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Data security, privacy concerns may hit cloud computing growth in India

Concerns over data security and privacy and an immature ecosystem are likely to stunt the growth of cloud computing in India. Despite the obvious benefits of lower capital expenditure and quicker rollout of new products and services, chief information officers (CIOs) are hesitant to make full-scale investments in the new technology.

For now, they are rolling out pilot projects or waiting for the technology to stabilise, before making this radical shift. Unlike traditional information technology, cloud computing relies on storing, managing and retrieving data hosted on the internet, rather than on a local server. As the amount of data generated grows exponentially - a McKinsey estimate believes the amount of data will grow 44-fold between 2009 and 2020 - companies may find it more viable to store this data virtually in a distant server, rather than buy more servers and storage systems to keep it in-house.

As broadband services expanded, more companies across sectors started exploring this possibility. Over the past 12 to 18 months, India's largest two-wheeler maker, Hero MotoCorp, has added 40 dealers to its sales and distribution network as it expands its reach across the country.

Hero's CIO Vijay Sethi leant on a new cloud-based software to hasten this process -- from weeks to a matter of days -- since the rapid expansion would have been impossible with its old technology. "Time reduction from four months to four days is much more advantageous than Rs 1 lakh saved in vendor negotiations," he says.

Based on the success of this project, Hero wants to extend its 'cloud' presence into six or seven other functional areas, he pointed out. Despite this major investment, Hero's Sethi and his peers across India Inc remain cautious about the rollout of cloud computing wherein applications related to supply chain and human resources are hosted on the internet.

In theory, this would have resulted in lower capital expenditure because companies would have needed to buy fewer servers and other hardware to store and access their data.

The concerns
However, concerns over security, insufficient development of cloudready applications, lack of case studies measuring returns from cloud computing investments and erratic broadband availability have forced CIOs to adopt a slow and steady route to cloud computing. Despite the service network implementation at Hero, Sethi doesn't think cloud computing will see widespread implementation across India Inc.

"There has been a lot of talk about this," he says. "But few companies have taken concrete steps to adopt this technology." HDFC Bank, India's second-largest private bank, is taking baby-steps to implement cloud computing. Anand Sankararaman, senior vice-president of IT, HDFC Bank, says a few pilot projects have been rolled out internally to gauge how ready the bank is for cloud computing.

However, it neither has a private (data hosted exclusively for the bank) or public (data hosted securely with other firms) cloud set-up yet. "In financial services, there are several concerns over data security and privacy, which aren't fully answered yet," he says.

According to experts, security and access to data is the biggest stumbling block to a wider cloud computing implementation across India Inc. Sid Deshpande, senior research analyst with technology consultancy Gartner, says basic tools like email , data back-up and video conferencing are the first tools to be moved to the cloud. "There are few cases yet of critical data related to customers or supply chain being cloud based," says Deshpande.

The mismatch
Executives at storage and security giant Symantec are closely watching the evolution of cloud computing to keep their products and services upto-date and according to one of their internal surveys, there's a lot to worry.

According to the firm's State Of The Cloud Survey, there is a stark mismatch between expectations from cloud computing and the end results. According to results from this survey , 85% of those interviewed expected cloud technology to improve their IT agility, but only 57% said that it actually did. Results also fell short in areas of disaster recovery, efficiency and security.

"CIOs are concerned about access to data and if their IT infrastructure and applications are cloud ready," says Vijay Mhaskar, VP, Information Management Group, Symantec. Others also think that cloud computing has got off to a slow start in India.

Under a third of 150 CIOs interviewed by Zinnov, a management consultancy based out of Bangalore, have full-scale implementations in place and just over a fifth have pilot projects underway. "While security and data privacy are the top concerns, companies are worried about how long they will spend (and how much money they will invest) in integrating older systems with those built around cloud computing.

"Nearly 75% of the CIOs we spoke to agreed that cloud computing would be an important part of their strategy," says Praveen Bhadada, director, Zinnov. "The biggest issue is one of perception."

The slow shift
There's no denying that cloud computing is an area of future technology investment for India Inc. Gartner says the move towards cloud computing is still in its infancy. Globally, Gartner estimates that while $74 billion was spent on public cloud services in 2010, this was a measly 3% of enterprise technology spending.

Several CIOs suggested that this would go up to 10-12 % of spending overall, as several issues surrounding cloud computing are sorted out. India's largest mobile services firm Airtel has been one of the most aggressive adopters of cloud computing.

According to Amrita Gangotra, director-IT , India and South Asia, Bharti Airtel, the firm began switching to cloud technology around two years ago primarily to reduce costs and carbon footprint globally. Gangotra says that the firm will have a common pool of infrastructure on demand for application developers. "We will have a common pool of technology resources using cloud computing, rather than a dedicated pool to each team," says Gangotra.

This means that there will be fewer peaks and troughs of server and storage usage and projects can be rolled out quicker - a key competitive advantage in the extremely competitive mobile services market. Gangotra says that Airtel has even completed at least five proof of concept to manage new cloud-centric applications with its vendors.

But not everyone is willing to take such a leap of faith. Sethi is hesitant to place the firm's mission-critical applications on the cloud because he is unsure of its availability at all times. "This is not because of the service provider but because we can't live with the slow speed of broadband," he says.

When there are hundreds or thousands of users trying to access this data, bandwidth costs shoot up and return on investment calculations go flying out of the window. Security paranoia and technology complexity too play a key role in cloud computing. "What happens if a provider goes bankrupt," asks Sethi.

"Most applications are not standalone today...enterprise resource planning software is integrated with data management tools, which are linked to the business intelligence software. How do you decide which goes on the cloud first?" Consequently, few CIOs across India Inc are willing to be pioneers in investing aggressively in cloud computing.

"There are no financial services companies on the cloud," argues Sankararaman of HDFC. The hesitancy is because there are few reports which have measured returns from these cloud computing investments-and as the economy sourspeople would prefer to restrict their expenditure on technology.

The uptick in cloud computing then, may not come from large enterprises such as HDFC, Airtel or Hero, but rather from small companies , who have limited budgets but need to have a full-fledged technology set-up.

For example, a small-sized readymade textiles maker in Tirupur in Tamil Nadu, may have to invest in IT to keep pace with a flood of orders from mega retailer Wal-Mart , which can happen only on an online order ful fillment system.

Rather than invest heavily in a complete set-up, such a company may prefer to host most of its data online and use pay-per-use software to keep costs down. With over 8 million small and business units in India, less than 10% of them connected , this may be a latent opportunity waiting to be tapped.

Changes in the approach to IT are also likely to influence a CIO's decision on cloud computing.

The explosion of mobile devices, the growing trend of bringing your own device to work, desktop and server virtualisation, explosive rate of data growth and a changing security threat landscape are the key drivers in this transition, says Symantec's Mhaskar. Before this opportunity can be tapped, a tight-fisted India Inc will need to be convinced cloud computing is worth their time-and money.

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