Pandemic-prompted cloud surge cements new age for ASEAN IT providers

Local IT providers that continue to adhere to the traditional model need to disrupt themselves before it’s too late, warns Cloud4C CEO and founder Sridhar Pinnapureddy.
Sridhar Pinnapureddy (Cloud4C)

Sridhar Pinnapureddy (Cloud4C)

In June this year, analyst firm Gartner revealed research suggesting that digital transformation efforts globally were being brought forward by at least five years as a result of the greater impact the pandemic-prompted remote work shift has wrought over the past 18-plus months.

With this transformation acceleration came an unprecedented surge in cloud usage and demand for software-as-a-service (SaaS) based solutions to help organisations keep their employees working despite having to shut down their offices to comply with the various lockdown measures across the region that were taken to help curb the spread of Covid-19.  

It should come as little surprise, then, that Gartner expects global spending on public cloud services alone to reach US$332.3 billion by the end of 2021, an increase of 23.1 per cent from the year prior. This doesn’t include private cloud, which has no doubt seen its own surge.  

Of the broader public cloud market, software-as-a-service (SaaS) is expected to be the largest segment this year, set to claim US$112.6 billion — just over a third of the overall spend — representing an increase of 19.3 per cent.

These figures are backed up by recent State of the Channel research – commissioned by Channel Asia and delivered in partnership with Tech Research Asia – showing that ASEAN partners continue to prioritise cloud migration (both public and private), in addition to digital transformation and security as core solution focus areas.

“2021 is the first time we’ve seen cloud migration as the no. 1 priority for partners in ASEAN,” said Mark Iles, executive analyst of Tech Research Asia.

Despite being traditionally slow to adopt cloud, Iles noted a $37 billion ASEAN regional market opportunity in relation to core infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) by 2023, at a compound annual growth rate of 32 per cent year-on-year.  

Meanwhile, SaaS represents $20 billion of potential within the next 18-24 months, at an annual growth rate of 29 per cent.

For Sridhar Pinnapureddy, CEO and founder of Singapore headquartered cloud managed services provider Cloud4C, the research very much reflects what the industry in the region has been seeing on the ground, so to speak.

“Of the trends I’m seeing, number one is cloud migrations,” Pinnapureddy told Channel Asia. “Almost every enterprise or SMB [small- to medium-sized business] has already done something or moved all of their applications onto public cloud. And the trend is continuing.

“I’m looking at digital transformation in a big way, almost every medium to large enterprise is looking at a number of projects and the CIOs are under pressure from businesses to take their companies completely digital.

“So, the digital journey of organisations obviously is going to quicken. And as soon as the pandemic is over, I see a huge number of projects which are going to be initiated by these organisations. Some of them have already started, but many of them are in the pipeline, and as soon as the pandemic is over, organisations will start those,” he added.

And while these trends have been a welcome source of new business for Cloud4C and other providers like it that could be considered cloud natives, Pinnapureddy harbours no small amount of concern for those providers that continue to adhere to a more traditional business model.  

“Over the next 10-15 years, the cloud service providers (private, public and managed service providers) are going to see huge traction,” Pinnapureddy said. “But at the same time, traditional IT service providers are going to face serious disruption.”

Pinnapureddy predicts that providers built around the traditional system integrator model will see service volumes diminish over the coming years.

“Eighty per cent of current legacy service providers depend on that business model and that business will go away and, if not disappear, will shrink,” he said. “Many companies will suffer, and weaker companies will fall apart.”

Although Pinnapureddy paints a grim picture, there is hope – but it involves some work on the part of providers that are stuck with outdated business models.  

“The older service providers have to necessarily disrupt their current business model, however profitable it is, and get ready for the new wave of outcome based, and quantity of data-based, services delivery,” he said.

This is how Cloud4C, a subsidiary of data centre operator and managed services provider CtrlS, has done things since it began. It no longer charges based on man-hours. Instead, like many born-in-the-cloud managed service providers and vendors, it charges based on the data that customers use, with services, security and other offerings bundled into the whole package.

This approach, from Pinnapureddy’s perspective, disrupts the whole traditional system integrator model. 

“Traditional IT is not suitable for the cloud age,” Pinnapureddy said, noting that he built Cloud4C’s business model from the ground up with this core principle in mind.  

Against this backdrop, Pinnapureddy has a dire warning for other IT providers not prepared to, or not able to get with, the times.  

“If they don’t change quickly, they are going to face serious heat,” he said. “It’s not possible to make this change happen quickly, it takes, depending on the size of the organisation, three to six years. I would say it’s already late if they haven’t started any efforts, and if they haven’t started, they need to do it quickly."