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Ascent to the Cloud: How Six Key APAC Economies Can Lift-off

Related Expertise:Technology Industries, Technology & Digital, Digital Transformation

Ascent to the Cloud: How Six Key APAC Economies Can Lift-off

October 16, 2019 By Abhinav Gupta , Kautuk Kushansh , Prasanna Santhanam , Takahito Osako , Thu Nguyen , and Vaishali Rastogi

The public cloud has emerged as an important technology platform since its advent about two decades ago, offering benefits to businesses that extend far beyond convenient data storage and innovative applications. By boosting internal productivity, ensuring a robust security environment and providing the technology and tools such as artificial intelligence and machine learning to enable digital transformation, the public cloud makes it possible for companies to develop new revenue streams and drive higher productivity within their organizations.

In this report we will look at the benefits the public cloud has brought to six key markets in Asia Pacific (APAC) – Australia, India, Indonesia, Japan, Singapore, and South Korea – and the economic impact that each of these markets stand to gain from the adoption of the public cloud over the next five years.

Each of these six markets are at different stages in the evolution of their use of the public cloud. Each of them, however, will experience a positive economic impact as industries in these markets explore new revenue streams and improve productivity by operating applications over the public cloud.

Our research into public cloud use in both the public and private sector in each of these markets finds that if growth in public cloud spending continues at its present compound annual growth rate (CAGR) of 25%, it will contribute to a total economic impact of about US$450 billion across the six markets between 2019 and 2023. This impact, which includes the direct impact on the industry users of public cloud as well as second order effects driven by business growth across the supply chain of industry users and increased consumer spending, is comparable to the annual GDP impact of many of the region’s large traditional industry sectors. Our survey of business leaders and senior IT decision makers reveals that most expect revenue uplift to be a meaningful driver of the overall economic impact within their business. In addition to the economic impact, public cloud provides potential to improve productivity of the economy through availability of digital government services which drives a significant improvement in citizen experience within these markets.

The direct effects of the economic boost will produce approximately 425,000 jobs, with about 1.2 million additional jobs being influenced by second order effects of deployment of public cloud. Industry users rather than cloud service providers (CSPs) will be the major source of GDP contribution and job growth.

Challenges lie ahead

While public cloud technology holds a great deal of promise for the region, we also found that there are a number of challenges that, if left unchecked, may slow down the potential economic growth that can be activated.

There is a growing need for digital talent skilled to use public cloud technology, part of which can be addressed through the re-skilling and up-skilling of the existing workforces. Large traditional businesses can also find it cumbersome to migrate their massive workloads to the public cloud. In some of these markets, the connectivity infrastructure needs to be improved so that public cloud service can be more reliable. Data privacy is another concern for many businesses, and CSPs need to invest more time in educating users on the benefits that public cloud can provide on these fronts. A policy regime consistent with international best practices would also make it easier for CSPs to rapidly launch new products that cater to market requirements and drive interoperability within their services in a cost-optimal manner.

This reports looks at how all three stakeholders—service providers, user organizations, and governments—can work together to mitigate such challenges in order to maximize the impact they can derive from the public cloud. 

Growth can be further enabled or inhibited

If these challenges were to persist or even worsen, the overall economic impact would reduce by about US$ 75 billion , producing a total economic impact of around US$375 billion over 2019-23, resulting in the addition of about 235,000 direct jobs and influence another 715,000 through the second order effects.

On the other hand, if the challenges in these six markets can be overcome, the total economic impact due to public cloud could increase to about US$580 billion, and result in the addition of about 770,000 direct jobs and influence as many as 2.1 million jobs from the second order effects.

The path forward for all six markets points to continued growth in their use of the public cloud. The extent to which they experience an economic lift-off, however, will depend on whether the environment is conducive to investing in the new technology-driven engines powered by advanced analytics, artificial intelligence (AI), machine learning (ML) and productivity tools. Each of these markets can seize the opportunity to unlock the potential benefits of the public cloud, but providers, users and governments must recognize the transformative opportunities that lie ahead, and make favorable growth conditions a priority.

Chapter 1: The Rise of the Cloud

Every business and government organization has data that it needs to maintain, store and process digitally. Depending on the nature of the organization, the data might include customer transactions, market analysis, product information, and increasingly, algorithms for advanced technologies including artificial intelligence and machine learning.

There are multiple technology infrastructure options that organizations can use. The most conventional infrastructure involves using on-premise systems and data centers. Since the advent of cloud computing about two decades ago, however, many businesses have moved their data and applications onto either the public cloud, in which one or multiple third-party cloud service providers (multi-cloud) own the architecture and deliver the service over the Internet; a private cloud operated by the company for its own use; or a hybrid cloud that combines both public and on premise/private cloud resources.

The public cloud offers the advantage of flexible, pay-as-you-go delivery of computing services, and enables end users to share a scalable infrastructure. In addition, it removes the need for an organization to maintain and manage their own infrastructure.

This is becoming an increasingly essential service in the Asia Pacific region, as both private and government sectors begin to recognize the benefits to be gained from utilizing a third-party provider for functions such as administration of storage, provision of virtual machines and other advanced services to help with the management of IT infrastructure, and business support with relevant digital tools and platforms.

Businesses in the APAC region are finding that the public cloud enables them to fuel growth by enhancing productivity, customer service and customer engagement, as well as reducing the time and cost of bringing new products or services to market. Many organizations also find significant benefit in the public cloud’s ability to provide security at a scale that often surpasses what even large companies can afford.

In this report we will look at the economic impact that deployment of the public cloud is likely to unleash in six key APAC markets: Australia, India, Indonesia, Japan, South Korea, and Singapore. Although the public cloud market in these six countries is in an emerging stage compared to the U.S. and Western Europe, growth rates are notably higher, demonstrating great potential for further development.

In 2018, these six APAC markets spent US$18 billion on the public cloud, including managed services. The U.S. spent US$121 billion in the same year, while Western Europe—France, Germany, Italy, Netherlands, Spain and the United Kingdom—spent US$44 billion. However, the compound annual growth rate from 2016 to 2018 in APAC stood at 25%, compared to a CAGR in Western Europe and the U.S. that hovered just below 20% (See Exhibit 1). In India and Indonesia, the fastest growing markets among the six, growth rates were more than 30%.

As a percentage of overall IT spending, the public cloud outlay from the six markets has increased from 3% in 2016 to 5% in 2018 and, according to estimates, is likely to reach approximately 10% by 2023. By comparison, public cloud spend in the U.S. was 14% of overall IT spending in 2018, while in the Western European markets it was 8% (See Exhibit 1). We believe there is room for even greater growth in the APAC countries if companies take advantage of the cloud’s full potential.

There is a wide range of cloud adoption rates within the six APAC markets studied. Japan and Australia are among the largest markets, and are more advanced in their use of the public cloud. India is the next largest market, and as one of the world’s strongest emerging economies, it continues to show enormous potential for rapid growth in public cloud use over the next five years. Singapore and South Korea are relatively small markets, but Singapore in particular is advanced in its public cloud adoption rates. Both markets continue to demonstrate strong growth potential. Indonesia, while at a nascent stage of cloud adoption, is expected to see a rapid growth in public cloud use over the coming years.

While businesses are driving much of this growth, governments are in a position to encourage and support growth throughout the region. The regulatory climate is an important factor, but what also carries a great deal of weight is when the government encourages its own agencies to adopt the public cloud. This acts as a signal to the private sector that the public cloud is secure and conducive to innovations that can be good for the economy as well as citizen services. In a majority of these markets, there is significant interest from within the highest levels of government, a view evidenced by Singapore Prime Minister Lee Hsien Loong, speaking in 2018 at the Singapore Government’s first annual technology developer conference.

To better understand both the benefits and barriers to public cloud adoption in the six APAC markets, Boston Consulting Group (BCG) conducted a survey alongside a series of interviews with senior executives and IT decision makers from a cross-section of industries. We looked at the use of public cloud by individual companies, by industry and by country, as well as the overall economic impact we expect to see from its use over the next five years.

Unquestionably, organizations are ready to expand their use of the public cloud. Among companies that are currently using the cloud, 54% of respondents said their public cloud spend has been increasing in recent years, while 64% said they expected spending on the public cloud to further increase in the next five years.

As this expansion continues, we can expect to see more organizations migrate to cloud models, allowing them to develop better applications and use their data more effectively through advanced digital tools on the public cloud. Software as a Service (SaaS) is the most widely used model across the six markets, accounting for just over 50% of the market, with about US$9.7 billion spent across all sectors on SaaS in 2018. SaaS is generally easier to introduce into business verticals, and can be deployed with minimal disruptions to existing operations.

However, adoption of the Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) cloud computing models is on the increase. The IaaS and PaaS models allow businesses to move their applications to cloud infrastructure. With the highly scalable infrastructure these models provide, businesses can expand their capabilities in areas like customer service, digital streaming, inventory or account management and much more, benefiting from virtually unlimited capacity and bandwidth.

Digital native businesses (DNBs) tend to prefer the IaaS model because the upfront capital required is less than it would be to build in-house servers, and the infrastructure platform allows a small company or a startup to introduce new product roll-outs and scale up quickly, thereby driving growth.

We expect to see IaaS and PaaS usage to grow faster than SaaS in the next few years. The IaaS market is likely to increase by roughly 23% annually on average between 2018 and 2023, with PaaS growing by approximately 20%, while SaaS will increase by an estimated 17% over the same period.

BCG analyzed multiple scenarios for public cloud adoption in each of the six markets, taking into account the fact that these six economies vary greatly by stage of development. In each market we have explored triggers for growth as well as circumstances that could decelerate growth. Measures taken by cloud service providers, company readiness, and government policy will all play important roles in the growth of public cloud use over the next five years.

Our findings reveal that over the next five years, in circumstances that encourage lower barriers to adoption and a stronger vision of how businesses can use the public cloud, spending could be far higher than survey respondents anticipate.

Chapter 2: Key Benefits of the Public Cloud

As companies in the six APAC markets have migrated their business functions onto the public cloud, they have begun to recognize that it offers benefits that go well beyond traditional on-premise or even private cloud architecture. While the public cloud makes business-as-usual operations more efficient, it also enables a company to reimagine the entire business. At a time when new innovations can alter customer habits from one day to the next, and businesses regardless of industry have to keep one step ahead of the next trend, organizations are looking to the public cloud to provide technology that helps them manage continuous change.

To further gauge how the cloud is changing the way companies operate, and how it can lead to greater advances, we asked participants in our survey to describe the most important benefits they see emerging from their use of the public cloud. They consistently identified six key benefits (see Exhibit 2).

1. Higher team productivity.

All markets ranked enhanced productivity as the leading benefit of using the public cloud. Users said they found that operating techniques such as DevOps and agile@scale can be comprehensive game-changers.

From an IT perspective, the cloud creates a standardized environment, scalable back-end systems and functions, and provides access to proven tools that IT teams can use to develop systems. Thanks to the IT efficiencies that result, the core business can perform all matter of tasks—targeting customers, developing content, and taking new products to market, for example—at a faster rate and at reduced cost. Better collaboration tools such as G Suite, Slack, and Skype create administrative and communication efficiencies, while advanced applications such as artificial intelligence or machine learning enable faster, clearer insights that enhance the overall productivity of the organization.

2. Faster time to market.

The public cloud allows users to take new products and services to market quickly, helping organizations develop a fail-fast approach that alerts them to problems immediately, and makes a fast turnaround possible when something needs to be fixed.

“What used to take weeks now takes days, [and that] allows us to experiment and be aggressive.”
—Executive Director, Government agency

3. Better security and compliance environment.

Hyper-scale public cloud service providers such as AWS, Google Cloud and Microsoft Azure each spend billions of dollars every year on cyber security upgrades—far more than most organizations can spend on their own, with the ability to achieve scale at a level not available to most users. This is a key incentive to using the public cloud, and more and more users are recognizing this aspect.

While concerns about security remain, and some users believe their data is safer on a private cloud, we find that a sizable portion of those using the public cloud see security as a key benefit. It is important to educate potential users about the security that the public cloud provides. The CTO of a large retailer in Australia told us that security was a key reason the company decided to migrate to the cloud. The user organizations still need to have their own risk management policies in place, but a large number of respondents said the public cloud has capabilities that help to reduce the overall security risk.

4. Ability to launch new products and services.

Users said that one of the most important benefits is the support they get from the computing infrastructure in allowing them to introduce new products and services, as well as the internationalization of new digital products and services. With the public cloud they are better able to expand the business model around such offerings. A cab-hailing platform, for example, can easily offer products like ride sharing, use analytics to offer dynamic fares, keep their riders engaged with entertainment systems and offer loyalty programs to their customers.

5. Enhanced customer engagement and experience.

New digital capabilities and services have enabled users to improve the customer experience, particularly from using advanced ML and AI tools to drive personalization, supported by the scalable infrastructure and computing resources provided by public cloud. For example, if an online retailer wants to draw in a select group of customers with a one-day sale, the scalability of cloud infrastructure provides assurance that the retailer’s website can accommodate the surge in traffic that is likely to result. No matter how heavy the server load, customers will be able to make quick, seamless purchases with no slowdowns.

More advanced markets in APAC like Australia and Singapore place a great deal of importance customer engagement and experience. In these markets, buyers already have access to multiple services and products. To win over new customers, a business needs to excel over its competitors when it comes to engaging the clientele and offering a positive experience.

6. Lower costs.

Not all organizations realize immediate cost reductions. This is especially the case for larger enterprises. More often than not, they end up with a hybrid model which results in a more complex operating environment for the organizations, and as a result they do not realize immediate cost savings.

To realize cost benefits, these businesses need to transform their entire architecture and make their systems compatible with the public cloud, including, in some cases, redesigning applications rather than simply using public cloud to store data or for computing tasks. Users that consolidate their IT management functions under the public cloud are able to achieve cost efficiencies that result from operating with smaller, fully autonomous agile IT teams that are able to focus on business rather than on managing IT infrastructure.

How industries reap the benefits

The public cloud is a key business enabler, especially for Internet and mobile-first companies―so-called digital native businesses (DNBs). The tech-savvy professionals who start such businesses understand better than anyone how critical it is to be able to execute easily and quickly, host and manage their data, and be ready to work in agile sprints to drive rapid change. The public cloud makes it possible to accomplish all of these goals with less capital expenditure than would otherwise be needed. Without the public cloud, DNBs would have to create in-house data centers and hire IT teams to manage them, which could make it difficult for them to pursue rapid growth that they otherwise target.

By lowering the barriers to entry, the public cloud makes it possible for many DNBs to initially launch. For DNBs, the cloud is core to their business model and services. Many of these businesses say that without back-end cloud support they might have trouble sustaining their business model and keeping pace with the rapid growth that is necessary. Digital native businesses have to attract and engage customers quickly, with a constant flow of new or improved products and services. As a result, they depend on the public cloud as a tool to help them scale up, launch new products and services, and enhance the customer experience with analytic tools.

In traditional industries, too, the public cloud is proving to be a tool for strengthening capabilities among companies in areas such as financial services, media and gaming, retail and wholesale, manufacturing as well as among government and education agencies in the public sector. Looking across a range of industry verticals, we found that users were very much looking to the benefits of the public cloud for industry-specific needs.

Media and gaming industry users place particular importance on enhanced customer engagement. The public cloud helps them reach a wider, sometimes global, audience, with personalized content and games as well as personalized ad placement and meta- tagging of videos for quick search access and easy analytics.

Financial institutions, which use the public cloud for fraud detection, risk analytics, smart pricing, and personalization, ranked a better security and compliance environment as a key benefit.

For the manufacturing industry, where use cases center around smart manufacturing, digital twins for simulations to save testing time and predictive analytics, key benefits included the public cloud’s ability to help companies launch and scale up new products quickly.

Retail companies are keen to deploy onto the public cloud for personalization, augmented reality and optimizing their customer contact centers, and appreciate the public cloud’s ability to deliver such capabilities at lower costs. This is not surprising, considering that most retailers have to survive with constant pressure on their margins.

The public cloud offers an additional attraction to industries — it optimizes electricity usage. The scale of public cloud hyper-scale data centers, along with their significant investment in highly efficient energy management and cooling technologies, makes it possible for them to consume about 50% less energy in their operations than a typical data center or on-premise infrastructure.

Traditional small and medium enterprises (SMEs), such as small component suppliers and retailers, also find the public cloud very useful as a tool for maximizing productivity on a lean budget, along with providing more personalized customer outreach and engagement.

Revenue growth for users tops the financial benefits

Cloud service providers will, of course, grow and earn revenues as more and more organizations in the six markets migrate applications. But in studying the economic effects of public cloud usage in the region, we find that industry verticals that adopt the cloud stand to gain far more in economic benefits than the providers themselves.

If Australia, India, Indonesia, Japan, Singapore and South Korea continue to deploy the public cloud at current rates, we expect cloud usage to contribute approximately US$112 billion in economic uplift between 2019 and 2023, emerging directly from financial gains for the key industry vertical users. Although this direct gain to industry verticals is only a part of the overall impact in the economy due to the use of the public cloud (See Exhibit 5), it is essential to discern where the financial benefits for the users are expected to emerge.

The reason that industry verticals will experience such dramatic financial benefits is a result of the way the public cloud makes it easy for businesses to innovate and transform. Conventional wisdom might assume that a significant part of the added value will come from IT cost savings, but our survey finds that the majority of senior executives and IT decision makers across the region hold a different view. Of the participants, 70% said revenue uplift was a principal driver of value-add from public cloud usage, 64% said productivity improvements were an important driver, while only 30% said IT cost savings were an important driver (See Exhibit 3).

In Chapter 3, we will discuss the economic impact in more detail, including how much of the value generated will come from indirect and induced versus direct forces. First, however, we will look at where the economic value begins―with the financial impact on the companies that use the public cloud.

We have identified four ways that the cloud has a financial impact on user businesses.

One impact is on the digital native businesses that could not exist without the public cloud. Whatever revenues and profits that many of these companies earn can thus be attributed to the public cloud.

For other users, a financial impact can come in one or more of the following forms:

Revenue uplift. The public cloud enables rapid launches of new products and services, helps internationalize businesses and engages customers with enhanced targeting and personalization through AI and ML, bringing a boost to revenues. Public cloud users are expected to gain about US$84 billion in revenue uplift over the next five years, which is roughly 3% of their current revenue base.

Productivity improvements. In addition to improved productivity in non-IT functions, using cloud-enabled analytics and other advances such as AI and ML, organizations are able to improve decision making, leading to greater cost efficiencies. Public cloud users should save about US$21 billion due to productivity enhancement over the next five years, equal to about 2% of their current non-IT cost base.

IT cost saving. Several companies reported that they have been able to save on infrastructure and staffing within the IT budget. These savings are likely to account for approximately US$6 billion over the next five years across user industry verticals.

The revenue increase will be a result of the proven benefits from which companies stand to gain, such as increased productivity, faster time to market, ease of launching new products and services including digital services, and enhanced customer targeting.

Take, for example, a mobile e-commerce platform in India that delivers groceries, fresh produce, cosmetics and electronics, and has been able to grow by migrating its operations to the public cloud. When the company was launched, its logistics system was wholly manual, with staff at the headquarters contacting drivers by phone. Within two years the number of deliveries it fulfilled was growing ten-fold monthly, but customers were logging in only to find that the database had crashed, especially on weekends when the traffic hit a peak.

The company resolved the server problem when they moved onto a public cloud platform, and were able to scale up from 10,000 orders a day to more than 70,000. When an order comes in, the system identifies the nearest delivery driver instantly, and sends them the order through a mobile app. Additionally, each driver now handles an average of 15 orders per day, compared to only five previously. As a result, the company has been able to take on more business without additional spending.

We see many companies recognizing the benefits that can lead to revenue uplift, and hence spending more on growth engines and newer applications rather than on simply replacing their old infrastructure. Our survey found that 51% of public cloud spending is going into growth. This also means that the public cloud is not just replacing traditional infrastructure, but is actually creating new business opportunities.

Chapter 3: The Economic Impact on the Region

With the revenue enhancement that the public cloud is expected to bring to businesses in the APAC region, it offers the potential to produce economic gains that reach well beyond the financial returns of individual companies.

If Australia, India, Indonesia, Japan, Singapore and South Korea continue to adopt public cloud at the current rates of deployment, we expect it to contribute approximately US$450 billion to the combined GDP of these six economies between 2019 and 2023. Approximately 425,000 jobs will be created as a direct result of the economic boost, with a potential for another 1.2 million jobs being influenced from second-order effects of stimulating the economy.

Our projections are based on BCG’s preferred methodology for assessing economic impact, which models the direct, indirect and induced effects on the economy (See Appendix for details on our methodology).

While the impact is likely to be considerable across these six economies, it varies according to the size and growth expectations of each. The actual economic uplift is expected to range from 0.5% to 0.6% of annual GDP across Japan, South Korea, India and Indonesia. This uplift is projected to achieve the higher rate of approximately 1.5% of annual GDP in Australia and Singapore.

In each market, however, we foresee that the use of the public cloud will lead to growth that makes a significant contribution to the economy—a contribution large enough to rival some of the most important and long-established industries such as auto manufacturing, mining, and financial services (See Exhibit 4).

Where the value will come from

As discussed in Chapter 2, our research shows that the public cloud enables user industries to grow by enabling better productivity alongside unlocking a wealth of opportunities to build new revenue streams. When the public cloud helps facilitate productivity and revenue growth, it yields a direct impact that is clear and easy to measure. A company develops new revenue streams and grows, hiring more people and increasing its spend, thereby affecting its supply chain. The cloud also helps increase productivity while reducing both non-IT and IT costs, freeing more capital for investment in growth avenues and core business functions.

Furthermore, the impact doesn’t end with the immediate financial benefits to user companies. The productivity and revenue uplift will create two categories of second order effects.

There will be an indirect impact across the supply chain of user companies due to new money being pumped into regional economies as a result of increased organizational spending. Additionally, there will be an induced impact as employee salaries go back into the economy as a result of spending by individuals.

Of the US$450 billion in impact, about US$170 billion will come from the direct economic impact across the six APAC markets over the next five years— around US$60 billion from cloud service providers and IT vendors and another US$110 billion from the industry users—with an indirect impact of about US$170 billion and an induced impact of about US$110 billion (See Exhibit 5).

The BCG report Capturing the Data Center Opportunity points out the shortcomings of a common public perception that technology providers create revenue mostly for international IT companies. In reality, the revenue earned reverberates all the way down the supply chain. We have found that the overall economies of the six markets will receive a far greater share of the economic benefit than the cloud service providers themselves will, with user industries emerging as the economic engines in their economies. Cloud service provider growth will be a factor, but we expect the direct contribution from providers to be only US$60 billion. The remaining 85% of the impact will come either from direct users of the public cloud or from benefits to the overall economy through secondary indirect or induced effects.

The key verticals in public cloud use—retailers, financial institutions, telecom, media and gaming companies and manufacturers—are expected to contribute 95% of the overall impact from industry verticals. Companies and organizations in these verticals have room to use the public cloud to conduct their business with vastly improved efficiencies that will greatly benefit their top and bottom lines. In some cases they will utilize artificial intelligence and other advances to expand their product and service offerings as well as their geographic footprint. Internationalization of operations thus achieved can also be a key growth driver for these enterprises.

Across all industry verticals, the digital native businesses will be the predominant engine of public cloud-enabled economic growth in the next few years. DNBs will account for 50% of the direct impact from all users— about US$50 billion of the US$110 billion.

It is also worth considering how the public cloud will affect the public sector. It will not be a major contributor to the GDP because organizations like schools and government agencies are less focused on earning revenue. Yet they use the cloud to increase productivity and reduce costs—benefits that can provide an important impact of their own to their constituencies in the form of improved public services and citizen experience, which is in addition to the overall economic impact of the public cloud.

Where the jobs will be

As the public cloud gains momentum across the six key APAC markets, we expect it to contribute significantly to employment opportunities. The direct economic impact will net approximately 425,000 jobs in the six markets between 2019 and 2023.

Inevitably, the digital transformation that comes in tandem with public cloud use changes the nature of the jobs that businesses need to fill. While that will require adjustment of certain jobs, there will also be a growing demand for a technologically skilled workforce. The jobs resulting from an outgrowth of the financial benefits of public cloud use will require upskilling and reskilling, training people in a variety of roles and professions. This is needed for non-IT sectors as well with a wide range of industries working with advanced digital technologies. Beyond digital jobs, public cloud will also help create new non-digital jobs in the wider economy. For example, as the sales of a fashion retailer increase due to e-commerce, the company would need more workers in its production centers, more employees for its in-bound and out-bound logistics, and a higher number of accountants to look after its finances.

At the same time, public cloud-enabled growth will also drive demand that will lead to indirect jobs impacted further down the supply chain, as well as other additional jobs, resulting from the induced impact upon industries that benefit from the increased consumer spending. These include both new jobs as well as roles where the requirements have changed and require reskilling and upskilling of an existing workforce. The total number of jobs impacted as a result of public cloud should amount to about 1.6 million over the five-year period.

With the growth in direct and indirect jobs related to public cloud deployment gaining momentum, they will have a sizeable impact for the six APAC regional economies. Actual employment impact will range from 0.2% to 0.3% of the current workforce across Japan, South Korea, India and Indonesia, to 0.6% in Australia and 1.2% in Singapore.

DNBs will be the source of a sizeable portion of the direct jobs created, accounting for around 195,000 in total, with about 60,000 in digital roles and another 135,000 in traditional areas including sales and marketing, human resources, business, risk and compliance, finance, operations and logistics. DNBs will also have a strong indirect impact on jobs as they grow and raise sales in areas like retail and B2B merchants in the e-commerce marketplace. Industry verticals in general are expected to gain approximately 25,000 digital jobs and 55,000 non-digital jobs as the result of public cloud use.

The increased use of the public cloud will fuel a rise in demand for digital talent, and we estimate that about half of the direct jobs that result will be digital positions. Of these, 150,000 will be jobs with CSPs and IT firms, while 85,000 will be digital roles within industry verticals. That will amount to approximately 235,000 jobs requiring highly specialized digital skills—an increase amounting to approximately 1% to 4% of the current information and communications technology (ICT) workforce in the six markets. By comparison, the total cumulative jobs that will result from public cloud use are equal to 0.2% to 1.2% of the workforce in the six markets as of 2018 (See Exhibit 6).

The six markets will need to make sure they have the supply of digital talent to meet the growth in demand. Service providers, industry users, and policy makers alike will need to help develop a skilled pool of digital professionals with the capabilities to guarantee that public cloud platforms not only run smoothly, 24/7, but also foster advanced analytics and new ways to innovate. This requires adequately training the current workforce in new digital skills.

A number of digital roles such as product management, design and user experience, engineering and data science, are core foundational roles. All players—CSPs and cloud integrators, digital native businesses, and traditional businesses—will be equally keen on hiring professionals trained to fill these roles.

While the effort to retrain talent is underway, there is also a need to adequately impart relevant skills to the new workforce. CSPs are increasingly developing plans to partner with universities, as well as online learning platforms such as Coursera, to develop courses that offer certifications, practice sessions, role-based learning experience and more, often including instructions in local languages. This is an opportune time for all stakeholders to look at where the jobs of tomorrow will be.

Chapter 4: Key Challenges to Deployment of the Public Cloud

The public cloud has shown that it can provide measurable benefits to users and the overall economy. Yet, to unlock the full economic value that the cloud can bring, users will need to feel more comfortable with the public cloud in a number of important ways.

A significant majority of survey participants (70%) said their organizations faced some degree of challenges in deploying the public cloud. The challenges they face are both internal and external, but they can be broadly classified in three categories:

  • Challenges related to the understanding of the public cloud as a product
  • Challenges linked to their internal organization
  • Challenges linked to unclear policies or regulations

Among the participants experiencing some challenges, the majority said issues were related to lack of understanding about public cloud as a product, followed by organizational challenges with deployment of the public cloud. Select users also had concerns about navigating the policy or regulatory environment (See Exhibit 7).

Below, we look at the concerns that business and IT decision makers across the private and public sectors say present the most serious barriers to more widespread use of the public cloud.

Challenges related to understanding the public cloud

A number of the six APAC markets are in the early days of moving onto the public cloud, and organizations that are using it for the first time often find that they don’t fully understand how it works. Cloud service providers themselves can do a great deal to educate their clients on crucial concerns like privacy and security, as well as how to operate on the cloud based on their particular needs. Of course, providers need to do their part to provide an excellent product for their clients. According to our survey respondents, providers could also do more to assure that their customers are both satisfied and aware of their own responsibilities, particularly in these four areas:

Lack of clear understanding of data privacy features

There has long been a misconception that because the public cloud platform is shared, users and CSPs might have access to one another’s data, especially among more traditional industry users. Although that view has begun to change over the last few years, users in industries that make heavy use of proprietary customer data, like financial services and public sector agencies, told us they would be more likely to put their most critical information on the private cloud or on-premise data centers even if they used the public cloud for peripheral applications such as human resources management, operations management, and finance.

Our survey found that one in four users that spend more on the private cloud than on the public cloud believes the private cloud offers stronger privacy, security and compliance provisions. While users tend to understand general IT risks, they remain uncertain about the overall system risks, which leads them to believe that their infrastructure is safer than public cloud. This is also driven by an under-assessment of the risk of on-premise and private infrastructure and a lack of complete understanding of public cloud features.

What not all users understand, however, is that privacy and security breaches are not public cloud specific. Cyber risks are not necessarily higher in the public cloud than they are in traditional on-premise IT infrastructure. CSPs have the means and the scale of operations to invest in security at a rate that even some of their largest client companies cannot afford. In addition, CSPs can continually access the latest security technology and capabilities, but the customer shares the responsibility for protecting its own data and access.

Complexity of managing multi-cloud environment

There are several reasons why users might adopt multiple-cloud systems, for example they have become advanced in their public cloud use and want to avoid being dependent or locked in with a single vendor, or they want to leverage the expertise of different cloud service providers across different dimensions.

Yet users can find that utilizing multiple service providers presents a variety of technical and managerial challenges, with little or no standardization from one to another. The multiple cloud environments might require training several employee teams in managing different systems, which can lead to unnecessary complexity and higher costs. When that happens it can be difficult for an organization to realize the anticipated productivity and cost benefits of moving to the public cloud.

There are solutions to the complexity problem, however. Technologies such as the open source orchestration system Kubernetes, for example, provide interoperability across on-premise servers and multiple clouds, so that applications can be portable. Such systems have been designed to recognize that the future is in hybrid and multi-cloud environments in which organizations are going to have to run and manage multiple services and applications simultaneously in different environments.

Concerns around cloud service provider lock-in and relationship

Businesses are concerned that if they start migrating to the public cloud with a particular vendor, they’re going to be locked in. Once that happens, they fear the vendor could extract higher prices, or the level of service might decline, and they may not have enough control in future. Lengthy and complex procurement policies and brief time periods for renewals can also keep users locked in with a certain vendor. Organizations in general want assurance that their public cloud providers are going to continue to serve their interests in a long-term relationship.

While technologies such as Kubernetes can help a company function across multiple cloud platforms and thereby avoid lock-ins, CSP vendors can alleviate many of these concerns by making appropriate modification to the commercial terms for their users.

Lack of clear understanding of product performance

Businesses generally want assurance of reliable on-line performance, whether their applications are on a server connected with their own system, a private cloud or the public cloud. In certain industries with critical applications, this is a major concern—airport operators, for example, are particularly sensitive to downtime. Media and gaming companies would also suffer if a customer were to experience a stretch of downtime.

A concern for many users is whether the public cloud’s performance will match that of their existing infrastructure. Most hyper-scale CSPs provide a guarantee of high cumulative system uptime, often over 99.99%, and have provisions for compensation if they are unable to meet this requirement over the course of a year. Such performance standards meet the requirements of most businesses, and generally are in line or even better than private cloud or on-premise systems.

While there have been instances of longer network blackouts from CSPs—for example a blackout of more than an hour in South Korea in November 2018 that affected many online businesses—these instances are exceptions. They do, however, color the perception of the public cloud’s performance. Public cloud players need to continue to demonstrate to potential users that their product performs well compared to standard on-premise systems. Users should also benchmark uptime of their on-premise and private cloud systems to properly reflect existing downtime risks.

Challenges linked to the organization

Moving to the public cloud requires a commitment to transformation for the entire organization. Managing this shift within the business is not just the responsibility of IT, but needs to be driven at a leadership level. It can be a challenge to get all parties on board. Equally important, it is not always easy to hire or train people with the skills needed for a smooth transition. Key organizational barriers that survey respondents cited were legacy integration and migration, managing internal capability, and driving cultural change.

It is a challenge to migrate or integrate legacy data, especially in heavy data generating industries such as financial institutions, telecom players and public sector agencies. Such businesses face a complex transition once they make the decision to move large amounts of information and applications to the public cloud, with a long list of questions to consider before they can start. They must map out a plan with answers to such questions as how do we do migrate? In what sequence? Do we rebuild the existing applications and architecture, or just make alterations? If we rebuild, how long will it take?

Our survey respondents said that the sheer logistics involved in moving legacy systems onto the cloud was one of the most daunting barriers to greater adoption.

Strong partnerships with CSPs can help companies navigate portability and compliance concerns. CSPs are increasingly building controls into the public cloud environment to meet regulatory, portability and compliance issues. CSPs need to continue this active engagement to keep evolving their offerings and adapt to the changing needs of the market.

Additional challenges that companies face often have to do with their own internal culture, an area in which providers can also lend support and experience. For example, the organization might encounter pushback from managers and IT specialists, who for many reasons might prefer to stick with the existing infrastructure. They might resist the idea of the public cloud out of concern for security or any of the other challenges we’ve discussed in this chapter.

Additionally, employees in legacy organizations might be worried about their jobs. There are often questions about what will happen to the IT administration and operations teams when a company migrates to the public cloud. This is a legitimate concern, because the capabilities required for public cloud technology, where tech practices tend to follow the DevOps model of participating in a team over the whole service lifecycle, are not quite the same as those required in traditional IT administration and operations roles.

Business leaders will have to oversee a certain degree of cultural transition in order to develop the internal team capabilities they need for a successful migration to the public cloud. Traditional companies, whether large or small, might be looking for simple ways to hire more digital talent. BCG’s Decoding Digital Talent report found, however, that many industries are having difficulties in attracting the talent they need for digitized functions due to the gap between what organizations want and what the digital experts they’re trying to hire desire in a role.

CSPs need to continue to engage with their existing and potential clients in skill building and training. Still, all stakeholders need to work in partnership to address the internal organizational challenges to cloud adoption.

Challenges linked to unclear policies or regulations

In many cases, it is typical for a business in the APAC region to keep only limited functions on the public cloud. A bank might keep its digital services system on a public cloud platform, or a manufacturer might perform its operational management functions on the public cloud. But many companies are reluctant to migrate financial transactions or sensitive data because they can’t be certain of whether they’re doing it in compliance with regulations in their country.

Throughout many parts of the APAC region, public cloud users and potential users are finding that government regulations can be uncertain, and potentially discourage public cloud use. Depending on the country, regulations might lack clarity on what constitutes personally identifiable information (PII), for example, or whether it is permissible to keep PII on the public cloud. Policy makers need to accelerate their efforts to develop harmonization standards around data, so that policy frameworks are interoperable across geographies, failing which the cost of the service for users would increase, making it financial unviable for many users, thereby limiting its economic impact.

The policy-related concern that came up most frequently in our study was that organizations did not have clear guidelines around data protection and classification. What this means in practice is that users are uncertain as to exactly what types of data their domicile allows them to store on the public cloud vs. what types of data are protected as classified—and if it’s classified, whether they are allowed to use encryption or other means of concealing the content.

Financial institutions and public sector organizations struggle to utilize the public cloud without greater clarity on data classification guidelines. These are sectors that retain a great deal of personally identifiable information on their clients or constituency, so they need to know how they should handle storage of such highly sensitive data.

Also of deep concern are questions around cross-border data flow. Restrictive data flow laws imply that a company needs to store the data within the geographic boundaries of the country. This kind of restriction could potentially inhibit cloud adoption in two ways.

First, if there is no hyper-scale cloud storage within the geographic boundary, organizations cannot move critical applications to the public cloud. Second, if a company operates in multiple countries, it may need to manage the data in each geography separately. In either case, the company might miss out on any number of benefits to be gained from use of the public cloud. It will not be able to take advantage of the economies of scale and standardization that make the public cloud more productive and cost efficient. In addition, restrictions on data flow can impede the development and adoption of ever more advanced AI and ML capabilities.

These missed opportunities affect the national economy as well. Smaller players could be punching above their weight by utilizing the public cloud, local suppliers could be expanding their partnerships, and the local workforce could be developing capabilities in areas like AI and ML that are in global demand. A lack of deployment due to regulatory complexity may impact those opportunities.

Our survey found that financial institutions, telecom companies, manufacturers and retailers all want to have clearer data security standards to ensure they can be confident that they will not be at odds with any existing regulatory guidelines. There are multiple ways to establish these guidelines. The governments could issue clear data classification guidelines that are interoperable to guide public and private sector users. Alternately, industry groups in a country could come together to create industry guidelines that are interoperable with international standards, and incorporate global best practices applicable to their industries. Once clear data classification guidelines that are interoperable with international standards are established, it makes the operating environment simpler for all stakeholders.

Another policy matter that is important to businesses, especially traditional SMEs but also to a degree larger companies, is a government mandate to help make public cloud adoption easier through financial assistance. For smaller traditional companies, managing expenses and cash flows during the transition in order to realize long-term benefits might be challenging. They would be more inclined to use the public cloud if they were able to finance the move through some form of government-backed tax credits or incentives. CSPs are starting to provide credit-based discounts to early stage startups, but government support would give a further boost to public cloud use by SMEs. Such programs could be worthwhile, especially if they help small businesses grow their revenue and boost their economic impact in the region through use of public cloud and associated technologies.

Cloud service providers are helping their clients make the transition with workshops and training programs. Businesses are partnering with systems integrators and IT consultants to address the talent issue as they move more of their applications onto the public cloud. Government agencies in some APAC markets are formulating clearer policies about data classification and cloud usage, and many are adopting the public cloud themselves.

What is needed throughout the region, however, is a deeper ecosystem for education and information that includes the contributions of systems integrators, partners, and all entities that can help provide resources for a more skilled and informed user base. In the next chapter we will look at the steps that service providers, individual organizations, and policy makers can take to help break down the barriers to public cloud migration.

Chapter 5: 10 Key Lessons for Breaking Down Barriers

As we have seen in previous chapters, the public cloud has a great deal to offer the APAC region in terms of productivity and economic gain, but potential users don’t always have a clear path to adopting the cloud and realizing these benefits. Cloud service providers and regulators can undertake a range of steps to make it easier for users to deploy bigger applications on public cloud.

For cloud providers, an effort to ease the transition for clients would lead directly to an increase in users and demand for more sophisticated products and services. Businesses can find cloud migration or integration complicated, and in some cases costly, but providers can act as long-term strategic partners with the goal of setting up users to succeed.

A supportive regulatory environment is equally important to enabling deployment of the public cloud. A specific set of policies on data classification and security standards works as a catalyst to encourage businesses to use it.

Equally important, governments can contribute to more widespread public cloud adoption by setting clear processes in place, utilizing it themselves, and serving as an example to the market, providing targeted financial incentives where needed, and upgrading supporting infrastructure.

With the benefits to all stakeholders in mind, we have mapped out 10 key lessons derived from the best practices of public cloud usage in global markets. These are practices and lessons that can help mitigate the challenges and make public cloud adoption an attractive proposition for all potential users (See Exhibit 8).

1. Improve cloud literacy for users.

CSPs consider it an ongoing job to educate both the decision makers who are in charge of buying public cloud services for their business and the developers in the organization who will be the ones who ultimately operate the cloud services. The public cloud is a transformative technology in terms of the way it can change an organization’s capabilities, and as with all transformative technologies, the organization will go through a learning curve. CSPs can speed up the process by collaborating with governments on capacity-building initiatives such as cloud certification and digital upskilling programs.

Providers can help the decision makers understand how the public cloud can deliver benefits specific to their business. For example, how will the public cloud enable them to add revenue-enhancing lines of business and save costs? Part of this education should also revolve around security, with the provider demonstrating that the public cloud is a lot more secure than most local installations and explaining which controls are in the hands of the user. It should also highlight the public cloud’s reliable and scalable server performance.

In less mature markets, not all users are going to be aware that they have the option of a hybrid or multi-cloud approach, moving only select applications to the public cloud. In legacy organizations, senior leaders have to be prepared to institute cultural changes when applications move to the public cloud. Providers should make themselves available to advise the company’s management on their options, and provide guidance through the transition.

At the same time, senior managers who are considering an initial migration or a deeper integration of applications onto the public cloud are going to need buy-in from their IT teams. Ease of use is critical for engineers and developers, and CSPs should be prepared to help them ramp up their skills.

“Our internal teams are still getting to play with the features of the product. If services are not easy, it will be difficult to create talent at a quick pace.”
—Head of IT infrastructure, Large manufacturer

Most providers have already developed in-house training for clients and sponsor courses on public cloud technology, sometimes helping design course content for universities, industry associations, or government skill-building programs and offering hands-on experience to students. Nevertheless, there remains an acute need for them to continue to invest in building the supply of cloud-native talent across the APAC region in order to meet the growing demand.

It also falls within the providers’ mandate to sponsor certification courses for developers, in local languages if needed, so that users can be sure of having enough support for their applications on the public cloud.

2. Launch new technologies to solve business problems and facilitate adoption.

As CSPs develop advances in public cloud technology, they have an opportunity to continue to engage their existing clients, with particular attention to creating technology that offers solutions to problems the clients have experienced, with an emphasis on making it easier to use the cloud.

Providers are continuing to develop solutions that help clients integrate their on-premise functions with the cloud through hybrid applications. They are also guiding clients in supporting hybrid and multi-cloud infrastructures. Some providers have developed technologies that help clients move applications seamlessly between hybrid and multi-cloud architectures with consistent security controls.

Providers are also offering technologies to clients that can help improve their compliance with the existing regulations. For example, Data Loss Prevention, available through many CSPs, makes it possible to discover, identify, classify, and manage sensitive or PII data. Moreover, providers are facilitating technology transformations using such advances as state-of-the-art machine learning models on structured data, video intelligence, artificial intelligence, and Internet of Things (IoT).

Advanced tools such as the Kubernetes platform, AI and ML applications, and hybrid or multi-cloud management tools, generally require a certain amount of skill and training to use to their full potential, and providers are in the best position to demystify these for their users. There is much that a provider can do as a partner to clients, for example, some have set up learning labs in which the company’s employees can receive immersive training in specific technologies such as machine learning and artificial intelligence.

3. Orchestrate an ecosystem to help users succeed.

Businesses need to know that an entire ecosystem exists around the public cloud to support their needs, help resolve IT problems, enforce security, ensure high operating standards, make advanced trainings available, and assist them when it comes to regulatory policies. It falls to the CSPs, as the originators of the public cloud infrastructure, to build this kind of ecosystem that helps their clients achieve all of the potential value that the public cloud can deliver.

Cloud service providers should work with their business clients in facilitating an extended interactive partnership that includes users, systems integrators, consultants, industry associations, regulators, and CSPs themselves. The network that results would have numerous purposes, including education and training, sharing information about new technologies, challenges, best practices and user needs, as well as engaging the industry associations to help anchor discussions between users, CSPs and regulators.

An ecosystem built around traditional SME clients is an excellent way to provide a forum for dialogue between smaller businesses and the partners that can help this business segment. Traditional SMEs can benefit from partnerships that are set up to help them learn about how the public cloud can assist them in building their businesses, advocate for financial resources to help them transition to the cloud, and give them access to digital training and expertise.

4. Adopt international security standards.

Data privacy and IT security are among the most critical challenges that users in the APAC region cite when discussing what might keep them from migrating data to the public cloud. Regulators could do much to ease their concerns.

It is particularly helpful to organizations when regulators provide security frameworks that draw from international standards, and are therefore interoperable across borders. Clarity of standards would boost public cloud adoption by assuring users that their data is protected. Depending on the level of deployment for different types of data, this can also help in articulating which elements of the security is their own responsibility to protect.

Not all users are aware of the grades of responsibility that come with different cloud models. CSPs are committed to doing their part to keeping customers’ data secure, but security is a shared responsibility, and requires collaboration. CSPs are generally responsible for securing their infrastructure, while customers are responsible for securing access to their data—often with guidance on best practices, security products, and other information from their CSP partners. The customer’s specific obligations vary according to whether they are using IaaS, PaaS, or SaaS models. Under SaaS, most of the responsibility falls onto the CSP, with the user managing the access and content. Under IaaS, the provider is responsible for securing the infrastructure foundation and the user for securing the software and applications that they set up.

If there were uniform security standards across markets, it would be easier for CSPs to launch new products that meet standards everywhere, and for businesses to broaden their adoption of the public cloud. A robust security framework also supports the creation of opportunities for CSPs to serve sector-specific security requirements, such as the security structures required for financial services, healthcare, and other industries with large loads of PII.

To this end, Australia’s Information Security Registered Assessors Program (IRAP), Singapore’s Multi-Tier Cloud Security Standards (MTCS), and South Korea’s Cloud Security Assurance Program (CiSAP) have set up security frameworks for the public cloud that are patterned after international best practice frameworks such as the ISO 27000 series, and are interoperable. The frameworks created by agencies such as the National Institute of Standards and Technology (NIST) and the Federal Risk and Authorization Management Program (FedRamp) in the United States, and the European Union Agency for Cybersecurity (ENISA) can also serve as effective benchmarks for security standards.

5. Adopt clear data classification frameworks in line with international practices.

Users believe they can take cloud migration only so far without clear guidelines around classification, otherwise they run the risk of violating regulations around how they can store sensitive data. CSPs generally do not have visibility into their customers’ data, so it falls to the user, the owner of the data, to determine what data is stored and processed in the cloud.

The classification of data rests on two factors. The first is the nature of the data itself. Basically, sensitive data contains personal information about user clients—for example, PII, financial transactions and health records. Other sensitive data elements could include proprietary information such as account numbers or product formulas.

The second factor is the determination of which industry is using the data and how it will use it. The data is likely to be considered more sensitive when it is coming from critical areas such as a country’s defense systems, utility infrastructure, or air traffic control records. There is data that can be innocuous in some cases, for example records on food purchases by a hotel chain, but subject to a more sensitive classification in a different context. If, for example, the food purchase records are coming from the defense industry, they might reveal information about the whereabouts and size of military installations, and therefore be subject to additional security configuration on the cloud.

Establishing clear classification practices about each type of data makes it easier for industries to determine what sort of security controls they need to put in place when they migrate data to the public cloud.

South Korea, through its Personal Information Protection Act (PIPA) and Network Act, and Australia, through its Privacy Act, have established classification frameworks identifying how public cloud providers and users should handle personally identifiable information which is classified as sensitive. For example, in South Korea, users are not allowed to collect PII unless they have explicit consent or special exception, and even data that is not personal is considered PII if it can be easily combined with another data set to enable individual identification.

6. Clarify guidelines on cross-border data flows in the public cloud.

Cross-border data flow regimes vary from free-flowing non-restrictive environments to heavily restricted ones, but most countries in the APAC region are becoming exceedingly protective about how and where sensitive data is stored. What this means is that just when the public cloud is available to store massive amounts of data priced to scale, regulations can make it difficult for a business to make use of the public cloud’s scale and efficiencies.

While the public cloud can readily accommodate the growing reams of geo-diverse data, cross border data flow rules can limit the ability of businesses to make use of the opportunity. Cross border data flow restrictions can even inhibit the growth of machine learning, which depends on access to hyper-scale computing of data to expand the scope and sophistication of its algorithms.

There are a number of ways to establish flexible systems for clarifying whether data can be transferred, allowing conditional flows of data through prior authorization from regulatory authorities, consent from citizens, and the use of prescribed contractual clauses with downstream data recipients.

Bilateral frameworks such as the EU-US Privacy Shield are one way to set up such a system. The G20, under Japan's chairmanship in 2019, is also exploring a Data Free Flow with Trust framework. Select frameworks such as the APEC Cross-Border Privacy Rules (CBPR) System and the EU’s Binding Corporate Rules allow organizations to transfer data within a corporate group or to specific recipients on an ongoing basis.

Data adequacy agreements across countries are also a way to make digital business easier. Japan has this kind of agreement with the EU, with built-in protections to allow cross-border data flows across markets. Such agreements include provisions that if an individual in the EU is not happy with the way their data has been treated, or believes their rights have been violated, they have various channels through which they can file complaints in Japan.

7. Establish clear processes for accreditation and selection of CSPs for use in government services.

Numerous industry leaders told us that when government bodies use the cloud, it creates more interest because it signals that CSPs can offer government-grade services and are secure and reliable.

To bring more public sector and government agency users on board, however, governments first have to establish the kind of standard security requirements for cloud adoption discussed in Lesson No. 4, thus ensuring a transparent and well-defined accreditation process.

To put such standards in place, it is necessary for the government to create a process for cloud accreditation and compliance certification, with clear steps to make the process easy, transparent and, to the extent possible, consistent across boundaries. The region is beginning to see progress on this front. For example, Australia’s IRAP initiative includes a benchmark accreditation program that institutions throughout the federal government use, along with global protocols like the ISO 27000s, to indicate that a CSP is secure for usage.

8. Create a nodal agency to manage government cloud requirements and actions.

Government use can spur growth among private sector businesses, thereby boosting the economic impact that comes from industry public cloud use. Besides being an economic catalyst, however, government agencies can use the cloud to provide better services for the citizens—for example, people can file taxes, apply for visas or passports, and renew licenses on their computers or mobile devices rather than having to travel long distances to the nearest city and wait in long queues.

An important step toward more government sector use of the public cloud is the formation of an agency to establish best practices for migration, along with clear procurement policies for government agencies to use in selecting a cloud service provider. The procurement policy should spell out such considerations as the tendering process and the criteria for evaluation and selection. The objective would be to facilitate a smooth transition to the public cloud, with a clear message that the migration will reduce the costs of government services and improve accessibility, quality, efficiency, and security. A strong transition plan would also provide a useful template to the private sector as businesses undergo digital transformations.

The governments of Singapore and Australia were early innovators in establishing nodal agencies and setting a ‘cloud-first’ procurement policy, which directs government agencies to evaluate the public cloud first when considering where to house new applications, and consider other options only if the public cloud doesn’t turn out to be viable.

Singapore’s nodal agency, GovTech, has had a ‘cloud-first’ policy in place since 2013. The agency has enabled interoperability between the Government Cloud (G-Cloud) and the public clouds through a set of internal G-Cloud standards. A Government Commercial Cloud Infrastructure (GCCI) project was set up to oversee an upgrade of the existing IT infrastructure, and also gives quick clearance to government agencies to procure public cloud services. The government’s use of the public cloud has been an important catalyst for the local technology industry.

“Adopting the public cloud throughout the Singapore government’s technology solutions connects us to our local tech ecosystem. Since we are all on the same platform, we can use APIs developed by startups on our government platform and continue to develop and refine a core set of e-services.”
—Director, Government agency

Australia launched its cloud-first policy in 2014, also creating a Digital Transformation Agency to support public sector’s cloud adoption. It currently has about 400 government apps available to residents. In 2017, the government conducted a survey on the cloud to gauge support for a marriage equality law.

Japan has established a cloud-first policy through federal and local bodies, in consultation with the government chief information officer. South Korea and India have a government cloud-first guideline for public sector applications, while Indonesia has no central governing body or cloud-first policy in place yet.

9. Provide appropriate financial incentives to select industries.

Along with the need for greater cloud literacy, industry advocacy and security guidance, traditional SMEs participating in our survey discussed the need for financial incentives such as tax relief and government subsidies to encourage the use of public cloud. Digital native startups can also benefit from government-sponsored financial incentives that help them launch and grow quickly.

We are starting to see incentive programs in the APAC region for companies that need support. Singapore’s GoCloud program provides funding along with consulting and training to equip DevOps team at small businesses and startups with cloud-native digital capabilities. South Korea’s public cloud adoption support program for SMEs subsidizes public cloud fees and offers consulting and security support for small financial technology (Fintech) firms using the public cloud.

This kind of support is aimed at making it easier for smaller businesses to use the public cloud. Since cloud applications enable SMEs to become more agile, flexible and scalable, policy makers should look at such programs as an investment in economic expansion.

10. Continue investment in the core network infrastructure.

The public cloud needs advanced telecom network capabilities to deliver an optimal performance. Local and national governments can make an aggressive push for state-of-the-art communications infrastructure, encouraging telecom companies to test and adopt advanced network capabilities so that the country can meet growing data needs and support higher cloud service availability and quality.

While many of the six countries have addressed these issues, India and Indonesia are continuing to invest in their network infrastructure to meet the data demands of their rapidly growing populations through internet access. Indonesia now has the Palapa Ring fiber-optic upgrade plan under construction, enhancing connectivity throughout the archipelago with undersea cables. India is expanding its telecom network coverage so that more than the present 25% of mobile network towers will be connected to fiber networks. South Korea launched its first 5G networks this year, while Australia, Singapore and Japan are planning to start testing commercial 5G in the next one or two years.

The level at which each of the six APAC markets have addressed barriers varies widely. If the APAC region is to successfully mitigate the challenges to public cloud adoption, the increased adoption rates that result will have a significant impact on the economy. In the next chapter we will look at how a positive change in the forces that determine the current pace of adoption would lead to a greater economic impact than our baseline forecast, while the impact would diminish if CSPs or regulators are unable to break down barriers.

Chapter 6: Three Scenarios for the Future of Public Cloud

In our overview of the economic impact that the public cloud will have upon the APAC region over the next five years, our estimates reflect the current natural progression, or what we call the baseline scenario. This is the landscape that will unfold if existing market trends and regulatory conditions continue as they are now.

Yet, as we saw in Chapters 4 and 5, there are barriers that could limit the level of growth if CSPs, user organizations, or policy makers pull back on the conditions that make public cloud adoption desirable. Conversely, if all barriers are mitigated throughout the APAC region in the near future, public cloud adoption could soar well beyond our baseline forecast.

We have developed models for a number of scenarios. The Big Bang Growth Scenario represents the most optimal forecast, while the Sluggish Growth scenario represents a restricted growth. The status quo scenario is represented in our Baseline Scenario. These models are archetypes that could vary dramatically from one APAC economy to the other.

In this chapter we will show what the overall economic and employment picture across all six markets would look under each scenario. Given that each of the markets is at a different stage of public cloud adoption in the base case, the specific factors defining the Big Bang Growth Scenario and the Sluggish Growth Scenario would also differ. In the country reports that follow we will assess the country-specific details that could affect how each of the scenarios would play out in each market.

What would cause a Big Bang Growth, Baseline, or Sluggish Growth Scenario?

Our models factor in the variables that would trigger growth on one end, and, on the other, those that would arrest rapid growth. We gauged the impact of each scenario through the lens of CSPs, industry verticals, and the policy and regulatory structure. We looked at parameters within each that would affect public cloud usage rates and serve as indicators of the sophistication of the market. These parameters include product availability and performance, maturity of the user industries in the market, network infrastructure quality, IT capability and digitization readiness, data standards, presence of digital agencies, and public cloud policies (See Exhibit 9). How these factors play out, especially in combination with one another, will determine the scenario that occurs in each of the six markets. (See Appendix for more details on estimation of Cloud Adoption Index using these parameters for each of the markets).

Behind each scenario we’ve modeled lies a combination of conditions that could affect the growth rate. Although the actual economic and employment impact could fall somewhere between the Big Bang Growth, Baseline and Sluggish Growth scenarios depending on the balance and severity of those conditions, here is a look at the key forces and outcomes for each scenario:

Baseline Scenario: Markets evolve in their natural progression

This is the scenario that will unfold if the current rate of progression continues. It represents a situation where providers continue to launch newer products and services at their current rate, and partner with users to help them in adapting to the public cloud. It involves industries and public sector organizations continuing to recognize the benefits of the public cloud and move newer applications to the cloud at the current rate, and policy makers keep their current stance. In this scenario, public cloud investment will remain consistent with what we are currently witnessing.

Under the Baseline Scenario, the CAGR of public cloud spending will be approximately 25% over the next five years, with 50% of that spending going into growth.

Big Bang Growth Scenario: public cloud adoption accelerates

This is the most optimistic scenario, and has the potential to yield a greater economic impact than the effects we discussed in Chapter 4. For greater growth to ensue, users, providers and governments would have to work together to break down barriers to adoption. Traditional enterprises would develop strong digital transformation agendas, and government policies would be designed to support public cloud adoption. Small businesses and startups would, through providers’ efforts, gain easier access to the public cloud, and large numbers of digital native businesses would launch. All parties would begin a strong push to address the talent supply constraints and increase cloud literacy.

In the Big Bang Growth scenario, the CAGR of public cloud spending would be as high as 30% over the next five years, and 60% of the money spent would go toward growth in the form of new or enhanced public cloud products and services.

Sluggish Growth Scenario: public cloud adoption is inhibited

If providers were to slow down their expansion plans, and organizations found that the challenges of adopting the public cloud outweighed the benefits, the economic impact of the public cloud would be slower than our baseline projection. Other factors that could cause a slowdown are constrained adoption by the public sector, more restrictive policies concerning data such as localization or stringent classification, or limited use of enablers like machine learning and artificial intelligence. In addition, growth can be negatively impacted in any market that is not able to develop the digital talent that is needed to operate on the public cloud.

In the Sluggish Growth Scenario, the CAGR in public cloud spending could be reduced to roughly 20%, with only 45% going to growth.

Understanding different economic impacts

The cumulative GDP impact of each scenario would vary from around US$580 billion over the next five years under the Big Bang Growth Scenario to just under US$375 billion in the Sluggish Growth Scenario. In short, the contributions of all stakeholders—providers, user organizations, and policy makers—can generate a potential difference of close to US$200 billion in the GDP impact across the six markets over the next five years (See Exhibit 10).

Similarly, under the Big Bang Growth Scenario, the region is likely to add as many as 770,000 new jobs through direct economic impact, while under the Sluggish Growth Scenario approximately 235,000 jobs would result from the direct impact. If we include the indirect and induced jobs influenced by economic stimulation, the number of jobs impacted could vary from less than about 750,000 in the sluggish growth scenario to be as high as about two million in the big bang growth scenario. Thus, the contributions of all stakeholders could make a difference of 535,000 direct jobs and influence another 1.5 million second order jobs in the six markets over the next five years.

While the scenarios represented in this chapter factor in the actions of cloud service providers, user organizations, and policy makers, our estimates are based on the assumption that the macroeconomic conditions will remain as they are today.

If an economic downturn occurs between now and 2023, all scenarios could deliver a lower impact, especially the Sluggish Growth Scenario, with the overall GDP impact reaching no more than US$320 billion, and the number of newly-created direct jobs as low as 170,000. Total jobs impacted, including those influenced from indirect and induced impact, would be about 620,000, approximately 30% less than the sluggish market would produce under non-recessionary conditions.

The uncertainties in the global economy heighten the need for urgency in providers, users and policy makers taking steps that will accelerate adoption of the public cloud, because the financial benefits from cloud use can increase resilience for businesses in APAC economies in the face of a downturn.

The comparable difference in impact of these identified scenarios demonstrates why it is critical that every country in the region get the public cloud right. With so much economic value at stake, CSPs, organization and policy makers need to act together while there is momentum gathering toward public cloud adoption in order to realize the maximum benefits that the public cloud can deliver.

Chapter 7: The Six APAC Markets in Depth

Each of the six APAC markets is at a unique stage of development in its adoption of the public cloud. Singapore, Australia and Japan are more advanced markets. India and South Korea are in intermediate stages of growth, while Indonesia is in early stages of public cloud adoption. The more advanced markets are focused on using the public cloud to develop new technological capabilities and revenue sources. Users in these markets tend to seek multi-cloud services, aided by a conducive regulatory climate and the powerful signaling effect of government agencies deploying the public cloud to upgrade citizen services. Users in the markets that are in earlier stages of growth tend to look to the cloud more for cost savings, but face such challenges as lack of product understanding and clear, interoperable regulatory frameworks.

Consequently, the growth potential across markets and economic impact varies, and the potential for a more aggressive or a more sluggish economic impact depends on what steps different stakeholders in the individual markets are taking to mitigate the challenges and encourage both public and private sector use of the public cloud. In the country reports that follow, we will look at the special circumstances surrounding cloud adoption, benefits, challenges, and outlook in each of the six markets.


Australia is one of the most advanced public cloud markets in APAC, and is projected to grow at a CAGR of 17% from US$5 billion in 2018 to US$11 billion in 2023. Large enterprises across all business sectors including media, retail, and financial services have adopted the public cloud, with interest growing among manufacturing and mining players. The government is also focused on public cloud migration and is now developing enhanced citizen services through the public cloud. There is a strong appetite among users for a multi-cloud environment to benefit from the experience and strengths of different service providers. The cumulative economic impact from the deployment of the public cloud is expected to be about US$110 billion over the next five years, which when annualized is equivalent to about 55% of the annual GDP impact from large traditional sectors such as mining. The direct impact would generate approximately 26,000 jobs, with another 47,000 influenced by second order effects. Optimal growth conditions, including an increase in the pool of digital talent and continued regulatory support, could increase the total GDP impact to an estimated US$130 billion, and the total employment impact to about 110,000 jobs over the next five years.

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India is a large and fast-growing public cloud market, projected to grow at a CAGR of 25% from US$3 billion in 2018 to US$8 billion in 2023. Digital native businesses and web-streaming media players are the main drivers of growth, while industries such as retail, financial services and manufacturing are in early stages of adoption. The cumulative economic impact from the deployment of the public cloud is expected to be over US$100 billion between 2019 and 2023, which when annualized represents about 15% of annual GDP impact from the country’s IT industry. The total employment impact stands to impact nearly one million jobs, including creation of about 240,000 direct jobs. Favorable advances such as increased deployment of the public cloud among traditional large enterprises, and a regulatory framework in line with international best practices can help increase deployment and drive the cumulative GDP impact to as much as US$130 billion, and total employment impact to about 1.7 million jobs over the next five years.

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Indonesia’s public cloud market is in its formative stages, representing one of the fastest growing markets in the APAC region. A projected CAGR of 25% is expected to raise the market size from US$0.2 billion in 2018 to US$0.8 billion in 2023. The country’s tech unicorns have relied on the public cloud to scale their businesses and grow rapidly, while large enterprises and the financial services industry are increasing their use of the public cloud. As hyper-scale cloud providers deepen their presence in the market, use will increase further. The cumulative economic impact of the public cloud is projected at US$35 billion between 2019 and 2023, which when annualized, is equivalent to about 25% of the annual GDP impact from large traditional sectors such as the palm industry. The direct impact is likely to create an estimated 70,000 jobs, with another 275,000 influenced by second order effects. However, the war for digital talent is acute, supporting telecom infrastructure needs to be significantly improved, and the country needs to adopt international best practices on data and digital policies. If these challenges can be mitigated, the overall cumulative GDP impact of public cloud spending could rise to over US$50 billion, with the total employment impact projected to reach 635,000 over the next five years.

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Japan is one of the largest public cloud markets in APAC, and is expected to grow at a projected CAGR of 18% from US$8 billion in 2018 to US$18 billion in 2023. While most large organizations have a high awareness of the public cloud, additional traction is expected to come from deeper penetration of IaaS across the industry landscape. Media, gaming and retail players are among the most advanced users, but interest is increasing among financial services institutions and the public sector. The government has set an ambitious goal of having 1,600 local government entities using the public cloud by 2023. The cumulative economic impact is expected to be about US$130 billion [JP¥14 trillion] between 2019 and 2023, which when annualized, is equivalent to about 20% of the annual GDP impact from large traditional sectors such as the automobile industry. An estimated 51,000 jobs would be created through direct impact, and another 95,000 influenced by the second order effects. Addressing the challenge of digital talent shortage and adoption of public cloud within government agencies can drive the cumulative GDP impact as high as about US$166 billion [JP¥18 trillion], with the total employment impact reaching about 288,000 jobs over the next five years.

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Singapore has one of the most highly penetrated public cloud markets in the region, and is expected to grow at a CAGR of 20% to US$3.5 billion by 2023. Digital native businesses that use public cloud to scale up and grow rapidly along with government’s focus on digital transformation and a supportive policy regime have been key drivers of public cloud adoption. There is high awareness across industry verticals including media, retail and financial services who are migrating their applications to the cloud, with some traction also coming from manufacturing industries and traditional enterprises. The cumulative economic impact due to public cloud adoption is expected to be US$31 billion between 2019 and 2023, which when annualized, is equivalent to about 15% of the annual GDP impact of large traditional sectors such as financial services. The direct impact is projected to create 22,000 jobs, and influence another 21,000 jobs by second order effects. Managing demand for digital talent and maintaining the status as a regional hub for cloud infrastructure is critical to increase adoption. Continued regulatory support and deployment of government applications will also play a crucial role in further growth. Together, these factors can drive the cumulative GDP impact as high as US$43 billion, with the total employment impact being about 80,000 jobs over the next five years.

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South Korea

South Korea’s public cloud market has robust growth potential. With a CAGR of 15%, the market is expected to double in size from US$1.5 billion in 2018 to US$3 billion in 2023. While digital native businesses and gaming companies are the main drivers, there is increasing traction from retail players and large conglomerates—the ‘chaebols’ —as they seek to support their digital arms and expand businesses internationally. With the continued support of local partners and systems integrators, the cumulative economic impact of public cloud adoption is expected to reach approximately US$45 billion [SK₩54 trillion] between 2019 and 2023, which when annualized, is equivalent to about 20% of the annual GDP impact from large traditional sectors such as automobile manufacturing. The direct impact is expected to create about 15,000 jobs, with second order effects influencing another 35,000 jobs. Acceleration of the government’s ‘digital nation’ push, and a greater presence of hyper-scale service providers, will help drive further growth. Together with effective management of cloud-native talent and supportive regulations, these factors could produce a cumulative GDP impact as high as US$60 billion [SK₩71 trillion], and a total employment impact of over 100,000 jobs in the next five years.

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The future of the public cloud in the APAC markets

Though they are in different stages of public cloud growth, the six APAC markets are all coming to an inflection point in their ability to reap the potential economic gains. The difference between a scenario in which the various stakeholders are proactively addressing the challenges versus a scenario in which less is being done, can mean a difference of billions of dollars in economic impact, as well as representing an additional gain of tens of thousands of jobs.

The public cloud represents an unparalleled opportunity for these markets in the next five years. They must act quickly to maximize the economic advantages that lie just overhead, floating in the cloud.

Appendix: Detailed Methodology


AI: Artificial Intelligence

APAC: The Asia-Pacific region for the study is denoted by the six markets covered in the report, namely Australia, India, Indonesia, Japan, Singapore and South Korea.

APEC: Asia-Pacific Economic Cooperation

API: Application Programming Interface

CAGR: Cumulative Annual Growth Rate

CBPR: Cross-Border Privacy Rules System set by the Asia-Pacific Economic Cooperation forum

CDO: Chief Data Officer

CIO: Chief Information Officer

CiSAP: South Korea’s Cloud Security Assurance Program

CSPs: Cloud Service Providers for public cloud e.g. AWS, Google Cloud, Microsoft Azure etc.

CTO: Chief Technology Officer

DevOps: DevOps refers to a set of software development practices that aim to shorten a system’s development life cycle.

DNBs: Digital Native Businesses are defined to be the technology based startups in a market (irrespective of their size of revenue).

ENISA: European Union Agency for Cybersecurity 

EU: European Union

FedRamp: Federal Risk and Authorization Management Program, U.S. 

FSC: South Korea’s Financial Services Commission

GCCI: Singapore’s Government Commercial Cloud Infrastructure

GDP: Gross Domestic Product

IaaS: Infrastructure as a Service is a cloud service model which provides instant computing infrastructure, managed over the internet. It offers a scalable architecture while avoiding the expense and complexity of buying and managing own data centers.

ICT: Information and Communications Technology

IMDA: Singapore’s Infocomm Media Development Authority

IRAP: Australia’s Information Security Registered Assessors Program 

ISO 27000 series: International Organization for Standardization. The ISO 27000 series of standards are designed to address information security matters.

IT: Information Technology

MaaS: Mobility as a Service

ML: Machine Learning

MTCS: Singapore’s Multi-Tier Cloud Security Standards

NIST: National Institute of Standards and Technology, U.S.

OECD: Organization for Economic Cooperation and Development

PaaS: Platform as a Service is a cloud service model where the service provider offers a cloud-based development and deployment environment. Cloud service providers manage the servers for storage while the users manage the applications and services they develop.

PII: Personally Identifiable Information

PIPA: South Korea’s Personal Information Protection Act

SaaS: Software as a Service is a cloud service model in which the users rent out the use of an application from the cloud service provider. All the underlying infrastructure, middleware, application software and data are managed by the service provider either through their own infrastructure or on the public cloud.

SGTS: Singapore Government Technology Stack

SMEs: Small and Medium Enterprises are defined as per the definitions followed by the labor departments of the respective countries. Some countries like Japan and Korea use the employee size e.g. Japan and South Korea: less than 300 employees. Some like India and Indonesia use revenue e.g. India: Revenue less than 250 Crore INR and Indonesia: Revenue less than 50B IDR. Others like Australia and Singapore use a combination of both employee size and revenue e.g. Australia: Revenue less than 50M AUD or less than 200 employees and Singapore: Revenue less than 100M SGD or less than 200 employees. DNBs are not included as a part of SMEs for this study.

SNDGO: Smart Nation and Digital Government Office, Singapore

Western Europe: Western Europe includes France, Germany, Italy, Netherlands, Spain and the United Kingdom for this study.

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