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1、 Report for the Digital Industry Policy Association(DIPA)Economic impact and dynamics of cloud services in South Korea David Abecassis,Michael Kende,Dion Teo,Jay Lee,Ryan Tay March 2023 Ref:8865878839-21 Ref:8865878839-21.Contents 0 Executive summary 1 1 Introduction 7 2 Overview of cloud services 8

2、 2.1 Cloud computing involves the on-demand delivery of computing services through the internet via architectures including public,private or hybrid clouds 8 2.2 Cloud services entail an extensive range of services to meet different customer needs,with products constantly evolving and blurring bound

3、aries between different cloud services 10 2.3 Cloud services enable improved economic efficiency,promote the emergence of start-ups and support improved IT energy efficiency 14 3 The supply landscape for cloud services 20 3.1 The cloud services value chain is complex and involves stakeholders rangin

4、g from real-estate providers to application providers 20 3.2 South Korea has a vibrant supply landscape supported by a diverse and increasing range of CSPs 21 3.3 Key global trends in the cloud supplier landscape indicate that customers benefit from continued innovation,fuelled by the competitive,te

5、ch-driven nature of the sector 26 4 The growth potential of cloud services in South Korea 30 4.1 South Korea is one of the most digitally advanced economies globally with favourable conditions to support cloud adoption 30 4.2 However,South Koreas cloud adoption is underdeveloped compared to peer cou

6、ntries,emphasising the strong potential for growth across all CSPs 31 4.3 Barriers to cloud adoption in South Korea include technology skill gaps,security,cost concerns and restrictive regulation 34 4.4 Supportive government policies that have been introduced can reduce these barriers and serve as a

7、 catalyst for cloud adoption growth in South Korea 38 4.5 South Koreas cloud services sector is expected to grow from KRW5.2 trillion in 2022 to reach KRW10.9 trillion by 2027 39 5 The economic impact of cloud services in South Korea 42 5.1 Cloud adoption has enabled South Korean organisations to re

8、ap the benefits of improved efficiency and supported economy-wide productivity improvements 42 5.2 Cloud adoption can enable South Korea to achieve its full digital economy potential by fostering digital transformation and the growth of digital native start-ups 44 5.3 Studies show that cloud spend c

9、an have a multiplier effect on GDP South Koreas cloud services sector is expected to drive a KRW 62.2 trillion GDP contribution over the next five years 45 5.4 Adoption of cloud services can also facilitate South Koreas achievement of its sustainability/net-zero goals 48 Economic impact and dynamics

10、 of cloud services in South Korea|ii Ref:8865878839-21.6 Providing a supportive policy and regulatory environment is critical to facilitate growth of cloud services in South Korea 49 6.1 Regulators around the world have been focusing on reducing barriers to cloud adoption,rather than imposing new cl

11、oud-specific regulations to a still immature sector 49 6.2 Regulatory or policy tools directed at cloud services must be considered carefully 52 6.3 Selecting appropriate regulation/policy regarding cloud services is key,given implications for the growth of cloud adoption and its associated economic

12、 impact 63 6.4 Policy makers in South Korea should approach ex-ante regulatory intervention in digital markets with caution to avoid unintendedly hindering the economic benefits from cloud services 65 Annex A Methodology Economic impact and dynamics of cloud services in South Korea|iii Ref:886587883

13、9-21.Copyright 2023.The information contained herein is the property of Analysys Mason and is provided on condition that it will not be reproduced,copied,lent or disclosed,directly or indirectly,nor used for any purpose other than that for which it was specifically furnished.This report has been pre

14、pared by Analysys Mason for the Digital Industry Policy Association(DIPA)and subject to Analysys Masons editorial judgement and discretion.The analyses contained within this report are the sole responsibility of Analysys Mason and do not necessarily reflect the views of DIPA.Analysys Mason Pte Ltd 7

15、7 Robinson Road#15-02 Robinson 77 Singapore 068896 Tel:+65 6493 6038 Registered in Singapore No.200506242R Subsidiary of Analysys Mason Ltd North West Wing,Bush House,Aldwych London WC2B 4PJ,UK Reg.No.5177472 Economic impact and dynamics of cloud services in South Korea|1 Ref:8865878839-21.0 Executi

16、ve summary This report has been prepared by Analysys Mason for the Digital Industry Policy Association(DIPA)and performs a review of the dynamics in South Koreas cloud services sector from both a demand and supply perspective,assesses the economic impact of cloud services in South Korea,and discusse

17、s regulatory considerations in light of the key findings.The analysis contained in this Report,including all future projections,is the sole responsibility of Analysys Mason and does not necessarily constitute an endorsement on the part of DIPA.The research that underpins this report was conducted be

18、tween December 2022 and February 2023.Demand for cloud services is growing rapidly and this supports the next phase of digital transformation for both companies and governments globally Cloud services is a generic term that covers a wide range of IT-related activities provided over networks.The conc

19、ept is not new enterprise computing started with a mainframe-client architecture where the IT infrastructure was removed from the user,in a mainframe,and accessed through a lighter client terminal.Today,the term cloud services tends to refer to functions including storage,compute and networking,but

20、also software platforms and applications provided by third-party cloud service providers(CSPs)over a combination of private networks and the internet.Traditionally,cloud services were segmented between infrastructure as a service(IaaS),platform as a service(PaaS)and software as a service(SaaS).This

21、classification was always an over simplification,and it is becoming increasingly outmoded as customer demands do not align to these classifications,as acknowledged by leading regulators(see Section 2.2).Cloud services allow organisations to avoid the costs of directly owning and managing IT infrastr

22、ucture,platforms and software,and benefits from economies of scale and scope where cloud resources can be shared between different uses,customers and end-users.Cloud services also play a critical role by enabling customers to redeploy their capital to other uses.CSPs also have critical interdependen

23、t relationships with other stakeholders within the cloud services sector,including real-estate companies who build the data centres,hardware vendors who provide the equipment that goes in these data centres,and professional services companies who support cloud users in understanding and making the m

24、ost of cloud services(see Section 3.1).Cloud services support the emergence of entirely new business models:cloud-native organisations,including start-ups and established companies with strong digital expertise,depend on access to a highly scalable and agile infrastructure with strong security and r

25、esiliency to offer services at scale to their own customers.In this way,cloud services contribute to driving economic growth through increased hiring of labour and increased spend on suppliers(see Section 2.3).Governments and public-sector organisations,including schools and universities,are also in

26、creasingly understanding and unlocking the benefits that cloud adoption brings to their economies.Economic impact and dynamics of cloud services in South Korea|2 Ref:8865878839-21.Many governments,including in South Korea,have started to introduce enabling policies to ensure the local workforce is e

27、quipped with the right skillsets and that commercial enterprises and government agencies are incentivised to migrate to cloud services(see Section 6.2.1).Spending on cloud services in South Korea reached an estimated KRW5.2 trillion in 2022 contributing to GDP of KRW9.7 trillion across the economy;h

28、owever,South Korea lags compared to other advanced economies and retains much scope for growth South Korea is well placed to derive strong benefit from cloud services.It is one of the most digitally advanced economies in the world,with high-quality internet access widely available to consumers and e

29、nterprises.It has also consistently demonstrated relatively high capacity to adopt and explore digital technologies,having achieved consistent improvements in digital rankings over the years.South Korea ranked second globally in the Future Readiness factor within the International Institute for Mana

30、gement Development(IMD)Digital Competitiveness Ranking,which measures a countrys“preparedness to exploit digital transformation”.1 We estimate that enterprises and government agencies in South Korea spent KRW5.2 trillion overall on cloud services in 2022.Based on a conservative interpretation of ava

31、ilable economic studies,we estimate that this spend supports about KRW9.7 trillion in economic output,driven by productivity gains and new business models enabled by cloud services(see Section 5.3).In other words,every 1000 won spent on cloud services contributed nearly 2000 won to South Koreas GDP

32、in 2022.Nevertheless,South Korea still lags behind many other advanced economies in cloud adoption based on OECD data for 2020.2 This may be in part because of certain cultural and structural aspects of South Koreas economy(e.g.local conglomerates3)but is also due to regulatory factors that have act

33、ed to constrain the externalisation of IT functions and the adoption of cloud services.Regulation in the financial sector imposed by the Financial Services Commission(FSC)s Regulation on Supervision on Electronic Financial Transactions(RSEFT)governs what IT functions may be served through cloud serv

34、ices.Recent revisions to the regulation in November 2022 reduced the number of criteria that financial institutions must assess to use cloud services.While these changes will reduce the burden to cloud adoption for financial institutions,4 they remain more burdensome than in advanced cloud jurisdict

35、ions such as Singapore,where financial institutions are only recommended to perform a self-assessment based on guidelines.5 Parts of the manufacturing sector,in particular semiconductors and batteries,are designated as national core technologies(NCTs).As such,they must comply with specific rules whi

36、ch require government pre-approval to use cloud services,which may hinder cloud adoption.Finally,government agencies and other public bodies,such as schools and hospitals,can currently only procure cloud services from a small shortlist of CSPs based on the 1 IMD World Competitiveness Center,2022.“IM

37、D World Digital Competitiveness Ranking 2022”2 OECD,2021.“Share of businesses purchasing cloud services”3 Chaebols are large family-owned industrial conglomerates in South Korea 4 Financial Services Commission,2022.“FSC Introduces Improvements to Cloud Computing and Network Separation Rules in Finan

38、cial Sector”5 Monetary Authority of Singapore,2018.“Guidelines on Outsourcing”Economic impact and dynamics of cloud services in South Korea|3 Ref:8865878839-21.Cloud Security Assurance Program(CSAP),which limits the ability of these agencies to select solutions and providers adapted to their needs,a

39、nd constrains the benefits they can reap from cloud services(see Section 6.2.2).Finally,some barriers to adoption have also been faced in economies that are further along the cloud adoption curve.Two key examples of this are workforce skills and cyber security.6 South Korean organisations need to en

40、sure employees are trained in cloud-related skills.At the same time,surveys show that South Korean enterprises still list security as the main obstacle to cloud adoption,despite mounting evidence of the strong security benefits of using best-in-class,professionally managed cloud services rather than

41、 relying on fragmented self-managed IT infrastructure.With no major changes to the supply landscape or regulatory environment,cloud spend in South Korea could grow to KRW10.9 trillion in 2027,contributing KRW14.7 trillion to GDP of that year,driven by growing demand and vibrant supply South Koreas c

42、loud services sector is remarkably diverse,with a large number of CSPs offering a broad range of innovative services to organisations of all sizes(see Section 3.2).Korean CSPs such as Naver Cloud,KT Cloud,NHN,Douzone Bizon and Kakao offer a range of services,including cloud-based compute and storage

43、,big data and AI platforms,as well as communication and collaboration platforms,and cloud-based game product suites.Naver Cloud stands out as a successful homegrown CSP in South Korea,having launched in 2017 with 22 cloud products and grown to over 200 product offerings across 18 categories by 2022.

44、Naver Cloud has also publicly stated its ambition to expand strongly outside South Korea,to become one of the three largest CSPs in the AsiaPacific region.7 In parallel,international CSPs including AWS,Google Cloud,Microsoft Azure and Alibaba Cloud,as well as smaller players such as Cloudflare and S

45、nowflake,are also actively servicing commercial enterprises in South Korea.In particular,regional enterprises could make use of international CSPs strong global presence supported by extensive infrastructure worldwide as well as support personnel that span across regions.The vibrancy of the cloud se

46、rvices sector in South Korea can also be seen from the sustained growth in the number of CSPs operating in South Korea the Korea Association of Cloud Industry indicated that there were 1764 CSPs in 2021,compared to 804 in 2017.8 South Korea is also experiencing a high degree of multi-cloud take-up w

47、ith an adoption rate of 2.5 public clouds per enterprise,9 versus 6 KDI Economic Information Center Data Research Team,2021.“Cloud Survey”7 Korea Economic Daily,2022.“Naver Cloud seeks win-win strategy with K-startups in overseas market”8 Korea Association of Cloud Industry,2022.“2021 Cloud Industry

48、 Survey Results Report”9 VMware,2022.“VMware Releases Multi-Cloud Maturity Study Report South Koreas Multi-Cloud Ranks Worlds Highest”Economic impact and dynamics of cloud services in South Korea|4 Ref:8865878839-21.the global average.10 These factors reflect that cloud customers have a wide range o

49、f needs that requires different services and solutions from different CSPs.We also observe increased levels of collaboration between CSPs,with KT and AWS announcing a partnership in 2021 to conduct joint research in AI and cloud technologies,as well as the launch of a hybrid cloud service(see Sectio

50、n 3.2.1).Despite the barriers to adoption mentioned earlier,the continued investments and education efforts of the diverse group of CSPs operating in the country is expected to drive sustained growth in cloud adoption in South Korea.Our central projection,where the supply landscape continues to be r

51、obust with demand increasing at a similar trajectory to past growth and the current regulatory environment remaining largely unchanged,expects overall cloud spend to grow to KRW10.9 trillion in 2027,with an estimated contribution to South Koreas GDP of KRW62.2 trillion cumulatively for the period of

52、 2023 to 2027(see Section 5.3).A more supportive regulatory and policy environment in South Korea,could unlock faster adoption and greater economic impact CSPs are investing and innovating at a rapid pace,reflecting the growing demand from customers(noting that cloud adoption is at an early stage,ev

53、en in the most developed economies).Governments also appear keen to support such investment,innovation and growth:in South Korea,the government recently launched the third basic plan for cloud computing that provides multiple initiatives to nurture cloud-trained talent in the country.It adopted legi

54、slation as early as 2015 to promote the use of cloud services by government agencies.The government is also supporting cloud services by investing in cloud-based research and development which includes cloud-based high-performance computing(see Section 4.4).Further actions,such as funding for traini

55、ng and subsidy programmes for digital initiatives,as well as ensuring that laws and regulatory measures are reviewed periodically to reflect and support government policy developments are needed.In particular,reviews of the CSAP regulation and NCT regulation to ensure cloud customers have access to

56、the widest possible range of solutions,including within clearly defined security and resilience standards,could lower barriers to adoption,and further support digital investment and growth in South Korea(see Section 4.3.4).Conversely,imposing regulatory measures that target specific CSPs or certain

57、cloud services have the potential to adversely impact technological and digital developments in the cloud services sector.For example,regulation that imposes new onerous obligations on CSPs could reduce the IT choices available for businesses and government agencies and/or innovation and investment

58、in new services in this sector.These risks indicate that in a fast-evolving sector,interventions must be carefully tested and calibrated to avoid poor outcomes that would ultimately reduce the economic potential of cloud services for South Korea overall(see Section 6.1.2).10 The global average numbe

59、r of public clouds per cloud customer is at 2.2 in 2022.VMware,2022.“The Multi-cloud Maturity Index”;based on a survey of organisations spread across 19 countries Economic impact and dynamics of cloud services in South Korea|5 Ref:8865878839-21.In most cases,good policy and regulation is a matter of

60、 balance with measured considerations on the level of obligations imposed which increases costs of doing businesses vs.the expected benefits to facilitate or level of risks to mitigate(see Section 6.2.2).For example,cloud security standards and certification programmes may increase costs to cloud us

61、ers,but they also foster trust in the security and resilience of cloud services when well calibrated and defined.This can be particularly beneficial for organisations that have elevated security or operational needs,including the government sector and some of the commercial sectors that have more se

62、nsitive requirements,and ultimately it benefits cloud adoption and reduces the risks associated with security issues.Ensuring that the benefits of regulation outweigh its costs requires standards to be set carefully and fairly across all CSPs.Further,noting that new policies and regulations can be i

63、ncorrectly calibrated(e.g.by being overly stringent)or even become outdated in view of industry developments,mechanisms are needed to revisit and revise such regulations.The anticipated relaxation of CSAP constraints is a good example of policy makers adapting regulation to reflect changing market c

64、onditions.We note that ex-ante digital interventions,11 encompassing cloud services,are currently being considered in other economies,with a lot of debate both within those countries and globally.From the perspective of South Korea,it is important to consider how the economic,political and legal con

65、siderations in those countries differ from South Koreas.For example,the implementation of the Digital Markets Act(DMA)was designed for the European Union(EU)and its unique characteristics and may not be suitable for single-country economies outside the EU.Notwithstanding the EUs decision to implemen

66、t ex-ante digital regulation,that EU regime is subject to criticism from both regulators and industry associations.12 Given the ongoing uncertainties surrounding how new and untested digital specific regulation will be implemented(e.g.DMA will only fully take effect in 2024)and its impact on the dig

67、ital sectors,South Korean policy makers should exercise caution in considering whether this type of digital specific regulatory intervention is appropriate.Any proposed digital regulation should include a rigorous economic assessment on the expected trade-offs(see Section 6.4).This is especially cri

68、tical given South Koreas lagging cloud adoption.Existing competition and antitrust laws in South Korea will also continue to provide effective tools for regulators to intervene when necessary.In the context of the rapid pace of change in demand and supply in dynamic sectors like cloud services,it is

69、 challenging to clearly quantify the trade-offs involved in any individual policy decision.However,it is important for South Korean policy makers and regulators to have in mind the link between promoting the digital economy including via facilitating increased cloud adoption and the economic growth

70、of South Korea.11 The Digital Markets Act(DMA)introduced by the European Commission as an example 12 See Section 6.4 of the report for several examples of criticism of prescriptive digital platform regulation raised by leading industry bodies/regulators.Economic impact and dynamics of cloud services

71、 in South Korea|6 Ref:8865878839-21.Illustratively,if cloud adoption accelerated over the next five years to KRW13.9 trillion in 2027,instead of our base case of KRW10.9 trillion,the corresponding multiplier effect could potentially result in a cumulative GDP increase of KRW8.3 trillion from 2023 to

72、 2027.Conversely,constrained cloud adoption growth(for example due to restrictive policies or regulatory frameworks)could result in lower cloud adoption and spend leading to the opposite effect:a lower spend of KRW8.5 trillion in 2027 would lead to a decrease in GDP contribution by KRW7.9 trillion c

73、umulatively from 2023 to 2027(see Section 6.3).Understanding that the benefits that cloud adoption can bring to commercial enterprises and government agencies positively impact the overall South Korean economy is crucial because only a policy and regulatory environment that facilitates the growth of

74、 cloud services in South Korea will achieve the cumulative GDP increase observed above.This suggests the South Korea government needs to carefully consider,assess and determine the impact of policies that may increase or restrict cloud adoption(including restrictions on specific CSPs and ex ante reg

75、ulation),through a careful analysis of their costs and benefits.Economic impact and dynamics of cloud services in South Korea|7 Ref:8865878839-21.1 Introduction This report was commissioned by the Digital Industry Policy Association(DIPA)and performs a review of the dynamics in South Koreas cloud se

76、rvices sector from both a demand and supply perspective,assesses the economic impact of the cloud services in South Korea,and discusses regulatory considerations in light of the key findings.The analysis contained in this report,including all future projections,is the sole responsibility of Analysys

77、 Mason and does not necessarily constitute an endorsement on the part of DIPA.The research that underpins this report was conducted between December 2022 and February 2023.The expansion of broadband infrastructure globally,particularly since the turn of the twenty-first century,has spurred increasin

78、g internet penetration,allowed companies that span a range of industries to deploy advanced IT infrastructure for their own and others operational requirements and facilitated the emergence of cloud computing.Cloud computing allows resources and services to be delivered through the internet.Strong g

79、rowth in cloud adoption by commercial enterprises and government agencies alike has provided significant benefits including enabling digital transformation and facilitating access to advanced digital applications that are commonly used today.While South Korea is a highly developed market that is amo

80、ngst the largest economies globally,cloud adoption lags behind those of peer countries.This has hindered the country from fully capturing the benefits of cloud adoption,including improving productivity and enabling the growth of the digital economy.Understanding barriers to cloud adoption in South K

81、orea and identifying policy tools that may reduce these barriers can thus facilitate stronger cloud adoption and enable a stronger positive impact for the economy.The remainder of this document is laid out as follows:Section 2 introduces cloud services,including main cloud architecture models,exampl

82、es of cloud products,and key benefits.Section 3 provides an overview of the supply landscape for cloud services,starting with a general global view and then looking at the specific South Korean context.Section 4 assesses the growth potential of cloud services in South Korea.Section 5 reviews the eco

83、nomic impact of cloud services in South Korea based on the expected growth potential of cloud services.Section 6 considers how government policy can be used to maximise the benefits of the cloud services sector to the economy.Economic impact and dynamics of cloud services in South Korea|8 Ref:886587

84、8839-21.2 Overview of cloud services The advent of cloud computing has played a key role in the digital transformation of organisations by allowing them to outsource computing resources and access them via a third party through the internet.Cloud services have delivered significant benefits to organ

85、isations in both commercial and government sectors,including improving productivity,supporting tech start-ups and the overall digital economy,as well as facilitating more sustainable use of IT resources to support net-zero goals.For example,cloud services reduce the need for significant upfront cost

86、s for capital expenditure on IT hardware,thus freeing up capital that can be used for other purposes while also enabling greater flexibility by providing access to computing resources on-demand.In this section,the Report:provides an overview of cloud computing and the main cloud architectures(Sectio

87、n 2.1);discusses the broad range of products enabled via cloud services including new products that cut across traditional definitions within the cloud services sector(Section 2.2);and introduces the key benefits enabled via the use of cloud services(Section 2.3).2.1 Cloud computing involves the on-

88、demand delivery of computing services through the internet via architectures including public,private or hybrid clouds The emergence of personal computers in the 1970s saw growth in computer literacy globally leading to increasing digitisation by organisations,and the twenty-first century saw the ad

89、vent of broadband internet,which enabled digital transformation via cloud computing.By the early 2000s,copper-based digital subscriber line(DSL)broadband was starting to become available in most markets,and by the early 2010s,fibre-based broadband was starting to be introduced enabling significant i

90、mprovements in the performance of broadband networks.Increasing broadband network quality and availability allowed the emergence of companies to provide internet-based services and applications to consumers,businesses,and governments.These services have grown in popularity and today include web sear

91、ch,social media and other digital content services.These developments enabled the rise of cloud computing,where computing resources are delivered through the internet,allowing organisations to access resources even if the underlying infrastructure is owned and/or managed by a third party.Today,cloud

92、 services are an alternative to self-managed information technology(IT)systems that operate on-premises in the organisations own data centre,with the organisations generally purchasing,owning and managing the underlying IT equipment.That said,many organisations have adopted models that involve both

93、cloud and on-premises solutions.Computing resources refer to underlying compute,storage and networking resources that enable the delivery of software applications and workloads.With the advent of cloud computing,such computing resources can be outsourced to third parties to varying extents depending

94、 on the Economic impact and dynamics of cloud services in South Korea|9 Ref:8865878839-21.requirements of the organisations using these resources.In addition,cloud computing facilitates virtualisation,which separates hardware resources from applications that utilise the resources.This separation all

95、ows multiple operating systems and applications to be run on common hardware(and potentially even allows for these to be shared across multiple different organisations)while improving the efficient use of resources.There are several key cloud computing architectures as described below,with their dif

96、ferences providing organisations with options to meet their unique and varying IT needs:Public cloud Public cloud refers to an architecture where on-demand computing resources are managed by third-party providers that offer these resources to organisations;computing resources are also shared across

97、multiple customers.This delivers efficiencies by sharing resources with other organisations and provides benefits to customers such as reducing upfront costs and minimising underutilised resources.Private cloud Private cloud refers to an architecture where computing resources are dedicated to a sing

98、le organisation;resources can be managed by the organisation itself or outsourced to a third-party provider.The virtualisation of resources in a private cloud fundamentally differs from on-premises IT.Hybrid cloud A hybrid cloud architecture allows organisations to combine private and public cloud e

99、nvironments.The organisation can continue using existing on-premises infrastructure for some workloads and applications while also utilising resources via the public cloud.Multi-cloud With the emergence of numerous cloud service providers(CSPs)that offer various services,a further option is multi-cl

100、oud adoption where an organisation utilises services from multiple CSPs.The differences between public cloud and private cloud as compared to on-premises IT are summarised in Figure 2.1.Public cloud offers the most significant“transformation to the way that businesses buy computing resources”as high

101、lighted by Ofcom and will form the primary focus of this report,though we will also discuss other service models.13 Figure 2.1:Characteristics of on-premises IT versus public/private cloud Source:Analysys Mason,2023 CharacteristicsCharacteristics OnOn-premisepremises s IT IT Private cloudPrivate clo

102、ud Public cloudPublic cloud Hardware ownershipHardware ownership Owned and managed by end user Owned and managed by end user or outsourced to third party Outsourced to third party 13 Ofcom,2022.“Cloud services market study”Economic impact and dynamics of cloud services in South Korea|10 Ref:88658788

103、39-21.CharacteristicsCharacteristics OnOn-premisepremises s IT IT Private cloudPrivate cloud Public cloudPublic cloud Location of hardwareLocation of hardware On-premises Either on-premises of off-premises Off-premises Shared vShared versus ersus dedicated dedicated computing resourcescomputing reso

104、urces Dedicated Dedicated Shared Virtualisation(i.e.decoupled Virtualisation(i.e.decoupled software and hardware)software and hardware)Cloud computing remains part of the overall IT services market serving as an option against alternatives that includes on-premises IT or a hybrid approach.This is su

105、pported by a survey of IT decision makers which showed that 74%of respondents“had moved an application into the cloud and then moved it back into their own infrastructure”highlighting how on-premises solutions remain viable alternatives to cloud services.14 Cloud services thus remain a relatively na

106、scent component of the broader IT services market.2.2 Cloud services entail an extensive range of services to meet different customer needs,with products constantly evolving and blurring boundaries between different cloud services 2.2.1 The traditional IT stack has evolved amidst cloud-driven innova

107、tions to now comprise additional layers that enable the execution of software applications Traditionally,an organisations IT stack can be represented by the layers shown in Figure 2.2 the various layers interact with each other to enable an application to be delivered to an end user.A simple illustr

108、ation of how these layers interact with each other is shown in Figure 2.3,hardware such as servers and storage equipment can have an operating system installed that then enables applications to be run and used by end users.Cloud computing allows for varying levels of this IT stack to be outsourced t

109、o a third-party and delivered through the internet.Figure 2.2:Key layers of the traditional IT stack Source:IBM,202015 LayersLayers DescriptionDescription ApplicationApplication Program or software that performs a specific task or set of tasks DataData Data refers to information that is stored and m

110、anaged by a computer or system RuntimeRuntime environmentenvironment The environment in which an application executes;this includes the operating system,libraries and dependencies 14 IHS Markit,2019.“The Bi-Directional Cloud Highway:User Attitudes about Securing Hybrid-and Multi-Cloud Environments”1

111、5 IBM Cloud Learn Hub,2020.“Cloud Computing”Economic impact and dynamics of cloud services in South Korea|11 Ref:8865878839-21.LayersLayers DescriptionDescription MiddlewareMiddleware Software that acts as a bridge between different applications or systems,enabling them to communicate and exchange d

112、ata Operating Operating systemsystem Software that manages a computers resources and provides a platform on which to run applications VirtualisationVirtualisation Use of software to create virtual versions of computer hardware,such as servers,storage and networking resources ServersServers Servers a

113、re powerful computers that host applications and services,and provide resources and capabilities to other devices on a network StorageStorage Storage is a general term that refers to devices and technologies used to store and manage data,such as hard drives,solid-state drives and storage area networ

114、ks NetworkingNetworking Infrastructure and devices that enable communication and connection between computers and other devices,such as routers,switches and hubs Figure 2.3:Illustration of how IT layers interact with each other Innovations in cloud computing have added new layers to the IT stack.For

115、 example:Containers Containers are executable units of software in which application code is packaged,along with its libraries and dependencies,so that it can run consistently across any supported environment.16 Containers can be considered as a form of operating system virtualisation and they thus

116、sit above the operating system layer in the IT stack.17 Functions Functions can be thought of as the individual components that make up an application.18 They are blocks of code that perform a specific task in applications and can be called upon to execute that task when needed.They can be represent

117、ed as sitting above the application layer in the IT stack.Todays IT stack can be represented with the layers shown in Figure 2.4.The layers towards the left of the figure provide increasing control of the computing resources as they represent the building blocks that the subsequent layers(e.g.operat

118、ing system and applications)build upon.16 IBM.“What are containers?”17 NetApp.“What are containers?”18 YouTube,2022.“Cloud Fundamentals What is FaaS(Functions as a Service)?”Servers Servers and storageand storageOperating Operating systemssystemsApplicationApplications sProvides the hardware which h

119、osts operating systems Provides the software which runs cloud-based appApplicationcan then be accessed and used by end userEnd userEnd userEconomic impact and dynamics of cloud services in South Korea|12 Ref:8865878839-21.Figure 2.4:Modern IT stack with cloud-driven innovations Source:Analysys Mason

120、 2.2.2 Cloud services enable parts of the IT stack to be outsourced to third-party CSPs,relieving organisations of the burden of directly owning and managing all layers With cloud computing enabling access to IT resources via the internet,organisations can choose to own and manage all layers of the

121、IT stack or they can selectively outsource parts of the IT stack to CSPs.With IT needs varying significantly across different industries and organisation sizes,a wide array of cloud services have emerged.The wide range of cloud services has led to the coinage of the term anything as a service(XaaS)t

122、o describe various cloud services that are delivered to end users via the internet.Some examples of cloud services are shown in Figure 2.5 which highlights the layers of the IT stack provided by the CSP as part of the cloud service.This non-exhaustive list already shows how the IT stack provides for

123、 a multitude of cloud services that vary by the extent of outsourcing to the CSP.Figure 2.5:Cloud services and the extent to which they are outsourced to CSPs Source:Analysys Mason,2023 Cloud servicesCloud services NetworkingNetworking StorageStorage ServersServers VirtualisationVirtualisation Opera

124、ting Operating systemsystem ContainerContainer MiddlewareMiddleware RuntimeRuntime DataData ApplicationApplication FunctionsFunctions Desktop as a service(DaaS)Containers as a service(CaaS)Database as a service(DBaaS)Functions as a service(FaaS)Cloud-based enterprise resource planning(ERP)Cloud-base

125、d communication platforms NetworkingNetworkingStorageStorageServersServersVirtualisationVirtualisationOperating Operating systemsystemContainerContainerMiddlewareMiddlewareRuntime Runtime environmentenvironmentDataDataApplicationApplicationFunctionsFunctionsIncreasing IT architectural controlIncreas

126、ing IT architectural controlEconomic impact and dynamics of cloud services in South Korea|13 Ref:8865878839-21.Cloud servicesCloud services NetworkingNetworking StorageStorage ServersServers VirtualisationVirtualisation Operating Operating systemsystem ContainerContainer MiddlewareMiddleware Runtime

127、Runtime DataData ApplicationApplication FunctionsFunctions LegendLegend:Controlled by CSP in delivery of cloud service The diversity of cloud services underscores how a broad array of differentiated cloud services can meet varying organisational needs Cloud product differentiation goes beyond differ

128、ences in the layers of the IT stack that are controlled by the CSP in the delivery of the product.For example,while both cloud-based enterprise resource planning(ERP)and cloud-based communication platforms involve the CSP controlling the full IT stack to enable the product(see Figure 2.5 above),the

129、functionality of these two product types differs significantly.19 These differences illustrate the significant diversity of cloud services with a broad array of services differentiated not only by the layers of the IT stack that are outsourced but also by the actual functionality and features of the

130、 service.This flexibility allows organisations to customise cloud solutions appropriately to meet their unique needs.2.2.3 Newer cloud services with features that blur the boundaries of the IT stack are reducing the relevance of traditional cloud categorisations Traditionally,cloud services have oft

131、en been classified simplistically across three main categories:infrastructure as a service(IaaS),platform as a service(PaaS)and software as a service(SaaS),with the key difference being the extent of outsourcing across the IT stack.However,as described above,cloud services span a broad range of func

132、tions and features across the IT stack.In addition,continued innovation within the cloud industry has seen the introduction of new products which do not directly fit into the traditional categorisation of IaaS/PaaS/SaaS.For example,CaaS refers to a cloud service that manages containers and organises

133、 containerised workloads the CSP is responsible for the networking-to-container functions described in Figure 2.5 above.This differs from the traditional classification of IaaS products,where only the network to virtualisation layers are managed by the CSP,and also differs from the traditional class

134、ification of PaaS products where additionally the CSP would be responsible for runtime and middleware functions(which are generally not part of CaaS products).The UK regulator,Ofcom,has noted that the boundaries between the“IaaS,PaaS and SaaS designations”can blur,and that“customers typically focus

135、on buying capabilities rather than by reference to these terms”.20 19 Cloud-based ERP involves the management of business functions such as accounting and supply-chain management;cloud-based communication platforms enable functionalities that include instant messaging,conference calls and document s

136、haring.20 Ofcom,2022.“Cloud services market study:Call for inputs”Economic impact and dynamics of cloud services in South Korea|14 Ref:8865878839-21.The traditional classifications of cloud services into IaaS/PaaS/SaaS is thus seen as increasingly outmoded given that it does not reflect:how customer

137、s typically purchase cloud services where customers generally first define their objectives and then consider how a broad set of IT service options that can help meet them which can include cloud-based and non cloud-based solutions.Customers typically do not evaluate services based on the traditiona

138、l IaaS/PaaS/SaaS categorisations;the complexity of cloud services there are a large number of cloud services offered by numerous CSPs that can fulfil customers IT needs,with cloud services often able to be used in combination with others realise different use cases.Such combining of cloud services c

139、an thus make it difficult to allocate individual cloud services to traditional IaaS/PaaS/SaaS categorisations;the introduction of newer cloud services where definitions are blurred innovation continues to introduce new types of cloud services where traditional IaaS/PaaS/SaaS classifications are blur

140、red.2.3 Cloud services enable improved economic efficiency,promote the emergence of start-ups and support improved IT energy efficiency 2.3.1 Cloud services enable improved economic efficiency for organisations Cloud services can bring many benefits to organisations,which serve as the main reasons w

141、hy customers choose to use cloud services,these benefits include:productivity gains;cost savings;increased agility;higher resilience;scalability.These benefits are explained further below.Productivity gains By removing reliance on on-premises IT systems,where hardware and software are directly inter

142、twined,cloud services enable organisations to easily access advanced technology and tools,enabling them to increase their productivity.Examples include:enabling the development of customised cloud-based tools that bring about the automation of tasks and facilitate the creation of a next-generation,b

143、uilt-to-suit workspace with streamlined operations using cloud-based communication and collaboration tools that facilitate more efficient working in teams such as via concurrent work on live cloud-based documents Economic impact and dynamics of cloud services in South Korea|15 Ref:8865878839-21.faci

144、litating aggregation of data across sources to create a comprehensive view of operations,enabling end users to better identify areas for improvement.The European Commission has stated that cloud services have enabled“productivity improvements generated at the company level”which“accelerate macroecon

145、omic growth”.21 Cost savings In on-premises IT systems,organisations typically own and manage the underlying hardware used to run their applications.Significant capital expenditure is required to invest in the initial deployment of the hardware as well as to support ongoing maintenance and replaceme

146、nt.Cloud services can enable further cost savings for organisations compared to on-premises IT systems,as they provide:the ability to access advanced computing resources without needing to commit to significant capital expenditure usage-based pricing models for cloud services,with varied payments ba

147、sed on organisational requirements(compared to on-premises systems where capital expenditure is spent upfront,with no savings even if the hardware is underutilised).A study commissioned by the European Commission notes the cost savings and financial flexibility that cloud services enable:“Cloud serv

148、ices allow firms to reduce IT costs ranging from a 20%to 50%reduction and to shift IT costs from capital expenditure(CAPEX)to operating expenses”.22 Increased agility Cloud computing and virtualisation technology decouple software applications from the underlying hardware that provides the computing

149、 resources,thus helping organisations to tailor their products/services to different environments,geographies and channels.New applications can be quickly developed,tested and launched without the need for an organisation to deploy its own hardware.21 European Commission,2020.“Advanced Technologies

150、for Industry AT WATCH Technology Focus on Cloud Computing”22 Study prepared for the European Commission DG Communications Networks,Content&Technology by Deloitte,2016.“Measuring the economic impact of cloud computing in Europe”Economic impact and dynamics of cloud services in South Korea|16 Ref:8865

151、878839-21.Netflix has highlighted the increased agility enabled by cloud services,stating that the use of cloud services was critical in enabling it to introduce new features,and that this would not have been otherwise possible.The convenience of quick access to servers has enabled Netflix to offer“

152、many new resource-hungry features”and played a key role in supporting its expansion and growth as a leading over-the-top(OTT)video provider globally.23 Regulators such as the Infocomm Media Development Authority(IMDA)in Singapore have also noted that access to cloud services“increases business agili

153、ty to market changes”.24 Higher resilience The increased digitalisation of consumer activities has resulted in a broad range of applications being used daily;these span a variety of use cases such as social media,content,enterprise collaboration and finance.The frequency of use of such applications

154、and their significant contribution to our daily lives has made it critical to ensure resiliency and prevent or minimise downtime.Cloud services can facilitate the higher resilience of applications many CSPs utilise redundant and geographically distributed architectures that minimise or eliminate the

155、 existence of a single point of failure.Major CSPs have established cloud regions where the hardware resources used to provide cloud services are located at(typically key cities).Each cloud region can comprise multiple availability zones these availability zones involve hardware deployed in geograph

156、ically isolated locations and are interconnected via high-performance links.This provides for redundancy as a breach or outage at one availability zone does not impact the other availability zones which can still provide computing resources to end users and minimise downtime.For example,a CSP may of

157、fer a cloud region in Seoul,with the underlying hardware spread across multiple locations(i.e.availability zones)in the city.According to Ofcom,the resilience and security benefits of cloud services is noteworthy it states that cloud services not only helps end users to“increase their innovation pot

158、ential”and“increase their quality of service”but also helps organisations to“achieve baseline security and resilience”.25 Scalability A key issue related to on-premises IT systems is the ability of an organisation to increase computing resources quickly and affordably.A lack of ability to do this ca

159、n hamper the organisations ability to meet growing computing requirements effectively.For example,an organisation that is looking to procure additional hardware to increase computing resources may face difficulties on a financial level(e.g.due to the need to incur upfront capital expenditure)as well

160、 as on an operational level(e.g.due to the need to follow a procurement process and ensure sufficient IT headcount to manage the process).In comparison,cloud services can allow organisations to rapidly alter and increase their access to computing resources as their requirements evolve.By providing a

161、 more flexible on-23 Netflix,2016.“Completing the Netflix Cloud Migration”24 Infocomm Media Development Authority.“Cloud Computing”25 Ofcom,2022.“Cloud services market study:Call for inputs”Economic impact and dynamics of cloud services in South Korea|17 Ref:8865878839-21.demand model,cloud services

162、 reduce financial(e.g.upfront capital expenditure to procure hardware)and operational challenges(e.g.need for procurement process)when needing to scale up computing resources in an on-premises IT approach.The Organisation for Economic Co-operation and Development(OECD)recognises scalability as one o

163、f the key features of cloud services,mentioning that cloud services help to provision computing resources“in a rapid and elastic way”.It adds that users can buy computing services at“various granularities”and can“up-and downscale those services according to their needs”.26 2.3.2 Cloud services benef

164、it both commercial-and government-sector organisations Government agencies and commercial organisations alike can benefit from migrating to the cloud Figure 2.6 provides examples of how both types of organisations have leveraged cloud services in their digital innovation journey.Figure 2.6:Examples

165、of government-and commercial-sector organisations leveraging cloud services TypeType Organisation Organisation(c country)ountry)DescriptionDescription Government sector GovTech(Singapore)The Singpass app was launched by GovTech in 2018,and offers an array of functions including a digital identity ca

166、rd(IC),access to commonly used government digital services and the digital signature of documents While Singpass initially ran on infrastructure that was entirely on premises,the majority of the back-end components today run on the Government on Commercial Cloud(GCC),which includes multiple public c

167、loud providers27 Singpass has service availability of“close to 100%”via cloud services28 By February 2022,the Singpass app had 3.5 million users,representing more than 75%of citizens and permanent residents aged 15 and above29 Commercial sector Netflix(global)After facing a severe outage in its own

168、data centre in 2008,Netflix decided to move to the public cloud,fully completing its migration in 2016 26 OECD iLibrary,OECD Digital Economy Papers,2014.“Cloud Computing:The Concept,Impacts and the Role of Government Policy”27 The World Bank,ID4D,GovTech Singapore,2022.“National Digital Identity and

169、 Government Data Sharing in Singapore”28 Computer Weekly,2022,“Inside Singapores national digital identity journey”29 Smart Nation,2022.“Singpass Singapores National Digital Identity(Factsheet)”Economic impact and dynamics of cloud services in South Korea|18 Ref:8865878839-21.TypeType Organisation O

170、rganisation(c country)ountry)DescriptionDescription It has cited multiple benefits from moving to the cloud,including improved service availability,rapid global expansion and cost savings30 2.3.3 Cloud adoption drives an increased number of firms via start-ups and thus enables growth in the digital

171、economy The rise of the internet has fuelled the emergence of the digital economy,with firms looking to leverage the internet and related internet-based services to meet consumer and enterprise needs.One feature of the digital economy is tech start-ups,with their typically lean organisational struct

172、ure and capital constraints.This allows them to particularly benefit from cloud services to scale quickly and cost effectively.Cloud services and providers are thus key enablers in the growth of the digital economy.The benefits of cloud services for tech start-ups and thus the digital economy are di

173、scussed in further detail below.Reducing set-up costs for start-ups One of the biggest challenges faced by start-ups is the finite funding available,particularly because their profit-generation capabilities are likely to be limited initially.Given such financial constraints,start-ups face difficulti

174、es in investing in their own computing resources by committing to upfront capital expenditure for hardware.Cloud services provide a cost-effective IT solution for start-ups by enabling access to advanced computing resources without this upfront capital expenditure.Cloud services can also provide com

175、puting resources on demand to facilitate entry into a new sector or launch of a new service.The Asian Development Bank notes how cloud services can benefit“cost-conscious start-ups”by reducing“large upfront spending on on-premises ICT infrastructure”which can“bog down their ability to focus on their

176、 core products and services”.31 Enabling corporate flexibility through cloud-based business services Start-ups tend to begin with a lean structure,and initial employees are often focused on driving revenue growth via functions such as product or business development.However,start-ups still require c

177、ritical functions like human resources and accounting these may not be revenue 30 Netflix,2016.“Completing the Netflix Cloud Migration”31 Asian Development Bank,2021.“Cloud computing as a key enabler for tech start-ups across Asia and the Pacific”Economic impact and dynamics of cloud services in Sou

178、th Korea|19 Ref:8865878839-21.generating,but do ensure smooth ongoing operations.Cloud services support the outsourcing of such critical functions,allowing the start-up to be run effectively even with a lean structure.According to the Asian Development Bank,cloud services play a key role in the succ

179、ess of start-ups due to the provision of such“cloud-based business services”(e.g.accounting,human resources)which allow them to“build support systems according to their needs”and“reduce the burden of having to build a new system from scratch”.32 2.3.4 Cloud services also improve the IT energy effici

180、ency of organisations Sustainability and IT efficiency are becoming increasingly critical priorities for commercial enterprises and government agencies globally.A major source of carbon emissions/electricity usage in organisations is self-owned data centres and IT equipment,and while organisations w

181、ould like to improve their energy efficiency and lower their carbon emissions most do not have the resources to make substantial improvements.33 The adoption of cloud services can facilitate these improvements due to following drivers:the utilisation of servers are maximised due to the availability

182、of on-demand models(as opposed to on-premises IT systems where servers are underutilised during off-peak periods but still use energy for operating and cooling)CSPs generally operate in more energy-efficient data-centre facilities with lower power usage effectiveness(PUE)that minimise excess energy

183、for non-computing needs(e.g.cooling)CSPs typically use state-of-the-art server chips and components that can provide better computing power per unit of energy.Cloud migration is estimated to reduce carbon emissions globally by over 59 million tonnes per annum this is equivalent to taking 22 million

184、cars off the road.34 The potential of cloud services to improve energy efficiency has also been acknowledged by governments and regulatory bodies globally.For example,Ofcom has noted that“cloud services could also help businesses become more sustainable by lowering their IT energy consumption”.35 32

185、 Ibid.33 S&P Global Market Intelligence,2021.“The Carbon Reduction Opportunity of Moving to the Cloud for APAC”34 Accenture,2020.“The green behind the cloud”35 Ofcom,2022.“Cloud services market study:Call for inputs”Economic impact and dynamics of cloud services in South Korea|20 Ref:8865878839-21.3

186、 The supply landscape for cloud services In Section 2,the Report provided an overview of cloud services,including how CSPs provide these services to customers,enabling the benefits described in Section 2.3.In this section,the focus moves to the complex underlying cloud service value chain,which feat

187、ures multiple types of players brought together by CSPs.South Korea has seen the development of a diverse cloud services supply landscape supported by different types of CSPs that offer a wide range of cloud services(Section 2.2)that are able to meet varying customer needs.The cloud services sector

188、continues to see strong innovation in terms of new types of cloud services;in addition,new CSPs provide new options for customers,thus increasing the potential benefits to customers.In this section,the Report:introduces the cloud services value chain(Section 3.1);provides an overview of South Koreas

189、 diverse cloud services supply landscape(Section 3.2);discusses innovations and successful challenger CSPs that continue to emerge in the cloud services sector(Section 3.3).3.1 The cloud services value chain is complex and involves stakeholders ranging from real-estate providers to application provi

190、ders The cloud services value chain involves multiple types of players that provide critical products and services to each other.Their interactions and relationships allow customers to use,and benefit from,cloud services.For example:CSPs are reliant on hardware that provides the underlying computing

191、 resources and connectivity that allows these resources to be delivered through the internet these are typically provided by third parties to the CSP.Hardware that provides computing resources for cloud services are typically located at data centres which are effectively a type of industrial real es

192、tate.CSPs often lease space from data-centre co-location providers and are reliant on these players for critical infrastructure to enable cloud services.Organisations considering IT services,including cloud services,often rely on professional service providers to evaluate vendors and provide recomme

193、ndations.These professional service providers can also be involved further support efforts,for example by managing the cloud migration process.Figure 3.1 below provides an illustration of the cloud services value chain,including the major types of players that interact with each other as well as exa

194、mples of companies in each category.Economic impact and dynamics of cloud services in South Korea|21 Ref:8865878839-21.Figure 3.1:Cloud services value chain Source:Analysys Mason,2023 The categorisation of players into different aspects of the cloud services value chain is not rigid,as players can c

195、hoose to offer services in multiple areas.For example,Dell Technologies(Dell)and Hewlett Packard Enterprise(HPE)are both recognised market leaders in the provision of server hardware,and together hold approximately one-third of the global server market.36 Both players also offer cloud services,as se

196、en with Dells APEX Cloud Services37 and HPEs GreenLake suite.38 The interactions between players along the value chain is not fixed as they are ultimately dependent on the unique deployment requirements of each customer.For example,organisations that opt for a hybrid IT services solution that combin

197、es cloud services and on-premises IT will see the hardware provider being located next to the end user.Similarly,the need for professional cloud services is dependent on the characteristics of the organisation larger organisations that have more developed IT teams internally may not require such ser

198、vices and may instead go direct to the CSP.3.2 South Korea has a vibrant supply landscape supported by a diverse and increasing range of CSPs The supplier landscape of the cloud services sector is important as it determines the range of services available to number of vendors competing to provide se

199、rvices to potential customers.South Koreas cloud services sector has a diverse supply landscape with a wide mixture of renowned and credible 36 Ofcom,2022.“Cloud services market study:Call for inputs”37 Dell Technologies,2021.“Dell Technologies APEX Transforms How the World Consumes Technology”38 HP

200、E.“HPE GreenLake”Real Real estateestateHardware and Hardware and connectivity connectivity Cloud Cloud providersprovidersProfessional Professional cloud servicescloud servicesEndEndusersusersBuilding ownersCo-location data centresEdge data centresServers/networking vendorsElectricity/internet provid

201、ersPlayers responsible for different outsourced layers in the IT stack Cloud brokerages/integratorsManaged service providersPublic institutionsEnterprisesIndividualsFor example:For example:EquinixDigital RealtyCoresiteFor example:For example:CiscoDellHPEFor example:For example:KT CloudNHN CloudAWSMi

202、crosoftDellHPEFor example:For example:MegazoneCloudBespinGlobalIncreasing proximity to Increasing proximity to end userend userEconomic impact and dynamics of cloud services in South Korea|22 Ref:8865878839-21.CSPs.In addition,the steady rise in the number of CSPs present in South Korea provides wid

203、er breadth of options available to customers and increases the level of competition in the sector.3.2.1 South Korea has a diverse mixture of CSPs that offer unique strengths,with collaboration between industry players to promote cloud services South Korea has a large range of CSPs present,with each

204、presenting unique strengths and propositions that appeal to different organisations.As discussed in Section 2.2,the cloud services sector involves an extensive range of services across the entire IT stack.This can similarly be seen in South Korea,where different CSPs offer varying cloud services acr

205、oss the IT stack.Figure 3.2 below provides examples of CSPs that are currently active in South Korea and a selection of the key cloud services that they offer.The key cloud service examples illustrate the broad range of services provided by these CSPs.Figure 3.2:Examples of CSPs operating in South K

206、orea Source:CSP websites,2023 CSPsCSPs Examples of key cloud servicesExamples of key cloud services Alibaba Cloud Alibaba Cloud ECS(elastic compute service)Alibaba Cloud CDN(content delivery network)PolarDB(cloud-native relational database)AWS AWS EC2(virtual servers)AWS SageMaker(machine learning p

207、latform)AWS Lamda(serverless computing)Douzone Bizon Douzone Cloud Server(virtual servers)Amaranth 10(cloud-based ERP)WEHAGO Platform(cloud-based business platform)Google Cloud Google Anthos(container platform)Google Workspace(cloud-based productivity)BigQuery(data warehouse)Kakao Mobile platform(cl

208、oud-based social media,messaging,payments,shopping etc)Kakao i Cloud(enterprise cloud services)KakaoWork(cloud-based communication and collaboration platform)KT Cloud CloudFarm(hybrid cloud service)KCI(KT Cloud container instances)Data Lake(big data platform)Microsoft Office 365(cloud-based producti

209、vity suite)Microsoft Teams(cloud-based communication)Azure Virtual Desktop(DaaS)Naver Cloud Compute and storage Clova suite(AI services)Workplace(cloud-based business applications)NHN Cloud Compute and storage NKS(managed Kubernetes clusters)NHN Cloud GamePlatform(cloud-based game product suite)Econ

210、omic impact and dynamics of cloud services in South Korea|23 Ref:8865878839-21.CSPsCSPs Examples of key cloud servicesExamples of key cloud services Salesforce Customer 360(cloud-based CRM)Tableau(visual analytics platform)Slack(cloud-based communication)Samsung SDS Compute and storage DB Service(da

211、tabase creation/management)Kubeflow(machine learning platform)SAP SAP S/4HANA Cloud(cloud-based ERP)SAP SCM software(cloud-based supply-chain management software)Cloud-based financial management software Tencent Cloud Lighthouse(lightweight cloud server service)TDSQL-C(cloud native database)Tencent

212、CVM(cloud virtual machines)Workday Workday HCM(cloud-based human capital management software)Workday Adaptive Planning(cloud-based enterprise planning software)Workday Peakon(cloud-based employee engagement software)Yanolja Global travel platform(cloud-based travel booking platform)Y Flux(cloud-base

213、d automated hotel solution)eZee(cloud-based global hotel management solutions)The diversity of South Koreas supply landscape is further supported by the success and growth of players focused primarily on the South Korean market over global counterparts.For example,Douzone Bizon offers cloud-based ER

214、P software and has become the market leader in South Korea,reaching a domestic ERP market share of 19%in 2019.In 2021,it was described as“eating away at the market share of the worlds dominant ERP software developer SAP”.39 Its success saw it receive investment of USD360 million from Bain Capital in

215、 the same year.Similarly,Naver Cloud was launched in 2017,initially offering 22 cloud products,which grew to over 200 products across 18 categories by 2022.40 In Q3 2022,Naver reported that its Cloud&Other(B2B)revenue had reached KRW112.9 billion,compared to its Q3 2021 revenue of KRW100.9 billion,i

216、mplying a 12%year-on-year growth in revenue.41 Another example can be seen via KT Cloud which achieved revenue of KRW144.1 billion in Q3 2022,with a quarter-on-quarter increase of 11%.42 In addition,there is on-going collaboration between CSPs to promote cloud adoption in South Korea.In July 2021,KT

217、 Corporation announced that it had entered into a strategic partnership with AWS to pursue joint research in AI and cloud technologies.The two players also announced the launch of a hybrid cloud service which would provide added flexibility for customers.In the context of this partnership,a newspape

218、r article stated that“if a company utilising KT Cloud services expands overseas,it will be able to use AWSs services and cloud infrastructure,which are better suited to local market conditions,and vice versa for AWS clients that enter the Korean market,where they 39 Korea Economic Daily,2021.“Bain C

219、apital to invest$360 mn in Koreas top ERP developer”40 Korea Economic Daily,2022.“Naver Cloud seeks win-win strategy with K-startups in overseas market”41 Naver,2022.“3Q22 Earnings Results”42 KT,2022.“KT 3Q22 Earning Release”Economic impact and dynamics of cloud services in South Korea|24 Ref:886587

220、8839-21.will be able to connect to KTs Cloud services.”43 This active collaboration illustrates the complexity and dynamism(and ongoing evolution)of South Koreas cloud services sector with CSPs able to collaborate and compete,all at the same time.3.2.2 South Koreas healthy supplier landscape is unde

221、rscored by the continued rise in the number of CSPs Figure 3.3 illustrates that the total number of companies providing cloud services in South Korea has been growing steadily in recent years.This growth can be attributed to the dynamic nature of the industry,with new suppliers constantly entering t

222、he sector.CSPs have been attracted by South Koreas immature cloud services sector and the strong growth potential offered(this is discussed in further detail in Section 4).Figure 3.3:Number of cloud providers in South Korea Source:National IT Industry Promotion Agency&Ministry of Science and ICT,202

223、344 The increasing number of CSPs in South Korea includes the emergence of successful South Korean start-ups who have attracted significant funding to support continued growth.For example,flex is a South Korean cloud-based human resource management platform which enables organisations to automate hu

224、man resource processes.It was able to grow revenues 10 year-on-year which led to it successfully raising USD32 million at a valuation of USD287 million in early 2022 despite only being two years old.45 Another example of this is DeepBrain AI which offers cloud-based AI-powered customer service produ

225、cts,with a focus on human-like avatars that respond to natural 43 Korea Times,2021.“KT partners with Amazon to collaborate in digital platform,media biz”44 Korea Association of Cloud Industry,2023.“2022 Cloud Industry Survey Results Report”45 TechCrunch,2022.“South Korean HR automation platform flex

226、 raises$32M Series B at a$287M valuation”8048041,1421,1421,2251,2251,4091,4091,7641,76420212017201820202019+22%+22%CAGR“We have a cooperative and competitive relationship with AWS in the cloud market.We will bring the optimum services to our B2B clients,which will be able to have more choices throug

227、h the partnership We will combine the know-how and capabilities of KT with AWSs diverse cloud services and technologies,including machine learning,Amazon Connect and the Internet of Things,while helping to enhance companies competitiveness and innovativeness.”KT official Economic impact and dynamics

228、 of cloud services in South Korea|25 Ref:8865878839-21.language questions.Its customers include major South Korean enterprises such as MBN,LG HelloVision,and KB Kookmin Bank and it successfully raised USD44 million in 2021 a valuation of USD180 million.46 The growing number of CSPs also includes the

229、 entry of international CSPs into South Korea and their increasing investments that will provide greater options available to potential customers.These CSPs entering and investing in South Korea include:Alibaba Cloud Alibaba Cloud launched its first local data centre in South Korea in 2022.47 It fur

230、ther announced a partnership with the Korea Indie Game Association to“boost the digital transformation of small and medium-sized game companies in Korea”,including providing them with“free cloud-related training and professional consultation”.48 Cloudflare Cloudflare,a publicly listed content delive

231、ry network(CDN)and security solutions provider,launched its office in Seoul in December 2022.It stated that it was already serving many local customers,including bemyfriens,EJN Corp,Hyperconnect,Neowiz,Radish Media Inc and TeamBlackbird Inc.49 Snowflake In November 2021,Snowflake,a sizable big-data

232、cloud provider from the USA,opened an office in Seoul.It described its expansion as showcasing“its ongoing commitment to empowering Korean customers with data”.50 46 VentureBeat,2021.“Deepbrain boosts AI-powered virtual avatars with$44M raise”47 Alibaba Cloud,2022.“Alibaba Cloud Launches Data Center

233、 in South Korea”48 Alibaba Cloud,2022.“Alibaba Cloud Partners with Korea Indie Game Association to Support Game Developer”49 Cloudflare,2022.“Cloudflare Announces New Seoul Office and Appoints Head of Korea”50 Snowflake,2021.“Snowflake Continues Global Data Cloud Expansion With Entry Into the Korean

234、 Market,Names Hyoungjun Kang as Country Manager”Economic impact and dynamics of cloud services in South Korea|26 Ref:8865878839-21.South Koreas diverse supplier landscape with a broad mix of CSPs that each offer unique strengths,coupled with the steady increase in the number of CSPs,promotes a healt

235、hy level of options available to customers.In addition,collaboration across players to promote cloud services will further spur greater levels of innovation and drive higher cloud adoption in South Korea.3.3 Key global trends in the cloud supplier landscape indicate that customers benefit from conti

236、nued innovation,fuelled by the competitive,tech-driven nature of the sector The competitive cloud services sector has driven innovation amongst CSPs and the continuous emergence of challengers that provide increasing options available to customers with growing multi-cloud adoption both globally and

237、in South Korea providing evidence of this.In addition,innovations introduced by CSPs and spurred by the competitive cloud services sector have reshaped how customers are able to use and benefit from cloud adoption.3.3.1 Growing multi-cloud adoption globally emphasises the abundance of credible cloud

238、 providers this is particularly apparent in South Korea Multi-cloud use refers to an organisation utilising services from multiple third-party CSPs.Multi-cloud adoption is driven by various factors,including the fact that it:allows end users to leverage a broader range of innovative and best-in-clas

239、s products,due to the abundance of CSPs that all have unique strengths and offer different products;supports cost optimisation by considering unique pricing by CSP when allocating various outsourced functions to different CSPs;“We are launching the data center in Korea to meet the strong needs for d

240、igital transformation from our Korean customers.Through the launch of the data center,we will continue to enable Korean customers with the latest cloud-based technologies and solutions to succeed in their digital journey.”Unique Song,Regional General Manager Alibaba Cloud Intelligence“Korea is an in

241、novation and technological hub and is one of the most Internet-connected countries in the world.As such,Korea was a clear choice when considering expansion locations for our next office in Asia.”Jonathan Dixon,Vice-President and Managing Director Cloudflare“Snowflake considers the growth potential o

242、f the Korean market very high.There is a high demand for Snowflakes services in Korea.”Kang Hyoung-jun,Country Manager(South Korea)Snowflake Economic impact and dynamics of cloud services in South Korea|27 Ref:8865878839-21.can strengthen resilience by reducing dependency on a single CSP and its inf

243、rastructure;improves the negotiating power of customers and can lower their barriers to switching CSP in the future.Multi-cloud adoption has been growing globally,and studies show that the average number of public clouds used by organisations has increased from 1.3 clouds in 2020 to 2.2 clouds in 20

244、22.51 One recent landmark example is the award by the United States Department of Defense(DoD)of cloud services contracts worth up to USD9 billion to Google,Oracle,Amazon and Microsoft.52 This represented a shift from a previous decision to award a single cloud services contract to Microsoft.The Pen

245、tagon stated that“the evolution of the cloud ecosystem and changes in user requirements to leverage multiple cloud environments”contributed to its decision to move to a multi-cloud approach.53 South Korea has a relatively high multi-cloud adoption rate of 2.554 public clouds per enterprise in 2022,w

246、hich shows that South Korean cloud customers are sophisticated and also indicates that multiple credible CSPs are readily available to serve cloud customers in the country.3.3.2 The competitive nature of the sector is demonstrated by successful CSP challengers globally Numerous new and innovative CS

247、P challengers have demonstrated their ability to successfully compete against larger or more established CSPs.Many of these challengers have obtained large amounts of funding at high valuations,which demonstrates investor confidence in these players.Some examples of successful CSP challengers are de

248、tailed below:DigitalOcean DigitalOcean was founded in 2011 and its cloud offerings cater mostly to start-ups and small businesses.It provides a range of cloud products that span compute,storage,networking and database categories.55 Its unique selling proposition to customers includes:a simple cloud

249、platform that is easy to learn and manage;consistent pricing across all data centres to provide greater price certainty;and offering significantly lower prices than the large CSPs.56 DigitalOcean went public in 2021,raising USD775 million,with a valuation of USD5 billion.57 51 VMware,2022.“The Multi

250、-cloud Maturity Index”52 CNBC,2022.“Google,Oracle,Amazon and Microsoft awarded Pentagon cloud deal of up to$9 billion combined”53 U.S.Department of Defense,2021.“Future of the Joint Enterprise Defense Infrastructure Cloud Contract”54 VMware,2022.“VMware Releases Multi-Cloud Maturity Study Report Sou

251、th Koreas Multi-Cloud Ranks Worlds Highest”55 DigitalOcean.“Products”56 DigitalOcean,2022.“AWS or DigitalOcean Which cloud platform is the best fit for you?”57 Bloomberg,2021.“Blavatnik-Backed DigitalOcean Raises About$775 Million in IPO”Economic impact and dynamics of cloud services in South Korea|

252、28 Ref:8865878839-21.Wasabi Technologies Wasabi Technologies(Wasabi)was founded in 2015.It provides cloud storage and claims that its pricing is 80%lower than large CSPs;it offers faster performance by optimising“the way data is stored on disk and designing a system that reads and writes to large ar

253、rays of drives at enormous speeds”.58 Wasabi raised USD250 million in 2022 at a valuation of over USD1.1 billion and has been expanding globally.This includes adding storage regions in AsiaPacific via Osaka,Singapore and Sydney.59 Backblaze In 2016,Backblaze launched its B2 cloud storage product,whi

254、ch is now its primary product offering.Its main selling point is its“astonishingly affordable”storage which it claims is 20%that of comparable products offered by larger CSPs.60 Backblazes strategy focuses on mid-market businesses via its“straightforward cloud storage offerings”where it sees“unmet m

255、arket needs”in contrast to large cloud vendors who it claims may be more“focused on the largest enterprises”with more complex offerings.61 Backblaze went public in 2021,raising USD100 million at a valuation of USD470 million.62 Snowflake Snowflake was founded in 2012 and offers a fully managed cloud

256、 data platform to facilitate workloads that include data warehousing,data lakes and data application development.For example,Snowflakes platform can be used to“consolidate data into a single source of truth”to“get the complete picture of individual customer behavior”.63 Snowflakes platform can be ho

257、sted on the public clouds of major CSPs.64 Snowflake raised USD3.4 billion in its 2020 initial public offering(IPO)with a valuation of USD33 billion.65 It opened a South Korean office in November 2021.3.3.3 Innovations are continuing to emerge in the cloud services sector CSPs are constantly looking

258、 to innovate and improve their cloud services to maintain competitiveness.As CSPs strive to differentiate themselves from competitors,significant cloud 58 Wasabi Technologies.“About Wasabi”59 TechCrunch,2022.“Cloud storage startup Wasabi raises$250M to reach unicorn status”60 Backblaze.“Cloud storag

259、e pricing”61 Backblaze,2021.“Preliminary prospectus”62 Crunchbase.“Backblaze financials”63 Snowflake.“Leverage ecommerce analytics to boost online sales”64 Snowflake.“Supported Cloud Platforms”65 CNBC,2020.“Snowflake prices IPO above increased range,implying initial market cap of$33.3 billion”Econom

260、ic impact and dynamics of cloud services in South Korea|29 Ref:8865878839-21.service innovations have emerged which have enabled end users to enjoy new products some of which have significantly reshaped how cloud services are used.One such example of innovation in cloud services is Kubernetes,a cont

261、ainer orchestration platform that enables the deployment and management of containerised applications.Containers function as packages of software that can be run quickly and reliably in different computing environments regardless of the hardware,operating system or who the infrastructure provider is

262、.Kubernetes was first introduced by Google Cloud in 2014 as an open-source standard in an“attempt to shift the industry to vendor-agnostic containers”and enable it to gain share in the emerging cloud services sector.66 Kubernetes played a key role as a catalyst for driving container usage within clo

263、ud services,and today it has become the de-facto container orchestration standard a 2021 survey found that 96%of cloud-native organisations are either using or evaluating Kubernetes.67 The use of Kubernetes enables end users to reap multiple benefits including:facilitating portability of application

264、s across different types of infrastructure,facilitating multi-cloud environments,supporting high availability,and enabling cost savings via more efficient use of resources.Kubernetes open-source standard has also enabled the rise of new infrastructure providers within the cloud services sector.For e

265、xample,Kasten was founded in 2017 as a data management and recovery platform;it was purpose built for Kubernetes and was subsequently acquired for USD150 million by Veeam in 2020.68 Serverless computing is another example of innovation in cloud services,allowing applications to be managed and run wi

266、thout the end user having to worry about the underlying infrastructure needed.In serverless computing architectures,CSPs help to manage and scale the servers that are required.This allows developers to focus on coding while reducing the effort required to maintain and scale the servers,which are now

267、 outsourced.Serverless computing further benefits end users by charging based on the resources used,which eliminates idle capacity and improves cost efficiency.AWS was the pioneer of serverless computing when it launched AWS Lambda in late 2014.Since its launch,other major CSPs have released their o

268、wn serverless computing offerings:in 2016,Microsoft Azure launched Azure Functions and in 2017,Google Cloud launched Google Cloud Functions.Many other CSPs have since developed their own serverless computing offerings,including CSPs that focus primarily in South Korea(e.g.the Naver Cloud Functions a

269、nd KT Cloud Serverless Code Run/App Run cloud services).These innovations developed by CSPs have played a significant role in the evolution of cloud solutions,allowing end users to solve more complex problems through cloud services and reap greater benefits.In addition,they have created opportunitie

270、s for the challenger CSPs to capture niche segments of the cloud services sector.66 Stratechery,2016.“How Google is challenging AWS”67 Cloud Native Computing Foundation,2022.“CNCF Annual Survey 2021”68 SDxCentral,2020.“Veeam Puts$150M Ring on Kubernetes Startup Kasten”Economic impact and dynamics of

271、 cloud services in South Korea|30 Ref:8865878839-21.4 The growth potential of cloud services in South Korea In Section 3,the Report discussed the vibrant supply landscape for cloud services in South Korea,supported by a diverse mixture of CSPs that compete and collaborate with each other.We now look

272、 more into the demand for cloud services in South Korea and understand both drivers and barriers to cloud adoption.While South Korea is a digitally advanced economy supported by high-quality broadband infrastructure,its cloud adoption rate lags behind those of other developed markets,partly due to b

273、arriers that are present.Initiatives that have been announced by the government to develop the cloud services sector and promote adoption can lower these barriers and thus enable growth.In this section,the Report:explains why South Koreas digitally advanced economy makes it a favourable environment

274、for cloud adoption(Section 4.1);notes that South Koreas cloud adoption is underdeveloped compared to peer markets and that this reveals key opportunities to grow cloud adoption(Section 4.2);examines the barriers to cloud adoption in South Korea(Section 4.3);identifies examples of supportive governme

275、nt policies that can address these barriers to cloud adoption(Section 4.4);discusses the expected growth of South Koreas cloud services(Section 4.5).4.1 South Korea is one of the most digitally advanced economies globally with favourable conditions to support cloud adoption South Koreas high-quality

276、 broadband infrastructure coupled with its high and improving position in global digital rankings provides evidence of a favourable environment for cloud adoption these factors are discussed further below.4.1.1 Broadband infrastructure investments have enabled South Koreas high fixed broadband penet

277、ration which facilitates digitalisation of consumers and enterprises High-quality internet access is a fundamental pillar for the adoption of advanced digital technologies and a critical enabler for cloud services,which rely on the internet for the delivery of computing resources from servers to end

278、 users.South Korea ranks first across OECD countries when considering access to high-quality fixed broadband,as 42 out of 100 inhabitants have fixed broadband subscriptions with speeds of at least 100Mbit/s(see Figure 4.1).Investments in broadband infrastructure in South Korea,particularly via fibre

279、 deployments,have enabled the availability of high-quality broadband that can facilitate adoption of advanced digital technologies,including cloud services.Economic impact and dynamics of cloud services in South Korea|31 Ref:8865878839-21.Figure 4.1:Fixed broadband subscriptions(100Mbit/s)per 100 in

280、habitants Source:OECD,December 202169 4.1.2 South Korea has also demonstrated relatively high capacity to adopt and explore digital technologies,having improved consistently in global digital rankings The International Institute for Management Development(IMD)Digital Competitiveness Ranking assesses

281、 a countrys capacity and readiness to adopt and explore digital technologies(including cloud services)for economic and social transformation.South Koreas ranking increased from twelfth in 2021 to eighth out of 63 countries globally in 2022,indicating its strong readiness to adopt advanced digital te

282、chnologies.70 In particular,when considering larger markets with populations above 20 million,South Korea ranked second globally,behind only the USA.In the same study,South Korea ranked second globally in the Future Readiness factor,which measures a countrys“preparedness to exploit digital transform

283、ation”,further emphasising the strong potential South Korea has to benefit greatly from the digital transformation afforded by cloud adoption.4.2 However,South Koreas cloud adoption is underdeveloped compared to peer countries,emphasising the strong potential for growth across all CSPs Despite havin

284、g favourable conditions for cloud adoption,South Korea lags behind peer countries highlighting the significant opportunity for growth in cloud services by closing this gap.In particular,lagging cloud adoption in small businesses and critical industries(e.g.manufacturing;69 OECD,2021.“Fixed broadband

285、 subscriptions per 100 inhabitants,per speed tiers(Dec.2021)”70 IMD World Competitiveness Center,2022.“IMD World Digital Competitiveness Ranking 2022”30500102040LithuaniaSouth KoreaNorwayPortugalMexicoSwedenIcelandIsraelDenmarkHungarySpainBelgiumGermanyUSALuxembourgChileFranceCanadaNetherlandsPoland

286、ItalyLatviaFinlandSloveniaIrelandSwitzerlandSlovak RepublicNew ZealandUKAustriaCzech RepublicColombiaGreeceAustraliaCosta RicaEstoniaEconomic impact and dynamics of cloud services in South Korea|32 Ref:8865878839-21.finance and insurance)suggest key areas for potential growth to enable South Korea t

287、o close its gap in cloud adoption.4.2.1 Enterprise cloud take-up in South Korea lags behind many markets South Korean enterprises lag behind many OECD markets and trails multiple less-developed markets in cloud adoption(see Figure 4.2),despite the countrys high-quality broadband infrastructure and h

288、igh capacity to adopt and explore digital technologies.This reduces the extent to which South Korea is able to reap the benefits of cloud services(as discussed in Section 2.3).Figure 4.2:Percentage of businesses(10 employees)purchasing cloud services in 2020 Source:OECD,202271 4.2.2 The state of cur

289、rent cloud take-up in South Korea reveals key focus areas to grow cloud adoption Cloud services can involve the use of cloud-based software products with lower technical complexity.This means the services can be used even by smaller organisations that may not have advanced or dedicated IT teams.Howe

290、ver,data indicates that within the different sizes of enterprises in South Korea,small businesses are the biggest stragglers relative to the OECD average when considering purchasing cloud services(see Figure 4.3).71 OECD,2022.“The OECD Going Digital Toolkit,based on the OECD ICT Access and Usage by

291、Businesses Database”25%80%40%20%0%60%Slovak RepublicFinlandLuxembourgAustraliaBelgiumJapanDenmarkFranceNorwayItalyEstoniaUKNetherlandsSwedenIsraelCroatiaBulgariaSloveniaAustriaGermanyPortugalLithuaniaCzech RepublicSpainLatviaHungarySouth KoreaTurkeyPolandGreeceRomaniaIrelandEconomic impact and dynam

292、ics of cloud services in South Korea|33 Ref:8865878839-21.Figure 4.3:Percentage of businesses purchasing cloud services by business size in 2020 Source:OECD,202272 In addition,while the manufacturing and finance and insurance sectors contribute over a third of South Koreas GDP,cloud adoption is lagg

293、ing considerably in these critical sectors in South Korea compared to selected OECD markets(see Figure 4.4).SectorSector PercentagePercentage contribution contribution to GDP to GDP 7373 PercentagePercentage of of businesses businesses purchasing purchasing cloud services cloud services OECD OECD av

294、erageaverage PercentagePercentage of of businesses businesses purchasing purchasing cloud services cloud services South KoreaSouth Korea Figure 4.4:Percentage of businesses purchasing cloud services by sector in 2020 Source:OECD,202274 Manufacturing 29%40%23%Finance and insurance 7%66%40%Low cloud a

295、doption in these sectors prevents the realisation of the benefits and use cases that cloud services can enable,such as:Manufacturing Cloud services can support improved productivity management using cloud-based applications to monitor and manage production.It can also improve supply-chain management

296、 by leveraging cloud-based digital twin technologies to help enterprises make better use of their data.72 OECD,2022.“The OECD Going Digital Toolkit,based on the OECD ICT Access and Usage by Businesses Database”73 KOSTAT,2023.“GDP by industry at current prices”74 OECD,2022.“The OECD Going Digital Too

297、lkit,based on the OECD ICT Access and Usage by Businesses Database”Small businesses(10 to 49 employees)Medium businesses(50 to 249 employees)Large businesses(250 employees and more)37%37%47%47%23%23%67%67%51%51%35%35%-38%38%-31%31%-30%30%OECD averageSouth KoreaX%Relative differenceEconomic impact an

298、d dynamics of cloud services in South Korea|34 Ref:8865878839-21.Finance and insurance Cloud services can facilitate the digital transformation of financial institutions,including building cloud-native digital banking apps that reduce reliance on manual processes and increasing resiliency of banking

299、 services by having a higher level of disaster recovery via cloud services.There remains significant untapped opportunity across organisations that have yet to take up cloud services and these organisations could reap significant benefits when they begin their cloud migration journey.4.3 Barriers to

300、 cloud adoption in South Korea include technology skill gaps,security,cost concerns and restrictive regulation Understanding the key barriers to cloud adoption in South Korea can help to identify potential measures to bolster cloud adoption.These barriers are discussed in more detail in the followin

301、g sub-sections.4.3.1 South Korean organisations face a gap in digital and cloud-related training and skills Digital and,more importantly,cloud-specific skills are critical for cloud adoption given the inherent complexity associated with cloud deployments.Examples of cloud-specific skills include:Con

302、tainerisation:trained employees who are able to use container technologies(e.g.Kubernetes)can facilitate numerous benefits including portability,greater efficiency,and faster delivery of feature enhancements Development and operations(DevOps):organisations with employees trained in DevOps principles

303、 can allow the integration of software development with IT operations thus allowing faster launch of products and enhanced agility in launching new features Cloud architecture:cloud architects translate the technical requirements of a project into cloud computing components required to enable it inc

304、luding front-end platforms,back-end platforms,cloud-based delivery,and the network.Organisations first require cloud experts who are able to assess the benefits of cloud services and justify them internally within the organisation to obtain management support for the adoption of these services.For t

305、he organisations to benefit from cloud adoption,IT functions must be equipped with the specialised skills to architect/develop cloud-based applications and other employees will also need to learn how to utilise these applications.However,there is currently a digital skills gap in South Korea seen ac

306、ross multiple studies:OECD75 A report published by OECD states that 72%of South Korean workers in micro-firms have low digital problem-solving skills.In addition,less than 75 Bianchini,M.and I.Kwon(2021),“Enhancing SMEs resilience through digitalisation:The case of Korea”Economic impact and dynamics

307、 of cloud services in South Korea|35 Ref:8865878839-21.15%of small and medium-sized enterprises(SMEs)in South Korea provide general ICT education to employees.IMD Digital Competitiveness Ranking76 While South Korea was ranked 8th in IMDs overall digital competitiveness ranking,it ranked 46th globall

308、y in terms of“digital/technological skills”,which assesses if these skills are readily available across a workforce.The importance of addressing South Koreas digital skills gap to support cloud adoption is highlighted by a survey of enterprises conducted by the KDI Economic Information Center in 202

309、1.Enterprises surveyed cited the“nurturing of manpower such as field talent”to be the most required factor to improve the competitiveness of South Koreas cloud industry.77 In comparison,Denmark was ranked first globally in terms of digital competitiveness,and was cited as being“among the worlds lead

310、ing economies in digital talent and training and education”,which underscores the connection between improving the availability of skilled digital experts and an increase in cloud adoption.78 4.3.2 Security concerns remain a key barrier for cloud adoption among South Korean enterprises It is vital t

311、hat all organisations ensure that their IT systems are secure and resilient against threats,as any breach can compromise operations and data.Cloud adoption can involve significant changes to an organisations existing IT architecture,thus organisations must be reassured that their security requiremen

312、ts will still be met.In a survey conducted by the KDI Economic Information Center,South Korean enterprises indicated that security concerns were the biggest obstacle to cloud adoption(see Figure 4.5).Education programmes that improve digital skills will play an important role in addressing such conc

313、erns.For example,trained cloud experts will have a better understanding of the security implications when migrating to cloud services and will be able to select CSPs that can meet the organisations specific security requirements.Trained cloud experts can also educate their organisations on how cloud

314、 services allow them to access best-in-class security features(see Section 2.3.1)and can enable them to enhance security levels thus addressing security concerns.76 IMD World Competitiveness Center,2022.“IMD World Digital Competitiveness Ranking 2022”77 KDI Economic Information Center Data Research

315、Team,2021.“Cloud Survey”78 IMD World Competitiveness Center,2022.“IMD World Digital Competitiveness Ranking 2022”Economic impact and dynamics of cloud services in South Korea|36 Ref:8865878839-21.Figure 4.5:Survey responses on the main obstacle to cloud adoption Source:KDI Economic Information Cente

316、r Data Research Team,202179 4.3.3 Funding to support initial cloud deployments can also help ease the transition and reduce initial upfront costs which can be a barrier for some organisations As discussed in Section 2.3.1,cloud services can provide significant cost savings relative to the use of on-

317、premises IT systems.This is due to the more efficient use of computing resources in cloud services,with organisations only paying for the actual resources they consume.Organisations can also minimise the need for upfront capital expenditure on IT hardware which can now be outsourced through CSPs.How

318、ever,the cost savings may not be fully realised immediately.Enterprises migrating to cloud services may incur costs due to a range of activities that can include decommissioning existing hardware,terminating contracts for on-premises IT systems,and increasing personnel to manage cloud migration.Thes

319、e costs can serve as a deterrent to initial cloud adoption and is evident in South Korea,where cost burdens were cited as the second-largest obstacle to cloud adoption(see Figure 4.5).In addition,respondents to the same survey highlighted that cloud conversion support and support for cloud usage fee

320、s(e.g.provision of vouchers)were some of the most effective support mechanisms to accelerate the growth of cloud services in South Korea.80 4.3.4 Regulatory barriers that hinder fair access by all CSPs or impose restrictions on potential end users can hamper growth of cloud adoption Regulation impos

321、ed on CSPs as well as potential cloud customers can lead to barriers to cloud adoption.While South Korea is the 10th largest economy in the world,81 it ranks 19th in MIT Technology Review Insights Global Cloud Ecosystem Index which is determined based on“how well technology,regulations,and talent pr

322、omote the availability of cloud services”.82 In particular,South Korea was ranked only 33rd out of 76 countries in the security and assurance pillar,which“measures the maturity of regulatory environments that promote progressive,cloud-forward data 79 Ibid.80 Ibid.81 The World Bank,data for 2021.“GDP

323、(current US$)”,extracted 20 January 2023 82 MIT Technology Review Insights 2022,“The Global Cloud Ecosystem Index 2022”Factors hindering Factors hindering growth in cloud servicesgrowth in cloud services%of respondents%of respondentsSecurity concernsBurden of introduction and conversionLack of infor

324、mation about cloud servicesOwnership preference vs.resource sharingUncertainty about performanceLack of response to market changesLack of conversion incentives25%32%7%12%8%11%5%Economic impact and dynamics of cloud services in South Korea|37 Ref:8865878839-21.security and sovereignty environment”.83

325、 This suggests that the regulatory landscape in South Korea may be hampering its cloud adoption.Examples of existing regulatory policies that may hinder cloud adoption in South Korea include:CSAP CSAP was introduced in 2016 and required CSPs to receive CSAP certification to serve government agencies

326、.Requirements to receive CSAP certification included(i)physical separation of servers for private enterprises from government agencies;(ii)localisation of cloud service management and operation personnel within South Korea;and(iii)the use of government-certified encryption technology.84 These measur

327、es have constrained supplier choice for government agencies.Act on Prevention of Leakage and Protection of Industrial Technology The Act was introduced in 2006 and includes designating several national core technologies(NCT)this includes certain semiconductor technologies.Companies operating as NCTs

328、 have obligations such as requiring government approval for the export of the technology to foreign enterprises.85 Such requirements have created a barrier to cloud adoption,as there is uncertainty on whether accessing cloud services would be deemed as an export of an NCT and thus require government

329、 approval.Such regulations are likely to have negatively impacted cloud adoption,effectively reducing the number of eligible CSP suppliers available to government agencies and hindering the ability of enterprises in major industries to adopt cloud services.The Computer&Communications Industry Associ

330、ation(CCIA)published comments to the United States Trade Representative(USTR),highlighting that CSAP“effectively serves as a technical barrier to trade and prohibits global cloud service providers from accessing the Korean public sector market”and“undermines the economies of scale of cloud computing

331、”.86 83 Ibid.84 U.S.Chamber of Commerce,2023.“Public Consultation on Amendments to Koreas Cloud Security Assurance Program(CSAP)”85 Korea Legislation Research Institute,2019.“Act On Prevention Of Divulgence And Protection Of Industrial Technology”86 Computer&Communications Industry Association,2021.

332、“Comments of the Computer&Communications Industry Association Regarding Foreign Trade Barriers To U.S.Exports For 2022 Reporting”Economic impact and dynamics of cloud services in South Korea|38 Ref:8865878839-21.4.4 Supportive government policies that have been introduced can reduce these barriers a

333、nd serve as a catalyst for cloud adoption growth in South Korea The benefits of an advanced digital economy supported by cloud services are widely accepted by governments globally.In South Korea,for example,the introduction of the Cloud Computing Act in 2015 included measures to promote the use of cloud services by public institutions.87 Since then,the South Korean government has continued to intr