Will Emerging Markets Bypass the US on Cloud?
February 14, 2012
South Korea has better broadband than we do. Australia has faster wireless networks. And according to Forrester’s Internet Population Forecast, by 2013 the number of online consumers in emerging markets will dwarf those in the US and Western Europe. In Forrester’s Forrsights Budgets and Priorities survey, these same countries are putting far more priority on cloud computing than we are. Does this mean we could lose our lead in cloud?
We all know that cloud computing is an agility play and that our business colleagues are more excited about it than us in IT. We also know that it’s much easier to invest in public cloud services due to their economic model and ubiquitous delivery capabilities – heck it’s an Internet-based service. And we know that organizations with less in-house IT are able to leverage cloud services more readily. On top of all this, according to Forrester’s Global Tech Market Outlook For 2011 and 2012, the markets increasing their investments in IT goods and services the most – nearly twice that of other regions – are Latin America, the Middle East, Eastern Europe and Africa…
That sure sounds like a recipe for emerging markets to leap frog us. But the reality isn’t so simple – geography actually gets in the way of this story. This topic was the focus of my keynote session at the CloudConnect conference here in Silicon Valley today.
Success for cloud computing hinges on its ability to deliver good performance of the service being provided and latency can kill that story. As of today – evidenced by our Market Overview of Public IaaS Solutions – there are very few cloud services emanating from these countries. This means that for cloud services to succeed in these markets today you either have to invest in placing your service in a data center in these markets or rely heavily on content delivery networks. And if a cloud service can’t take significant advantage of caching, it may not see significant benefit from CDNs.
The second geographic challenge is borders and they seem to be going up these days. Concerns over the handling of personally identifiable information (PII), governmental sovereignty and local technology market protections are coming together in legislatures around the world that might just keep clouds out of these fast growing markets. To get a picture of just how confusing the world has become, take a look at Forrester’s Global Heat Map of country-specific privacy regulations. One global market it ain’t.
But if you are either a cloud vendor trying to prioritize your investments or an enterprise I&O professional trying to shape your cloud strategy, don’t take this news as an excuse to rest on your laurels. The emerging markets will find a way to make progress here, just as your business leaders are going around you to use the cloud today. And that means increased business risk if you just let it happen. These bumps in the cloud road need to be dealt with – and now – for you to ensure corporate success with cloud computing services.
In our interviews with business leaders in emerging markets who are leveraging cloud services today we found a consistent theme – ignorance is bliss. They are leveraging cloud services and are either knowingly ignoring the above stated issues or leveraging them anyways because the business value, as they see it, is far greater than the risk they perceive from these challenges. This tells us two important things:
1. We can’t let ignorance land us in jail but, “thou shall not cloud compute,” won’t work. This means both cloud vendors and enterprise IT need to step up and ensure that the business risks being taken are managed and that we engage with the business to ensure their use of cloud services is modified or adapted in a way that delivers against our corporate responsibilities. For example, can that SaaS service emanating from the US Patriot Act-based data center still provide the workflow we are seeking if we store the client data used elsewhere? Or can we create a hybrid implementation that puts some data on site, in country while other data is anonymized for placement in the cloud service?
2. The bar we set for SLAs may just be lower than we think. Next time you are in Latin America, try connecting back to the cloud services you use on a daily basis and you will get a sense of what latency really means. Now ask yourself if the services you use would still be acceptable at these speeds given the alternatives. That’s often how these business decisions are made. And good enough IT performance is actually great when the business value is high. We’re spoiled in the US and Western Europe because we’re used to having the majority of services we use every day come out of our data centers over fat pipes to beefy laptops. Emerging markets have gotten used to lighter weight experiences and often find cloud services with low latency just fine. So we can’t assume our emerging market colleagues will dismiss a cloud service based on performance. But we must acknowledge that competition will bring this bar up and that means there is ample opportunity for return on investments in these markets.
The key to capitalizing on these market opportunities, whether as a cloud provider or enterprise IT, is to think like a local. How do you marry the enterprise IT needs with the demands and desires of business leaders in these markets? There isn’t a blanket answer that applies to all markets so you need to prioritize the key countries, engage the local teams and shape the solutions that deliver the greatest business value while maintaining regulatory and compliance fidelity. It might mean a different type of cloud service, a unique user experience or a hybrid implementation. Don’t be afraid to invest in in-country capital or staff but ensure the business objective is the driver. What works for IT here isn’t necessarily a recipe for success in emerging markets.