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India's booming startup landscape has evolved in the last five years to the 3rd largest in the world, with over 78,000 Department for Promotion of Industry and Internal Trade (DPIIT) recognised startups from all 36 states and union territories (UTs) in 644 districts, spanning 56 industries. In 2021, as India started moving out from the back-to-back pandemic-induced lockdowns, it witnessed the recognition of over 20,000 startups in 2021.

The pandemic has acted as a catalyst and accelerated the adoption of cloud services in India. The 'cloud' refers to servers accessed over the Internet and the software and databases that run on those servers. As digital transformation picks up, it has turned the spotlight on cloud adoption in the do-anything-from-anywhere world.

Cloud is the way forward, with predictions of over 95 per cent of new digital workloads to be deployed on cloud-native platforms by 2025, up from 30 per cent in 2021. According to a Boston Consulting Group (BCG) report, India is one of the largest and fastest-growing public cloud markets in the Asia-Pacific (APAC) region, projected to record trifold growth from $ 2.6 Bn to $ 8 Bn between 2018 and 2023.

Key Market Drivers

  • The Indian startup ecosystem is booming owing to monetary and non-monetary support from the Government's Startup India Initiative and the availability of skilled Information Technology (IT) personnel. Start-up companies here are acting as cloud service consumers (Ola Cabs, Bigbasket) and cloud service providers (such as Practo and Freshdesk). Hence, the increasing number of start-ups is driving the provision of cloud services and adoption.
  • Digitisation in India enables business operations of Artificial Intelligence (AI) and Virtual Reality (VR). Cloud computing is the principal force that allows companies to store, manage, and analyse the massive amount of data required for AI applications.
  • The industry for smart appliances and wearables is booming. Cloud computing is the principal mechanism to communicate and store information in such appliances.

Policy Initiatives

  • Government initiatives such as MeghRaj and Cloud vision for India 2022 have established India as a global hub for cloud computing and give impetus to improving the adoption of e-governance initiatives using the cloud
  • The National Digital Communications Policy 2018 envisions establishing India as a global hub for cloud computing, content hosting and delivery, and data communication systems and services by setting up regulatory frameworks, data centres, delivery networks and internet exchanges
  • Cloud services have improved governance in India as national initiatives and schemes like Swachh Bharat Mission, Government e-Marketplace (GeM), e-Hospital, My-Gov, and e-Transport are now cloud-based
  • The Government launched DigiLocker, a cloud-based platform for issuing, sharing, and verifying critical lifelong documents or certificates. As of March 2022, DigiLocker had more than 101.1 Mn users and had issued 4.94 Bn documents

Undoubtedly, the move to the cloud is driven by its unbelievable business advantages - from resiliency, speed, and mobility to scalability. Together, these culminate into unlocking innovation, operational efficiencies, real-time analytics, and cost savings across verticals, setting businesses up for successful digital adoption.

So, what explains this cloud ubiquity in the industry?

The 'Trillion-Dollar Paradox': Putting Long-Term Cloud Cost into Perspective

Even as enterprises embrace the cloud, there are increasing speculations in recent times about its long-term cost implications.

An article published by Andreessen Horowitz (an American venture capital firm) drew attention to the impact of cloud lifecycle on a company's finances, referring to it as the "trillion-dollar paradox". While the cloud remains profitable early after its adoption, its cost far exceeds the Return on Investment (RoI) it drives as a business evolves, scales, and its growth loses pace.

The revelation drives businesses across the board - from start-ups to established enterprises - to rethink their cloud spending and strategies.

The cloud enables start-ups to shift gears and meet the changing market dynamics by revamping processes, culture, and customer experiences; it lies at the heart of successful digital acceleration. Leveraging the cloud in the right way matters the most to unlock the best of both worlds - value from the cloud while keeping the costs down.

In the case of start-ups specifically, as the focus lies on building the business rather than spending energy on IT infrastructure, the public cloud seems like a perfect solution. However, various alternatives are more cost-effective and allow startups to channel their funds into growing their business. Studies have pointed out that workloads that run 24/7 on a public cloud for around eight months cost as much as owning the infrastructure with 36 months of support, including the cost of operating.

So, startups need to define a strategic hybrid or multi-cloud roadmap and consider the correct placement of workloads based on access requirements, security and control, period of operation, skills, complexity, business goals, and other factors.

For example, workloads that are dynamic and geographically dispersed benefit more from the auto-scaling capabilities of the cloud. In contrast, consistent workloads such as Test and Development, which run 24/7, may not be ideal candidates for the public cloud.

Moreover, costs associated with early-stage data policies and retention of IT professionals with relevant skills could further boil up the cloud costs.

It is worth acknowledging that India today stands a chance to emerge as the next big cloud player supported by the strong adoption of cloud technologies in its business ecosystem. To make its next big leap, it will have to revisit its spending strategies, from the Government's macro spending on cloud infrastructure to the business investment in cloud services. An innovation sandbox for local players to unlock the full potential of the Cloud with unit economics of costs and RoI in place will sure help India rewrite history as the biggest cloud market.

This has been authored by StartupIndia, Raunaq Jaisinghani and  Dell India. 

We are India's national investment facilitation agency.


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