I was reading this story in a newspaper today: Indian firms go missing on the big cloud stage-show . According to the article, all top Indian IT firms have had teams of engineers working on cloud offerings for two or more years, but are yet to achieve global recognition for their products.

It would be nave to assume that the Indian biggies would let a $48 billion opportunity slip by them. So if they’re missing on the big stage, it isn’t because of lack of cloud engineering skills, it’s due to the commercial model. They probably feel the same as Tom Cruise in Jerry McGuire, demanding,  Show me the Money.

They’re still trying to figure out how to make money in this model. In the cloud, the deal sizes are typically very small. Depending on whether you’re selling products or services, it’s a very different model. Also, most payments are made in hundreds/thousands (not millions) and delivery happens in hours/days/weeks (not years).

So the big Indian firms face two issues, when it comes to making money. Firstly, their size gets in the way, since they are very dependent on large commoditized services deals worth tens of millions of dollars each. Secondly, since the cloud offers their customers the ability to save money, those savings eat into the revenue these Indian firms can otherwise generate or, in other words, the cloud cannibalizes their services revenues.

Some firms, such as Infosys, have also begun pursuing a non-linear revenue model for reducing their reliance on project pricing based on heads involved in a project. However, I’m not sure if the non-linear model is targeted at getting a piece of the cloud pie.

To make money in the cloud, these firms would like the projects to grow in size as well as bring incremental revenue rather than eat into the current one. They will probably campaign against multitenancy. In other words, instead of them going to the cloud, they’d like the cloud to come to them.

It is therefore important to ask: who will be more successful in this marketplace for the foreseeable future? Smaller, nimbler companies without the hourly-billing baggage (see my post on Navatar Group) or the large legacy firms with big wallets.

Would love to hear your viewpoint.

Aurobindo Sarkar