clients and Cloud computing inclusive of BPaaS provides a big opportunity for service providers. According to Gartner BPaaS market is expected to reach $ 133.5 billion in 2015 from $71.7 billion in 2011. Forester estimates it to reach $3 billion in 2015 from $530 million in 2011.