Sizing Cloud Markets in Asia Pacific - Forrester - Feb 2012

February 3, 2012
Sizing The Cloud Markets In Asia Pacific

by Michael Barnes for Vendor Strategy Professionals
Making Leaders Successful Every Day
For Vendor Strategy Professionals

understanding Cloud Growth Dynamics Across The region
by Michael Barnes with Dane Anderson, Frederic Giron, Stefan ried, Ph.D., and Miroslaw lisserman
February 3, 2012
ExECuT I V E S u M MA ry
Exploiting cloud computing growth opportunities in Asia Pacific requires insights into future cloud market size, growth dynamics, adoption trends, and demand drivers, all of which vary widely across different markets within the region. Based on Forresters previously published cloud market taxonomy, we provide forecasts and guidance on seven distinct cloud market segments across five key markets in Asia Pacific for 2010 to 2020. In this report, we focus specifically on the public cloud and virtual private cloud markets. We will cover forecasts and analysis of the private cloud market in Asia Pacific in subsequent research. Vendor strategists can use this report to validate internal estimates and guide strategy and planning in the key cloud computing markets and segments across Asia Pacific.
TABl E o F Co nTE nTS

2 Breaking Down The Cloud Market Opportunity 6 Understanding Cloud Demand Across The Region 9 Analyzing Regional Variations In Cloud Market Growth
WHAT IT MEAnS
n oT E S & rE S o u rCE S
Data in this report comes from Forrsights Strategy Spotlight: Cloud In Asia Pacific Excluding Japan, Q3 2011 and Forresters 2010 Springboard Asia Pacific Cloud Phone Survey. The report also uses Forresters B2B forecast methodology. Companies interviewed include Amazon Web Services, CA, HP, IBM, Microsoft, netApp, netSuite, Symantec, Parallels, SingTel, Telstra, and VMware.
21 Consider Market Differences To Exploit Cloud Opportunities In Asia Pacific 21 Supplemental Material
Related Research Documents navigating The Asia Pacific Software-As-A-Service Market october 25, 2011
Sizing The Cloud April 21, 2011 Which Software Markets Will SaaS Disrupt? January 12, 2011 The Evolution of Cloud Computing Markets July 6, 2010 Cloud Computing In APJ: Trends, Challenges, And opportunities June 22, 2010
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BREAkInG DOwn ThE ClOUD MARkET OPPORTUnITy As a region, Asia Pacific is rapidly gaining in importance among vendor strategists. Strong ongoing economic growth across key markets and a relative underinvestment in IT (particularly in the high growth markets of China and India) make the Asia Pacific market highly compelling. Cloud computing is an equally enticing market, as rapidly growing demand is coupled with an immature vendor ecosystem, providing enormous opportunities for rapid growth. To successfully exploit these opportunities, vendor strategists must understand the unique characteristics of key markets across Asia Pacific and how the various inter-related cloud market segments will evolve. Cloud computing is comprised of many distinct market segments, each with its own specific maturity cycle and growth dynamics (see Figure 1). In this report, we focus specifically on the four segments of the public cloud market and three of the four segments of the virtual private cloud markets, excluding dynamic business process outsourcing (BPO) services.1 This report does not cover tools and technology that are critical to enabling internal, private clouds such as infrastructure virtualization.
Figure 1 Applying Forresters Cloud Computing Taxonomy To Asia Pacific
Level of sharing
Public cloud
IaaS
PaaS
SaaS
BPaaS
Virtual private cloud
Dynamic infrastructure services
Cloud-based integration (CBI)
Dynamic apps services
Dynamic BPO services
Private cloud
Infrastructure virtualization tools
Middleware virtualization tools
Apps virtualization tools
BP virtualization tools
Infrastructure
Middleware
Applications
Information and processes
Business value
Note: Segments in gray are not covered in this report

61125 Source: Forrester Research, Inc.
February 3, 2012
2012, Forrester research, Inc. reproduction Prohibited

Regional Market Sizing We cover five Asia Pacific markets in this report Australia, China, India, Japan, and the Association of Southeast Asian Nations (ASEAN), which includes Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. These five markets combined account for approximately 85% of the total 2011 Asia Pacific cloud market size. This figure will rise to more than 90% by 2020. As such, vendor strategists should consider the growth trends across these combined markets to be representative of the overall Asia Pacific region. Forrester forecasts that the combined size of the these cloud market segments all four public cloud market segments and three of the four virtual private cloud market segments (excluding dynamic BPO services) will grow from $2.9 billion in 2011 to $32 billion in 2020. To put the regional estimates into context, Forrester forecasts that the global market for these seven cloud market segments will grow from $30.3 billion in 2011 to more than $241 billion in 2020. Asia Pacifics share of global spending in these seven cloud segments will therefore increase from approximately 10% in 2011 to more than 15% in 2020. For the actual market size calculation, we used Forresters business-to-business (B2B) market forecasting model, which involves a logistic, or S-curve, modeling technique that we have outlined in the methodology of this report. Public Cloud Market Segments Are Driving Awareness And Demand The public cloud market in Asia Pacific will grow from $2.3 billion in 2010 to $21.8 billion in 2020. The public cloud includes IT resources delivered as services via the public Internet on a self-service, pay-per-use basis. These services are highly standardized allowing limited customization and rely on massively shared resources. Forrester has identified cloud market segments based on the resources used; these include infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), software-as-a-service (SaaS), and business process-as-a-service (BPaaS).
IaaS demand will continue to grow strongly through 2015. The compound annual growth
rate (CAGR) for IaaS across Asia Pacific is 55.3% from 2011 to 2015. But market growth will slow considerably from 2016 onward (CAGR of -0.9% from 2016 to 2020) due to rapid standardization and commoditization. Outside of Australia, IaaS hypergrowth across Asia Pacific has slightly lagged the more mature markets of North America and Western Europe. This is due to a lack of local players and limited presence of global IaaS leaders in Asia Pacific; this has really only changed in the past 12 to 18 months as many of these global IaaS leaders have increased investments across the region. IaaS solutions currently appeal to mature IT markets like Australia, Singapore, and Japan, particularly for cloud-bursting capabilities, where organizations augment on-premises infrastructure in areas like compute capacity and storage. However, from 2011 to 2015 the strongest growth in IaaS will be in India and China, as organizations (both established companies as well as startups) seek to bypass on-premises infrastructure for key workloads and scenarios. Sample IaaS offerings include Amazon Web Services Elastic Compute Cloud (EC2), Rackspace Cloud, and Telstra IaaS.
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PaaS will grow quickly over the next two to three years, starting from a very small
base. In contrast to North America, there is currently a much smaller base of independent software vendors (ISVs) headquartered in Asia Pacific reselling PaaS beneath newly built SaaS applications. Nonetheless, we expect their numbers to grow over the next three to four years, particularly in the large growth markets of India and China based, in part, on the availability of locally based PaaS solutions to build on. These ISVs will be the primary drivers of PaaS growth across most of Asia Pacific. Uptake of PaaS among Asia Pacific enterprise users migrating custom application development to the cloud is still nascent, the exception being Japan, where PaaS adoption for corporate application development is already strong. Across Asia Pacific as a whole, we expect local and regional service providers to drive growth by leveraging PaaS to host applications in virtual private cloud models. Sample PaaS offerings include Microsoft Windows Azure, salesforce.com Force.com, and Tata Consultancy Services (TCS) iOn.
SaaS is by far the largest cloud market segment, with strong growth sustained through
2020. SaaS is particularly appealing in growth markets, where organizations are increasingly likely to consider (and often choose) SaaS as an alternative to on-premises applications. Two major subsegments within SaaS will continue to drive growth over the next two to three years in Asia Pacific; customer relationship management (CRM), which accounted for approximately 30% of total regional SaaS revenue in 2010, and content and collaboration, which accounted for nearly 35% of all regional SaaS-related spending in 2010. From 2014 to 2015, we expect other SaaS subsegments e.g., enterprise resource planning (ERP), human capital management (HCM), and business intelligence (BI) to grow at a faster rate as the SaaS CRM and content/collaboration markets reach saturation, particularly in Australia and Singapore. Sample SaaS offerings include Citrix Systems Online GoToMarket, Google Apps, NetSuite, RightNow Technologies (acquired by Oracle in October 2011), Saasu, and salesforce. com CRM offerings.
BPaaS is a tiny fraction of current cloud spend, but rapid innovation will likely spur
demand. BPaaS will evolve directly from the traditional BPO market. But, unlike BPO services, BPaaS will leverage shared resources across multiple customers. While still several years from entering hypergrowth in any Asia Pacific markets, we expect this segment to evolve quickly as the core characteristics of cloud computing, standard processes, scalable technology platforms, and shared resources, drive major changes in the traditional BPO space. The result will be effective provisioning of highly standardized and shared business processes delivered via dynamic, pay-per-use, and self-service consumption models. Vendors like PayPal are quickly moving into this space, but sample BPaaS offerings are currently limited to relatively simple business processes, such as instant invoicing and billing via the Internet.
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Virtual Private Cloud Market Segments will Transform The Existing IT landscape The virtual private cloud market in Asia Pacific (excluding dynamic BPO services) will grow from $534 million in 2010 to $10.1 billion in 2020. This market represents a hybrid business model combining highly standardized public cloud offerings with control over how services are accessed (typically via a virtual private network) and where data is stored (meaning which data center and/ or country). The virtual private cloud market is therefore best viewed as a natural evolution from traditional outsourcing, with providers offering a more modular services portfolio, dynamic delivery/scalability capabilities, and an elastic pricing model. Given the huge variations in data privacy and sovereignty regulations across Asia Pacific, growth in demand for virtual private cloud services is set to outpace the currently far larger SaaS market as well as the IaaS market. For this report, Forrester has focused specifically on three segments of the virtual private cloud market: dynamic infrastructure services, cloud-based integration (CBI), and dynamic application services. We will cover market sizing and analysis of the dynamic BPO services segment in Asia Pacific in subsequent research.
Dynamic infrastructure services represent the fastest growing cloud market segment. The
CAGR for dynamic infrastructure services will be 75.2% from 2011 to 2015. While similar to IaaS in terms of services provided (e.g., compute power, storage, and archiving), dynamic infrastructure services differ in one fundamental respect; they are hosted at a known location and can provide for a clear mapping between tenants and the cloud providers servers. Hypergrowth will begin throughout 2012 across all major Asia Pacific markets. By 2015, the dynamic infrastructure services market segment will overtake IaaS in all major markets in Asia Pacific except China, where this will occur one year later in 2016. Offerings have been rapidly hitting the market across Asia Pacific over the past six to 12 months, primarily from traditional outsourcing providers like HCL Technologies, HP, IBM, as well as regional players like SingTel.
CBI, as a distinct market segment, will remain small. Despite ongoing integration concerns
among cloud adopters, the CBI market will not grow substantially over the next eight to 10 years. Essentially cloud-based middleware platforms, CBI evolves directly from more traditional hosted business-to-business (B2B) integration solutions. The CBI market in Asia Pacific will remain niche, accounting for less than 1% of total cloud-related spending in all major Asia Pacific markets by 2020. Sample CBI offerings are beginning to appear from a diverse range of vendors providing integration capabilities, ranging from Axway, Cast Iron Systems, and GXS to Seeburger and Sterling Commerce/IBM.
Dynamic application services will evolve from traditional managed services. Falling
between SaaS solutions and traditional on-premises application services, dynamic application services will grow as an alternative to both on-premises ERP deployments and traditional application outsourcing. While not typically multitenanted, solutions like Oracles On
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Demand offering of its E-Business Suite increasingly fall into this category when offered via usage-based pricing, with increased scalability achieved through the use of highly virtualized and shared infrastructure. Moving forward, we expect traditional outsourcing providers like HCL, HP, IBM and Tata Consultancy Services (TCS) to dominate this segment. Hypergrowth will begin in all major Asia Pacific markets over the next 12 months, but takeover time will stretch beyond 2020, mainly due to the still slow evolution of traditional on-premises ERP solutions that many dynamic application services will evolve from. UnDERSTAnDInG ClOUD DEMAnD ACROSS ThE REGIOn Cloud market growth analysis and estimates are based in part on the increasing availability of cloudbased services across Asia Pacific. This is particularly crucial in the high-growth markets of China and India and the less mature markets in ASEAN like Indonesia, Malaysia and the Philippines. In these markets, the leading cloud providers still have limited, albeit quickly expanding, presence; additionally, the broader ecosystem of cloud service providers and channels is still nascent. While the vendor ecosystem is critical to sustained, strong uptake of cloud-based services, cloud awareness/understanding among Asia Pacific organizations and end user adoption plans remain the primary indicators of future cloud market growth. Forresters most recent phone-based survey of cloud adoption trends among IT and business decision-makers across the region shows growth in cloud adoption and increasing formalization of cloud procurement approaches. This study included 530 respondents from all major markets included in this report, except Japan. Cloud Adoption Is Growing Steadily Fifty-two percent of organizations in Asia Pacific excluding Japan (APEJ) are either currently using or actively planning cloud initiatives up from 44% in 2010 and 22% in 2009 (see Figure 2).
Cloud adoption is currently strongest in Singapore and Australia. Forty-two percent of
organizations in Singapore are currently leveraging cloud, up from 16% in 2010 and 6% in 2009. Cloud adoption in Australia has also accelerated rapidly, with 36% of Australian organizations currently leveraging cloud-based services, up from 22% in 2010 and 14% in 2009.
Chinese organizations are beginning to mobilize around the cloud. While lagging some of
the more mature APEJ IT markets in current cloud adoption, China has the highest percentage of cloud planners at 40%, well above the regional average of 24%. This indicates a strong likelihood that Chinese organizations will adopt cloud services over the next 12 months.
Despite slow economic growth, the cloud market opportunity in Japan is enormous. We
did not include Japan in the most recent Forrester cloud adoption survey for the Asia Pacific region. However, separate Forrester research indicates that cloud adoption in Japan currently
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lags Australia and Singapore but remains ahead of China and India.2 Given the sheer size of the Japanese IT market, this translates into a massive cloud opportunity in Japan. There is minimal variation from the regional average in cloud adoption by organization size in Japan. The only exception is among very small organizations in Japan (fewer than 100 employees), with a mere 21% having already adopted cloud solutions or approaches.
Figure 2 Cloud Adoption Continues To Grow Across The region
Do you currently have a cloud computing initiative or strategy in place within the organization? Yes, we have already adopted cloud solutions or approaches All APEJ (N = 530) India (N = 150) China (N = 100) Australia (N = 100) No, but we are currently planning to implement cloud computing 28% 26% 22% 36% 24% 21% 40% 26% No current plans to adopt cloud solutions or approaches 48% 53% 38% 38%
Base: IT and business decision-makers from companies with 20 or more employees Source: Forrsights Strategy Spotlight: Cloud In Asia Paci c Excluding Japan, Q3 2011 Note: All APEJ includes Malaysia, Hong Kong, and Singapore, which are not shown on this chart.
Cloud Procurement Is Formalizing To ensure sustainable cloud market growth and, more importantly, increase the likelihood of cloud initiatives delivering positive return on investment (ROI), organizations must evolve from ad hoc, disjointed cloud approaches to well-defined, effectively managed cloud procurement.
Centralized IT procurement of cloud services is not consistent across the region. Australia
(82%) and India (83%) currently lead in driving centralized procurement and management of cloud services through IT. Both markets are well above the regional average of 74% (see Figure 3). This drops to 66% in China and 69% in Singapore.
Chinese organizations are least likely to have a formal cloud strategy in place. As with
current cloud adoption, China also lags in driving centralized cloud procurement and management 39% of respondents confirm having no cloud strategy in place. In fact, 56% of respondents in China currently see unsanctioned buying by the business outside of IT. This is the highest rate in APEJ by far, which has an average of 35% and lows of 23% in Australia and 25% in Singapore.
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Growth in cloud pilot programs is evidence of progress. In a sign of rapid cloud market
evolution and maturation in the two largest high-growth markets of APEJ, 63% of Indian respondents and 60% of Chinese respondents have formal and structured cloud pilot programs in place. This compares with a regional average of 52% and a low of only 35% in Australia.
Figure 3 Cloud Procurement Is Becoming More Formalized

Today, which of the following best describe your firms strategy/approach to cloud computing? We are centralizing the procurement and management of these services through IT We have a strategy in place and are executing a multiyear plan We have a formal and structured pilot program We have implemented in all the niche areas that make sense We are focusing on building internal private cloud capabilities We are crafting a formal migration plan We are executing on a formal migration plan We see unsanctioned buying by the business outside of IT We have no formal strategy/approach 52% 52% 49% 48% 40% 35% 31% 74% 68%
Base: 530 IT and business decision-makers from Australia, China, India, Hong Kong, Malaysia, and Singapore from companies with 20 or more employees (multiple responses accepted; none of the above, and dont know responses are not shown.) Source: Forrsights Strategy Spotlight: Cloud In Asia Paci c Excluding Japan, Q3 2011
Public And Virtual Private Clouds Are Gaining Ground Given ongoing concerns over data protection issues and confusion about data residency and sovereignty regulations, most APEJ organizations have focused primarily on private cloud initiatives. In fact, the percentage of organizations focused on private clouds has remained consistent over the past year at 33%. However, as cloud awareness increases and the market matures, were seeing heightened interest in public and virtual private cloud initiatives across APEJ (see Figure 4).
Interest in public clouds has increased from 14% in 2010 to 18% in 2011. But variations
in organizations willingness to seriously consider using public cloud-based services are still pronounced across Asia Pacific. Respondents in China (21%) and India (20%) are most
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bullish on leveraging the public cloud, while Australian organizations are most hesitant, with only 14% currently more likely to leverage public cloud versus private cloud.
Hybrid approaches are becoming more common. The percentage of organizations across
the region expecting to leverage multiple cloud approaches has increased from 18% in 2010 to 23% currently. Interest in this approach is highest in Australia, where 34% of respondents expect to leverage a combination of public, private, and virtual private cloud approaches.
More APEJ organizations are confident of their preferred cloud approach. The percentage
of respondents unsure of their cloud approach has decreased dramatically across APEJ, from 35% in 2010 to 13% currently, although 20% of Chinese respondents are still unsure what cloud approach they will likely leverage.
Figure 4 Public And Virtual Private Clouds Are Gaining Ground

Is your firm more likely to use or consider public clouds (externally hosted), private clouds (internally hosted), hosted clouds (virtual private), or all of the above? Public cloud (externally hosted) All APEJ (N = 530) India (N = 150) Australia (N = 100) China (N = 100) 14% 21% Private cloud (internally hosted) 18% 20% 26% Hosted (virtual private) cloud 33% 33% 14% 35% 21% 12% 13% All of the above 23% 25% 34% 3% Not sure 13% 10% 12% 20%
Base: IT and business decision-makers from companies with 20 or more employees (percentages may not total 100% because of rounding) Source: Forrsights Strategy Spotlight: Cloud In Asia Paci c Excluding Japan, Q3 2011 Note: All APEJ includes Malaysia, Hong Kong, and Singapore, which are not shown on this chart.
AnAlyzInG REGIOnAl VARIATIOnS In ClOUD MARkET GROwTh Cloud market growth will be consistently strong across all markets in Asia Pacific through 2020 and beyond. However, growth will vary widely across different cloud segments and organization sizes and types. Large organizations with significant existing IT investments will continue to drive strong demand for IaaS, but their spending on dynamic infrastructure services will outpace this. This is particularly true in the large, mature IT markets of Australia and Japan, where spending on dynamic infrastructure services will more than double IaaS spending by 2016. To save money, smaller organizations across the region, particularly small and medium-size businesses (SMBs) in growth markets like India, China, and parts of ASEAN, are driving demand
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for public cloud-based services (SaaS in particular). Essentially these organizations will leverage cloud-based services as an alternative to traditional on-premises IT solutions that have long been out of reach due to their high costs and complexity. The SaaS market is by far the largest cloud market segment in all countries within Asia Pacific. For 2011, SaaS spending as a percentage of total public and virtual private cloud spending ranges from a high of 77% in India to a low of 55% in Japan. Dynamic application services edge IaaS as the second largest cloud market segment in all markets except China, where IaaS is the second largest cloud segment, representing 9% of total 2011 public and virtual private cloud spending. Australia Remains the Most Mature Cloud Market in the Region Australia is the most mature cloud market in Asia Pacific by most measures. The public cloud market in Australia will grow from $732 million in 2011 to $3.2 billion in 2020. The three segments of the virtual private cloud market we have analyzed will grow from $157 million in 2011 to $2.4 billion in 2020. Strong concerns over data residency and sovereignty remain potential barriers to broad cloud adoption, along with existing regulatory constraints limiting offshore storing of data. However, we believe the benefits of cloud computing in reducing capital expenditures and simplifying service access for Australian businesses and government agencies will outweigh these concerns (see Figure 5).
Successful rollout of the National Broadband Network (NBN) will spur cloud demand.
Along with the release of the federal governments Cloud Computing Strategic Direction Paper in April 2011, we expect government initiatives to drive increased demand for cloudbased services across all cloud market segments. We also expect the Australia governments Whole-of-Government approach to data center consolidation over the next 10-plus years to increasingly steer agencies such as the Australian Taxation Office (ATO) and Department of Immigration and Citizenship (DIAC) toward cloud-based delivery of services, both internally and externally.
The presence of well-known global players has also helped spur cloud adoption. This is
particularly true for SaaS solutions as most global SaaS vendors established a presence in Australia long before expanding into the rest of Asia, hence driving early penetration relative to the broader region. For 2011, SaaS represented 65% of total public and virtual private cloud spending in Australia, dropping to 43% by 2015 and 34% by 2020. However, we expect growth to slow after 2015 as the SaaS market comes closer to saturation. SaaS growth from 2015 to 2020 will by 8.4%.
Dynamic infrastructure services will grow strongly over the next three to four years. By
2014, the dynamic infrastructure market in Australia will overtake IaaS, reflecting the strong desire among Australia-based organizations to control how and where their data is stored. Currently 7% of total Australian public and virtual private cloud spending, the dynamic infrastructure services segment will grow to 17% by 2015 and 24% by 2020.
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Figure 5 Forecast: Australia Cloud Market Size, 2010 To 2020

Cloud-based integration (CBI)
$6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2010 BPaaS $27
BPaaS SaaS
Total cloud marketers (US$ millions)
PaaS IaaS Dynamic applications services Dynamic infrastructure services 2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* $38 $577 $32 $54 $760 $64 $77 $952 $121 $112 $159 $223 $306 $409 $504 $587
SaaS $409 PaaS $16
$1,132 $1,263 $1,435 $1,581 $1,705 $1,808 $1,888 $202 $290 $362 $416 $448 $464 $469
IaaS $23 $84 $190 $255 $271 $266 $256 $246 $235 $225 $215 Dynamic applications $65 $94 $143 $213 $312 $442 $613 $786 $931 $1,014 $1,073 services Cloud-based $1 $3 $5 $8 $11 $14 $16 $18 $19 $20 $21 integration (CBI) Dynamic $60 $104 $184 $313 $507 $735 $960 $1,128 $1,253 $1,329 infrastructure $34 services Note: Total does not include the numbers for the private cloud segment and dynamic BPO services from the virtual private cloud. *Forrester forecast
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China Market Growth Spurs Cloud Demand The public cloud market in China will grow from $297 million in 2011 to $3.8 billion in 2020. The three segments of the virtual private cloud market will grow from $44 million in 2011 to $1.6 billion in 2020. The unparalleled economic growth in China will certainly help spur strong cloud market growth in China across most cloud segments through 2020. But unique market characteristics are hindering cloud market evolution in China, specifically, ongoing over-reliance on manual labor in place of automation, underinvestment in IT relative to other countries and regions, a strong preference for local IT providers over global firms trying to penetrate the China market, and the slow emergence of local cloud providers (including basic SaaS solutions) to support enterprise IT requirements (see Figure 6).
China organizations are quickly closing the gap in cloud adoption plans. Over the past
several years, China organizations have consistently lagged the broader Asia Pacific region in cloud awareness, understanding, and adoption. Multinational corporations (MNCs) with subsidiaries have been relatively early adopters of SaaS, but local firms and state-owned enterprises have been laggards. This has changed over the past 12 months, with Chinese organizations now leading the region in cloud adoption plans 40% are actively planning cloud initiatives over the next 12 months, versus 24% regionwide.
SaaS growth will remain very strong in China through 2020. China will lead the region in
SaaS growth through 2020, driven by a combination of pent-up demand for cost-effective ITenabled automation and the emergence over the next one to two years of viable, local Chinese SaaS providers catering to the domestic market. Sample providers include 800APPs, Baihui, Kingdee International (Youshang), and UFIDA.
The Chinese government is a strong advocate of cloud computing. IT investments are
a crucial component of Chinas broader economic growth strategy. China highlighted the importance of technology investments as a mechanism for sustaining economic growth in the governments 12th Five-Year Plan announced in March 2011, which specifically listed technology as a strategic emerging industry.
Cloud data center investments are increasing rapidly. In addition to the five cloud data
centers already set up in major cities, the government has announced plans to build 20 cloud computing centers across the country, totaling more than 10 million square feet of cloud data centers. Forrester estimates that, currently, direct cloud infrastructure investments made by different provinces and cities in China have already exceeded $8 billion.
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Figure 6 Forecast: China Cloud Market Size, 2010 To 2020

Cloud-based integration (CBI) BPaaS $5,000 $4,000 $3,000 $2,000 $1,000 $0 2010 BPaaS $3 PaaS IaaS Dynamic applications services Dynamic infrastructure services 2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* $4 $252 $9 $31 $7 $395 $20 $85 $11 $607 $45 $178 $16 $25 $35 $48 $64 $85 $103 SaaS
$6,000
SaaS $159 PaaS IaaS $4 $10
$909 $1,243 $1,572 $1,898 $2,226 $2,540 $2,820 $93 $270 $166 $330 $251 $356 $331 $369 $405 $376 $469 $380 $525 $384
Dynamic $22 $37 $62 $99 $157 $224 $311 $400 $474 $515 applications $14 services Cloud-based $1 $2 $4 $7 $10 $15 $19 $23 $26 $28 $30 integration (CBI) Dynamic $19 $35 $68 $127 $227 $370 $545 $726 $875 $1,005 infrastructure $10 services Note: Total does not include the numbers for the private cloud segment and dynamic BPO services from the virtual private cloud. *Forrester forecast
61125
Source: Forrester Research, Inc.
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India Is Poised For Increasing Cloud Demand Internet adoption along with IT adoption more generally remains relatively low in India, particularly among SMBs. The public cloud market in India will grow from $250 million in 2011 to $1.8 billion in 2020. The three segments of the virtual private cloud market will grow from $33 million in 2011 to $1.1 billion in 2020. While cloud growth will be strong across India, over the next two to three years we expect large organizations and subsidiaries of global multinational companies to drive demand for cloud segments other than SaaS (see Figure 7).
Government initiatives to drive cloud-related investments remain limited. In contrast to
China, the Indian government has not taken an active, coordinated role in promoting cloud investments as a means to spur innovation and help incubate a local ecosystem of cloud providers. However, a thriving private sector and a strong entrepreneurial culture have offset this lack of government involvement.
Indian service providers are rushing to deliver cloud-based services. India-based service
providers Infosys, Mahindra Satyam, Reliance, TCS, Wipro are all moving rapidly to flesh out their portfolio of cloud services. This will most directly impact the dynamic infrastructure services market, which has a CAGR of 92% from 2011 to 2015 the highest in the region. The IaaS market will also benefit, with a CAGR of 78% from 2011 to 2015 the second highest in the region behind China.
SaaS adoption has ramped up quickly. Indias lack of installed, on-premises applications
has meant a quicker ramp to 10% SaaS adoption saturation compared with China and other growth markets across ASEAN, specifically in large urban areas where network connectivity is more consistent. The rapidly emerging market of local SaaS providers, including Cynapse, Ramco Systems, and Synage Software, is driving this quick growth.
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Figure 7 Forecast: India Cloud Market Size, 2010 To 2020

Cloud-based integration (CBI) BPaaS $2,500 $2,000 $1,500 $1,000 $500 $0 2010 BPaaS $5 SaaS
$3,000
PaaS IaaS Dynamic applications services Dynamic infrastructure services 2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* $8 $219 $7 $16 $12 $335 $17 $44 $19 $481 $37 $90 $31 $631 $75 $131 $50 $823 $131 $159 $69 $94 $125 $162 $194
SaaS $137 PaaS IaaS $3 $5
$926 $1,011 $1,082 $1,141 $1,187 $181 $167 $219 $169 $249 $170 $270 $171 $286 $172
Dynamic applications $12 $20 $35 $60 $102 $171 $240 $312 $372 $408 $434 services Cloud-based $1 $1 $2 $3 $5 $6 $8 $9 $10 $11 $12 integration (CBI) Dynamic $12 $23 $45 $87 $161 $257 $370 $485 $578 $655 infrastructure $6 services Note: Total does not include the numbers for the private cloud segment and dynamic BPO services from the virtual private cloud. *Forrester forecast
61125
Source: Forrester Research, Inc.
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Japan Cloud Demand will Far Outpace Economic Growth The public cloud market in Japan will grow from $833 million in 2011 to $11.4 billion in 2020. The three segments of the virtual private cloud market will grow from $263 million in 2011 to $4.3 billion in 2020. Flat GDP growth over the past decade has resulted in pent-up demand for IT investments. At the same time, there has been a steadily increasing supply of cloud-based services targeting the local market over the past 18 to 24 months. When combined with Japans very strong broadband network, there is currently a strong opportunity for Japanese organizations to leapfrog directly to consumption of cloud-based services, skipping an entire generation of on-premises infrastructure (see Figure 8).
Unique market characteristics will hinder cloud adoption in many segments. While a
very mature IT market by global standards, Japan is unique in IT adoption patterns, with a very strong local network of IT providers that dominate the domestic market. Given the conservative nature of Japanese culture, change management is also often a long and painful process, where the adoption of new services paradigms (whether cloud computing or more established practices like outsourcing) takes time to reach saturation.
IT user-led pressure for change will be less pronounced in Japan. Due to a combination
of cultural factors, relative to the rest of the Asia Pacific region, businesses in Japan are also less likely to pressure internal IT into adopting cloud-based approaches. In contrast to China, for example, we do not expect to see significant unsanctioned buying of cloud-based services by the business outside of IT in Japan. We expect this percentage to be less than the 23% of Australia organizations that report seeing such unsanctioned buying within their organizations the lowest rate among the organizations we surveyed in 2011.
A preference for custom-built applications will persist. The dominance of local systems
integrators (SIs) and custom-built applications that must be maintained tempers demand for cloud-based services in Japan, potentially hindering a wholesale market shift toward cloud-based services, which will likely remain dominated by foreign vendors. In fact, we expect cloud market growth in Japan to reflect the ongoing disparity between innovationdriven organizations (both public and private) that will leverage cloud-based services as an effective way to overcome limited economic growth versus the larger base of traditional, manufacturing-focused Japanese firms that will continue to resist structural changes, including the replacement of traditional, on-premises custom-built applications.
The PaaS market is therefore particularly strong in Japan. At $758 million by 2015, Japan
will be one of the largest PaaS markets in the world, nearly three times larger than Australia, the next largest PaaS market in Asia Pacific, at $290 million by 2015. In particular, salesforce. com is a major player in the Japanese market. In fact, Japan is salesforce.coms second largest market, behind only the United States. This strong presence is primarily based on sales of Force.com to several large customers (e.g., Japan Post and the Ministry of Economy, Trade and Industry [METI]).
February 3, 2012

17
Traditional outsourcing trends will slow cloud adoption in Japan. The relatively slow
uptake of traditional outsourcing in Japan will hinder organizations willingness to seriously consider cloud-based services. Forrester estimates that outsourcing represents approximately 28% of total IT spending in Japan; compared with more than 50% in the US.3 Where outsourcing is well established in Japan, organizations are far more likely to spend on infrastructure outsourcing, not application outsourcing. Growth in demand for dynamic application services in Japan will therefore lag behind other markets in Asia Pacific through 2020. However, the sheer size of the Japanese market means that by 2015 the dynamic application services market will reach $865 million, double the next closest market of Australia at $442 million.
February 3, 2012
18

Figure 8 Forecast: Japan Cloud Market Size, 2010 To 2020

$20,000 Cloud-based integration (CBI) IaaS $15,000 BPaaS SaaS $10,000
$5,000
PaaS Dynamic applications services Dynamic infrastructure services 2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* $46 $604 $97 $64 $91 $130 $185 $258 $352 $469 $579 $676
$0 2010 BPaaS $35 SaaS $442 PaaS $42
$858 $1,249 $210 $393
$1,802 $2,567 $3,629 $5,008 $6,418 $7,898 $9,295 $600 $758 $860 $923 $957 $973 $977
$87 $213 $374 $464 $496 $494 $483 $468 $452 $435 IaaS $29 Dynamic applications $120 $168 $255 $394 $589 $865 $1,229 $1,613 $1,943 $2,146 $2,290 services Cloud-based $9 $17 $30 $49 $70 $90 $107 $119 $128 $135 $141 integration (CBI) Dynamic $77 $134 $245 $422 $701 $1,027 $1,347 $1,579 $1,742 $1,832 infrastructure $46 services Note: Total does not include the numbers for the private cloud segment and dynamic BPO services from the virtual private cloud. *Forrester forecast
February 3, 2012

19
ASEAn Cloud Demand Varies By Country The individual countries that comprise the ASEAN region vary widely, not only in terms of IT maturity and relative cloud adoption but in other, more fundamental areas as well, including political stability, economic transparency, geography, and language. Nonetheless, these differences are becoming less pronounced as the region continues to see strong, broad-based macroeconomic growth. The public cloud market across the ASEAN region including Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam will grow from $230 million in 2011 to $1.6 billion in 2020. The three segments of the virtual private cloud market we have analyzed will grow from $38 million in 2011 to $799 million in 2020 (see Figure 9).
Singapore is rapidly emerging as a cloud hub for Asia. In addition to maintaining
investments to ensure continued world-class broadband performance and near-universal access, the Singapore government has provided strong support for third-party cloud-related investments, driven primarily by the Infocomm Development Authority of Singapore (IDA). The government is wisely leveraging a business-friendly economic climate, convenient geographic location and near-universal English language skills to court strong local data center investments from global and regional cloud providers, including Amazon Web Services (AWS), Google, HP, IBM, salesforce.com, SingTel, SoftLayer, and TCS. The large presence of MNCs in Singapore is a key incentive as well, because demand for cloud services is already strong. To drive further demand, IDAs SaaS Enablement Program, announced in October 2011, provides funding support to Singapore-based companies to aid their migration from on-premises deployments with traditional software license models to cloud-based deployments and utility-pricing models.
Connectivity remains a challenge in many areas. This is particularly true in rural areas of
Malaysia, Indonesia, and the Philippines, where inadequate performance and reliability are hindering widespread cloud adoption. Broadband costs also remain prohibitively high in some ASEAN countries. This is especially true in Malaysia, where SMBs cant afford current connectivity prices.
Mobile Internet access is high, particularly in Indonesia. While overall broadband
infrastructure is lacking in much of Indonesia, the country has a very high rate of mobile Internet access relative to other parts of ASEAN. Cloud providers targeting mobile devices, such as smartphones and tablets, are therefore well positioned for growth.
Strong local IT skills should help drive the cloud market in the Philippines. Unlike
Singapore, the Philippines lacks strong central information and communications technology (ICT) authority or leadership to drive cloud-related infrastructure investments. The country also has limited data protection policies in place. However, strong preexisting outsourcing capabilities, widespread fluency in English, and IT skills availability make the Philippines a potentially compelling market. NetSuite is an example of a global SaaS player that has already invested significantly in capabilities in the Philippines to support regional growth.
February 3, 2012
20

Figure 9 Forecast: ASEAn Cloud Market Size, 2010 To 2020

Cloud-based integration (CBI) $2,500 BPaaS $2,000 SaaS
$1,500 Total cloud marketers $1,000 (US$ millions) $500
PaaS IaaS Dynamic applications services Dynamic infrastructure services 2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* $9 $198 $8 $12 $289 $16 $17 $389 $30 $25 $515 $57 $36 $644 $91 $50 $776 $125 $68 $91 $119 $144
$0 2010 BPaaS $6
SaaS $132 PaaS IaaS $4
$903 $1,021 $1,128 $1,215 $150 $167 $176 $180
$5 $15 $38 $71 $95 $106 $107 $105 $101 $98 $94 Dynamic applications $15 $22 $34 $51 $77 $115 $162 $223 $284 $335 $364 services Cloud-based $1 $1 $2 $3 $4 $6 $7 $8 $9 $10 $11 integration (CBI) Dynamic infrastructure $9 $15 $25 $45 $77 $127 $195 $271 $341 $389 $424 services Note: Total does not include the numbers for the private cloud segment and dynamic BPO services from the virtual private cloud. *Forrester forecast
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21
W H AT I T M E A n S
COnSIDER MARkET DIFFEREnCES TO EXPlOIT ClOUD OPPORTUnITIES In ASIA PACIFIC

In addition to understanding the potential cloud market size, growth dynamics, adoption trends, and demand drivers across the different markets within Asia Pacific, vendor strategists must also:
Map capabilities to cloud market segments. Vendor strategists should map products to
market needs and revenue growth opportunities. Growth in Asia Pacific will remain heavily channel-dependent. leverage the Forrester cloud taxonomy to better understand market dynamics and more successfully identify partner and channel opportunities.
Account for variations in awareness and adoption. The Asia Pacific cloud market will
evolve in unique ways. Consider IT adoption patterns and cultural complexities when planning regional strategy. localizing offerings and strategies to account for differences in IT organizational maturity and buying behavior will remain a key success factor.
Prioritize investments based on market readiness. Weigh investments against potential

returns using factors such as government support for infrastructure investments like cloud data centers and broadband capabilities. Expect to work closely with officials to influence cloud-related policy decisions in areas like data privacy and sovereignty.
SUPPlEMEnTAl MATERIAl Methodology The underlying spreadsheets detailing the forecast in Figures 5, 6, 7, 8, and 9 are available online. The cloud market size calculations in this report are based on Forresters business-to-business (B2B) market forecasting model, which involves a logistic, or S-curve, modeling technique designed around three specific growth parameters:
Saturation level: the estimated penetration a particular segment will achieve in the overall
market.
Hypergrowth year: the year in which a segment achieves 10% of that saturation level,
signaling takeoff or accelerated growth.
Takeover time: the number of years it will take a segment to get from 10% to 90% of the
saturation level.4 In addition to the above growth parameters, we considered the impact of two different scenarios when analyzing cloud market dynamics across different markets in Asia Pacific the cannibalization of existing on-premises markets and the creation of new markets.
February 3, 2012
22

Forrsights Strategy Spotlight: Cloud In Asia Pacific Excluding Japan, Q3 2011, was fielded via phone to 530 IT executives and technology decision-makers and business decision-makers located in Australia, Singapore, China, India, Malaysia, and Hong Kong from SMB and enterprise companies with 20 or more employees. This survey is part of Forresters Forrsights for Business Technology and was fielded from August 2011 to October 2011. Each calendar year, Forresters Forrsights for Business Technology fields business-to-business technology studies in more than 17 countries spanning North America, Latin America, Europe, and developed and emerging Asia. For quality control, we carefully screen respondents according to job title and function. Forresters Forrsights for Business Technology ensures that the final survey population contains only those with significant involvement in the planning, funding, and purchasing of IT products and services. Additionally, we set quotas for company size (number of employees) and industry as a means of controlling the data distribution. Forrsights uses only superior data sources and advanced data-cleaning techniques to ensure the highest data quality We have illustrated only a portion of survey results in this document. For access to the full data results, please contact Forrsights@forrester.com. Companies Interviewed For This Document Amazon Web Services CA HP IBM Microsoft NetApp EnDnOTES
1
NetSuite Parallels SingTel Symantec Telstra VMware
Forresters taxonomy of cloud computing markets provides vendors and customers with clear definitions and labels for cloud capabilities. With this taxonomy in hand, vendor strategists can position their offerings in the overall cloud market and better articulate their business value propositions to customers. See the July 6, 2010, The Evolution Of Cloud Computing Markets report. For further analysis of the Japan Cloud market, see the September 1, 2010, Japan Cloud Computing 2010: End User Adoption Trends report. For a more detailed analysis, see the January 10, 2012, Asia Pacific Tech Market Outlook For 2012 report. For a detailed discussion of the forecasting model and its theoretical foundation, see the April 8, 2008, Introducing Forresters B2B Technology Market Forecasting report.
3 4
February 3, 2012
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February 3, 2012

Sizing The Cloud Markets In Asia Pacific

Making Leaders Successful Every Day

For Vendor Strategy Professionals

Sizing The Cloud Markets In Asia Pacific

TABl E o F Co nTE nTS

Sizing The Cloud Markets In Asia Pacific

Virtual private cloud

Dynamic infrastructure services

Cloud-based integration (CBI)

Dynamic apps services

Dynamic BPO services

Infrastructure virtualization tools

Middleware virtualization tools

Apps virtualization tools

Information and processes

Note: Segments in gray are not covered in this report

2012, Forrester research, Inc. reproduction Prohibited

Sizing The Cloud Markets In Asia Pacific

2012, Forrester research, Inc. reproduction Prohibited

Sizing The Cloud Markets In Asia Pacific

2012, Forrester research, Inc. reproduction Prohibited

Sizing The Cloud Markets In Asia Pacific

2012, Forrester research, Inc. reproduction Prohibited

Sizing The Cloud Markets In Asia Pacific

Cloud adoption is currently strongest in Singapore and Australia. Forty-two percent of

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Sizing The Cloud Markets In Asia Pacific

2012, Forrester research, Inc. reproduction Prohibited

Sizing The Cloud Markets In Asia Pacific

Figure 3 Cloud Procurement Is Becoming More Formalized

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Sizing The Cloud Markets In Asia Pacific

Figure 4 Public And Virtual Private Clouds Are Gaining Ground

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Sizing The Cloud Markets In Asia Pacific

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Sizing The Cloud Markets In Asia Pacific

Figure 5 Forecast: Australia Cloud Market Size, 2010 To 2020

$6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2010 BPaaS $27

Total cloud marketers (US$ millions)

SaaS $409 PaaS $16

2012, Forrester research, Inc. reproduction Prohibited

Sizing The Cloud Markets In Asia Pacific

The Chinese government is a strong advocate of cloud computing. IT investments are

2012, Forrester research, Inc. reproduction Prohibited

Sizing The Cloud Markets In Asia Pacific

Figure 6 Forecast: China Cloud Market Size, 2010 To 2020

Total cloud marketers (US$ millions)

SaaS $159 PaaS IaaS $4 $10

Source: Forrester Research, Inc.

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Sizing The Cloud Markets In Asia Pacific

Government initiatives to drive cloud-related investments remain limited. In contrast to

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Sizing The Cloud Markets In Asia Pacific

Figure 7 Forecast: India Cloud Market Size, 2010 To 2020

Total cloud marketers (US$ millions)

SaaS $137 PaaS IaaS $3 $5

Source: Forrester Research, Inc.

2012, Forrester research, Inc. reproduction Prohibited

Sizing The Cloud Markets In Asia Pacific

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