Up in the cloud, battling the storm of piracy

Despite the country’s booming consumer market, Indonesia has contributed little to software giant Microsoft’s bottom line. As new technology becomes available, Microsoft Indonesia is hoping it can change that. Jacqueline Wales interviews the CEO.

Microsoft Indonesia occupies a modest office space at the Indonesian Stock Exchange building in Jakarta where president director Sutanto Hartono is charged with the challenging task of deciphering how Microsoft can make the most of this country’s burgeoning market.

Sutanto has primarily set his sights on the corporate sector and the adoption of cloud computing technology, a combination where he hopes Indonesia can contribute more than just the usual tiny fraction to Microsoft’s global revenue in the future.

Microsoft Corporation, founded in 1975, is the world’s largest software company, famous for its Windows operating system and Office software which are largely viewed as core services of the business world.

Over time, Microsoft has expanded its product portfolio into new areas of the IT industry, online services and consumer electronics. Microsoft’s search engine Bing now powers Yahoo and, as announced just this year, Nokia will be producing smartphones using the Windows operating system. Certainly, online services is where Microsoft has concentrated most of its efforts for growth and the next step, it seems, is towards cloud computing.

Cloud computing is essentially an internet-based system where software data, and documents are stored and are available online from any device anywhere in the world via an Internet connection. It is a system already widely used by consumers, for example, via Google’s gmail service, google docs and groups; Microsoft’s own Hotmail service, and the Amazon EC2 (Elastic Compute Cloud). Each of these global giants are investing aggressively to win a stake in the future of private and public cloud computing services.

According to information technology research and advisory company Gartner in a study issued last June, revenue from worldwide cloud services at the end of 2010 will have reached $68.3 billion, an increase of 16.6% from 2009. Their predictions see revenues reaching $148.8 billion by 2014.

A more recent survey by Gartner, released in February, shows that many businesses are investigating how cloud services can improve business processes within their organisation and with their partners, suppliers and customers.

Riding the new wave
“Whoever plans to play in the corporate cloud market would ideally have some experience with the technology already, and only a few companies have that capability, such as Microsoft, Google and Amazon.” says Microsoft Indonesia’s Sutanto.

Microsoft has poured the majority of an $8.7 billion research and development budget into the new technology, according to the company’s annual report, not to mention the labor of roughly 70% of its 40,000 engineers. In 2011, Microsoft says its manpower commitment to the cloud project will increase to nearly 90%.

Sutanto is confident that with its business-centric model and software, Microsoft will appeal to Indonesian businesses.  “Working with the corporate sector also requires the provider to have the expertise in providing corporate customers with the software and services platform, and that is Microsoft,” he says, adding that Microsoft is also able to provide security of information.
“Also, 99%-secure is not good enough for the corporate sector. A corporate body requires stability and absolute security, and that’s where Microsoft has the potential ability to win this battle for the corporate sector.”

To accelerate penetration of the new technology in Indonesia, Microsoft has established partnerships with local service providers. Partners include PT Telkom, IT service provider PT Astra Graphica Information Technology; Greenview-Cloud Services, which offers related infrastructure and services; and PT Infynis System Indonesia, which offers infrastructure as well as software services.

Infinys System provides cloud computing services to the Indonesian market and has one data center in Jakarta and another in Surabaya with plans to expand its network. The company also is a BlackBerry solution provider. General manager Dondy Bappedyanto says one of the immediate benefits for businesses using the technology is financial.

“They don’t have to do up-front investment for new technology, maintain the system or acquire a high-end IT human resources department.”

There are also unique advantages to the local-partnership model, says Dondy, including technical support in Bahasa Indonesia and on-the-ground support from engineers, speed via local bandwidth and being in compliance with government policy for industries which require data to be hosted locally.

Adi Rusli, country manager for EMC Indonesia, a worldwide information storage and information infrastructure business originating in the US, says popularity of the cloud is growing in Indonesia because of its streamlining of internal communication and cost-saving abilities.

“It is definitely one of the top topics that most of the IT organizations are talking about. Even at the CIO (Chief Information Officer) level, definitely we are seeing huge interest from large- to medium-sized corporations.”

EMC, says Adi, has seen confidence from companies grow in the new technology and says a variety of large- and medium-sized businesses, including some in the natural resource industry, have begun to experiment with or adopt the cloud.

“More recently, we have been seeing manufacturing and food and beverage companies adopting the cloud to consolidate information between multiple business units into one central line,” he says.

Piracy promise
For Microsoft itself, cloud computing could also be a way of attacking the issue of Indonesia’s rampant piracy.

“Cloud computing means providing IT services, software, platform and infrastructure over the Internet. People can access the service only if they subscribe, whether it is a paid or free subscription model. This will certainly enable the provider of the service to have much more control over who has access to the service and thus reduce the piracy rate significantly,” says Sutanto.

Piracy impacts on the revenue of every player in the IT industry, from Microsoft to local software developers. According to the latest report from International Business Software Alliance (BSA) released in May last year, the value of unlicensed software in Indonesia for 2009 was $886 million.

Worldwide, the value of unlicensed software in 2009 was $51.4 billion, and the Asia Pacific region is the most significant contributor to this with the commercial value of unlicensed software reaching over $16.5 billion.

BSA operates in more than 80 countries attempting to educate consumers on software theft and work with governments to establish legislation and help enforce it. BSA’s Indonesian office is one of 11 around the world.

“Piracy is damaging global and local companies and the IT industry,” says BSA’s Indonesian representative, Donny Sheyoputra. “Clearly it’s a huge issue from consumers and small businesses, but we have seen software theft happening in large offices. Companies see a car, a building and office space as an asset to their business, and it should be the same for software.”
Despite the huge consumer market that has been the center of much excitement for Indonesian and international businesses, Microsoft is yet to benefit. Where Sutanto will, if possible, find a source of revenue for Microsoft from this country is still uncertain, but the opportunities have at least been broadened.

“Whether that comes from the cloud or from genuine value of software or communications products, once you fix it then I think this country will definitely provide a much bigger opportunity for Microsoft.”

Published in Globe Asia magazine. March 2011.


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