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Cloud – The business value driver in the new normal

Neha Jain

@nehajain

March 24, 2021

Cloud Computing

1337

In my last blog “Acquisitions – The growth story for Indian IT services Industry in 2020” I discussed how acquisitions were the key growth strategy in 2020 for the Indian IT Services segment. Taking that discussion forward let’s talk about another focus area that was the front runner in the strong deal pipeline announced by the Indian IT majors – Cloud.

Cloud – The 1 trillion value* up for grabs

Before we dwell on the Indian IT Services’ cloud focus there is something that we know - the recent McKinsey study which highlighted cloud as a major value creator. Which in-turn highlights the immense potential cloud has considering most companies currently are scratching only the surface.

* Run-rate EBITDA across Fortune 500 companies as up for grabs in 2030

Case Example - Moderna deriving tremendous value from cloud

In January 2020, Moderna CEO Stéphane Bancel made the decision to build his mRNA research-and-development platform on public cloud to accelerate therapeutic discovery and development. When the COVID-19 pandemic hit, this strategy proved prescient as the company was well positioned to quickly design research experiments and to harness its automated laboratory and manufacturing processes and enhanced drug-discovery pipeline. Notably, cloud was partly responsible behind’s Moderna’s ability to deliver the first clinical batch of its vaccine candidate (mRNA-1273) to the US National Institute of Health for phase one trials just 42 days after the initial sequencing of the virus According to Bancel it was possible “because you don’t have to reinvent everything, you just fly”.

Cloud can unlock substantial value for technology use cases

Source: McKinsey

Cloud Adoption – A growing opportunity for Indian IT Services

Covid-19 pushed significant cloud adoption across enterprises as they were forced to work remotely. Notably, organizations that were already on the cloud faced lower disruption in businesses compared to ones that were not on the cloud.

Source: McKinsey

Consequently, in a recent survey by Google and IDG improving remote working/collaboration capabilities and migrating workloads to the cloud were the top priorities that witnessed acceleration/ introduction across a majority of organizations.

Source: Google IDG Survey of A survey of 2,000 IT leaders shows an acceleration of multicloud, analytics, sustainability, and security during Oct-Nov 2020

This focus on the cloud across enterprises has made cloud a significant growth opportunity for IT services providers across the globe. Consequently, the year saw companies such as Accenture which announced the launch of “Cloud First” announcing $3 billion investment to help clients become cloud-first and accelerate their digital transformation, while IBM announced split of its cloud business as a separate entity to focus on $1 trillion hybrid-cloud opportunities.

Indian IT services companies also increased their focus on strengthening their cloud practice through partnerships, acquisition as well as restructuring.

Infosys and Wipro partnered with IBM for hybrid cloud.
Infosys acquired GuideVision, Blue Acorn iCi; while Wipro acquisitions of 4C are just a few examples in the cloud space.
TCS streamlined its Cloud services business into five strategic units – Amazon Web Services (AWS), Azure, Google, TCS’ own private cloud arm, and a cloud consulting arm. While HCL Technologies had set-up a dedicated business unit for Google Cloud with over 1,300 professionals.

The Road Ahead

Cloud has become a key focus area in the IT infrastructure segment, which is also reflected in the fact Cloud and Security Services are witnessing a price uptick, while traditional infrastructure services are seeing a pricing pressure.

Source: Everest Group

Consequently, cloud and related services are expecting to witness strong demand in the coming years.

Cloud system infrastructure services spending is expected to grow from $44 billion in 2019 to $81 billion by 2022
Cloud migration services will remain a key growth opportunity for Indian IT Services providers which is expected to reach $515.83 billion by 2027, growing at a CAGR of 24.8% from 2020 to 2027.

Cloud was the key theme accelerated by the pandemic, to read more on the key trends that shaped-up the Global and Indian IT Services Industry download NASSCOM’s Strategic Review – “Technology Sector In India 2021- New World: The Future Is Virtual”.

Cloud migration Cloud Infrastructure TCS #wipro #reskillingseries #digitaltransformation IBM IT Services; TEchM; Infosys; Acquisitions; Digital

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Neha Jain

Senior Analyst

Neha Jain