Will Korea’s “Cloud” Market Grow?

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The hype around cloud computing continues to build up and open many Korean companies’ doors. As more companies, both small and large, realize that cloud computing is the vehicle to becoming next-generation digital businesses, CIOs and IT managers in Korea are increasingly turning their attention to cloud solutions, ranging from IT infrastructure to application software.

According to a report (“Korea SaaS and Cloud Software Market Forecast, 2016-2020”) by Korea IDC, an IT market analysis and consulting company, the domestic cloud software market grew 26% year-over-year to $300M USD. The market is expected to grow at a CAGR of 16.3% over the next four years, exceeding $500M USD in 2020.

While the growth of the Korean cloud market is mainly driven by infrastructure services (most commonly known as “IaaS: Infrastructure-as-a-Service”), demand for cloud-based software is also growing. Leading vendors in the cloud software market are exploring a variety of ways to increase their share in the cloud market, while relatively inexperienced vendors simply acquire cloud-based software service providers or rewrite existing installed software into cloud-based software.

Market Outlook

Market growth will remain high due to increased adoption of cloud among enterprises that recognize the benefits of using cloud: low upfront capital investment and potential for achieving cost savings, agility and scalability. Given the current rate of growth, cloud computing is regarded as one of the most disruptive forces of IT spending since the early days of the digital age.

The report also stated that one of the remaining reasons for companies’ reluctance to switch to a SaaS and cloud environment in Korea is concern for data security, emphasizing that vendors should invest in building out more robust security services, tools and protocols. “More education is needed to help organizations overcome the hype associated with security concerns. This should be a key area of focus for providers in working with their clients to unlock the benefits of public cloud services.” said Ed Anderson, research vice president at Gartner.

Global companies expanding into Korea

The growing demand and popularity of cloud computing in Korea has presented an attractive market opportunity for leading global cloud companies such as Amazon, Microsoft, Google and IBM. These cloud service providers are actively fighting for market share.

  • Amazon: Amazon Web Services (AWS) has begun a full operation with new data centers in Korea, the fifth Asia-Pacific region, last January (regions refer to physical locations with multiple data centers).
  • Microsoft: In the first quarter of this year, Microsoft will likely launch a new region in Seoul and Busan, expanding its cloud services (Azure and Office 365) for existing domestic customers.
  • IBM: In August, 2016, IBM formed a cloud center in Pangyo, Gyeonggi-do with SK Corp.’s C & C. “The major part of our cloud strategy is working with local companies that understand the native market,” said Robert LeBlanc, senior vice president, IBM Cloud.
  • Alibaba: Alibaba Cloud, Alibaba’s cloud service, launched its service in Korea under the name of “cloud link” in April 2016.
  • Oracle: Oracle is stepping up its efforts to penetrate the domestic market by opening Oracle CloudWorld, a large-scale technology road show, in Seoul last January.

While Microsoft and IBM lead the domestic market with the largest customer base, a growing number of Korean companies are competing, or in many cases, partnering with large U.S companies to get a share of the pie. For example, SK Corp. C&C is strengthening its ‘multi-cloud service’ by partnering with IBM and Alibaba Cloud. SK Telecom and Naver are also leveraging their existing customer base to penetrate the cloud market.

Note

Cloud computing is a “style of computing in which scalable and elastic IT-enabled capabilities are delivered as a service using internet technologies.” (Gartner, American research and advisory firm providing IT-related insight)

Inspired by IDC KR Press

I’m a problem-solver in the daytime, and a writer at night. I find joy in trying new things, from exploring every jolly, peaceful public reading spot in NYC to learning to play guitar and kickboxing masterfully. Let’s connect: https://www.linkedin.com/in/jasonthom

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