Emerging markets lead the way in cloud application adoption

Large companies in Latin America and Asia Pacific are the most aggressive adopters of the cloud computing paradigm, while their European and US counterparts remain conservative about shifting applications to the cloud.

The average Latin American company has almost two fifths (39%) of its total applications in the cloud. Asia Pacific follows closely behind with over a quarter (28%). In contrast, less than one fifth (19%) of the average US company’s applications are hosted in the cloud. In Europe, the figure is closer to one tenth (12%).

The findings come from an extensive study conducted by Tata Consultancy Services (TCS) involving senior managers and corporate IT executives from over 600 large companies representing 16 industry verticals across the globe, reveals that while cloud applications are still in the minority of all applications, companies in Latin America and Asia Pacific have a much higher proportion of cloud applications to total applications.

“We have reached the inflection point in cloud computing and there is no turning back. Cloud-based applications are already a substantial piece of large corporate IT infrastructure and the early benefits achieved are too substantial to ignore. There is huge scope for growth in both developed and emerging economies and we firmly believe that cloud computing will continue to open up opportunities for companies across many different functions,” said N Chandrasekaran, CEO and MD of Tata Consultancy Services. A year ago TCS launched iON, a cloud-based IT offering for small and medium-sized businesses in India.

He further adds that the research predicts that by 2020, when executives at large global companies reflect back on the major trends that shaped their businesses this decade, they will see cloud computing as one of the biggest.

The study also reveals that overcoming fear of security risks remains the key to adopting and benefiting from cloud applications. While companies globally admitted this is the biggest challenge to leveraging cloud today, those in the US and Europe remain especially conservative in their approach to cloud adoption for fear of data security breaches.

Despite a significant shift to cloud applications, Western companies are also more sensitive about which applications they put in public clouds. Only a fifth (20%) of US and European companies would consider or seriously consider putting their most critical applications in public clouds. Yet two-thirds of US (66%) and almost a half of European companies (48%) would consider putting core applications in private clouds. Companies in Europe and in the US also showed a reluctance to put applications with customer data in the cloud.

The study also uncovers that cost cutting is not in fact the biggest driver of cloud applications. Indeed while IT cost reduction is an important factor for companies globally, the need to streamline and speed up processes was greater. In the US and Asia-Pacific, companies cited standardization of software applications and business processes as the main driver for shifting on-premise applications to the cloud. In Europe and Latin-America, the ability to ramp systems up or down faster was the motivation.

The study also points out that companies believe that in future the spend on cloud computing will grow significantly by 2014. For example, in European companies cloud applications are projected to double to becoming 24% of all applications. US firms see cloud applications being about a third (34%) of total applications by then, when Asia-Pacific companies project them to be a full half of all their applications and Latin American companies see them becoming 56% of total applications.