The Economics of an In-country Cloud Business – Understanding Costs, ROI, Opportunities and Your Market.

In our previous post, we discussed the basics and the economics involved in setting up an in-country cloud business. We also talked about the costs, revenues and the long term returns that you can generate from the cloud business. In this post, we’ll walk you through the details of why domestic public cloud business is an opportunity to pursue. We’ll take a look at why local data centres, ISPs and telcos are best suited to take advantage of this opportunity. We have demonstrated with example and a complete playbook, a sample business case that helps understand the capital expenses, operating costs and the ROI of setting up a public cloud. Finally, we’ll see what kind of enterprises you can sell your newly setup public cloud to. 

Let’s take a look at ‘why’ and ‘how’ you can start a cloud business:

Why start a domestic public cloud business?

A large number of businesses and enterprises today depend on public clouds to deliver their services. Whether it’s government organisations or local businesses, the demand for public cloud services has consistently grown in the past decade and a half. Today, 77% of the cloud services market is dominated by the hyperscale cloud providers – AWS, Google Cloud and Microsoft Azure. In spite of their superiority in terms of market size, they do not have the reach in those geographical locations that have data localisation regulations. Other reasons for not expanding into certain markets is that the market sizes aren’t large enough for them to set up and effectively run a cloud service.

Geographical location has become a key differentiator in the public cloud business. This is exactly why domestic cloud service providers have emerged. They can cater to the cloud infrastructure requirements of the regions more effectively and offer better latency, cutting edge tech stacks, local currency billing along with compliance with the local data residency laws. These benefits stack up as powerful competitive advantages for enterprises who choose domestic public clouds.

Why would enterprises, start-ups and local businesses be interested in your domestic cloud offering?

Capital and operating expenses: With local cloud services, businesses find it easier to hire infrastructure rather than outright purchase of hardware and software. This helps them reduce their capital and operating expenditures. Renting storage and complex disaster recovery plans that are offered by cloud vendors is a plus. Cloud vendors help them reduce the operating expenses on server maintenance and applications.

Better management of storage: Single storage location enables them to better manage their files and documents. The hyperscalers only localise the storage. Localised cloud computing is much more than just that.

Resources: Enterprises get the flexibility to scale up or down their use of bandwidth and storage based on their needs. Cloud service providers protect their cloud infrastructure physically and digitally by using the best encryption, anti-malware, and antivirus tools.

There is high demand for local currency billing for cloud resources: The hyperscale cloud providers usually bill in dollars. For larger transactions such a gap can wreak havoc with working capital management. In-country cloud services bill customers in the local currency. As a result, customers avoid foreign exchange shocks and manage their operating expenses better.

Enterprise’s tech teams demand low latency services for better end-user experience: In-country cloud service providers because they can deliver quick and more personalised services and full-fledged tech support when their clients need it. Also, they can offer limitless options for stacking technologies and customize price plans because their scale allows them greater flexibility in designing service offerings.

COVID-19 has accelerated digital transformation and cloud adoption: In the post COVID 19 world, with work from home becoming mainstream, businesses are looking for ways to collaborate with internal and external teams. They want to have their business applications, data, and processing in the cloud to enable their employees and partners to work independently of their location. Public cloud service providers are best placed to meet this surging demand.

Cloud minimises technical and business risks: Cloud is a highly low risk solution for businesses and enterprises. It eliminates the upfront costs for procuring hardware. You have an option to reuse existing or spare hardware. Technical and business enablement support eliminates the costs that might be incurred for knowledge and manpower too. It also offers the shortest time to go live.

Why are service providers the best people to start a public cloud service?

It’s evident that starting a domestic public cloud that caters to the technology requirements and local data regulations is a good opportunity in the current market scenario. Local ISPs, telcos and data centres are best suited to take up this opportunity. They have the required infrastructure that creates a strong foundation for building a cloud setup. They also have strong existing relationships with many businesses and customers which works to their advantage while selling their cloud offerings. They already possess the key assets required to provide cloud services – a broad base of enterprise customers, data centre space and an extensive internet backbone. Building and managing public cloud services extends their current strengths and they can reach out to the markets and satisfy their technology requirements in a much better way than new entrants or non-local cloud players.

A business case for a starting set-up of a public cloud service

Let’s now take a look at the expenses incurred and how long it will take you to breakeven for capital expenses as well as operational expenses and ultimately see ROI. We have worked with public cloud setups of all sizes. Having designed cloud services for both – bare minimum requirements and with large data centre customers servicing hundreds of users, we’ve seen that a bare minimum starting set-up needs 3 hosts and can earn up to $240,000 in yearly revenue.

For example, let’s take a look at a business case with a minimum configuration of 100 physical cores. With 3 hardware hosts and 800 virtual cores and with average VM size of 4VCPU 8GB, here’s a handy playbook to calculate your break even and ROI if you sell max. 200 VMs.

Let’s take a look at an example business case with a minimum configuration of 100 physical cores. This would be possible with 3 hardware hosts and you can configure 800 virtual cores with average VM size of 4VCPU 8GB, here’s how the cost works out if you sell around max. 200 VMs.

What Next? Who Can You Potentially Sell To?

If you have launched an optimum cloud setup for your region/country, here’s where the demand for cloud is on the rise. Mainly, there are three reasons for businesses and enterprises to seek public cloud services – data localisation, latency issues and the ability to bill in their local currency. Depending on these factors, let’s take a look at whom you can sell your public cloud services to. 

Data localisation is one of the major drivers for the following sectors:

There is a growing emphasis on data localisation in the banking and financial services, government organisations and healthcare sector. There’s always apprehension around availing public cloud services from global providers. This has raised the demand for data localisation and sovereignty compliant cloud services from local providers. 

Banking and financial institutions

Banking and capital market leaders are increasingly recognizing that moving to cloud is a means by which banks and financial services can store and access data and applications effectively. Moreover, in-country public clouds effectively solve the challenges of low latency and data sovereignty that usually make financial institutions think twice about public cloud solutions. Over the years financial institutions have used cloud-based solutions for non-core services like virtualisation for data centre consolidation, storage and disaster recovery solutions etc. In recent years however, the banking industry has started to implement cloud-based solutions for their core services too. These services directly impact their services and offerings and at the same time lower the cost of infrastructure to do so.


Globally, government sector use of public cloud is still relatively low. In the past, this was usually due to their hesitation about hosting their data in a multi-tenanted domain with other private enterprise users.  However, this scenario is slowly and steadily changing. Greater share of IT budgets is now allocated to cloud adoption. Government sector is potentially a significant user of public cloud services given that government sector agencies tend to be large organisations with significant legacy systems. Yet governments are starting to value the benefits that a transition to public cloud can bring, mostly due to perceptions on security, data privacy and the ability to easily exit solution providers. Government sector decision makers are now looking at in-country public clouds due to the data localisation and sovereignty they offer along with improved agility and the ability to scale operations as needed.


The healthcare providers are approaching the cloud in different ways. Healthcare, unlike the financial or legal industries, has a lot of integration points to other systems such as prescriptions, X-Rays, patient records, labs etc. which might be at separate locations. Cloud offers the flexibility to integrate various systems and access them with low latency. This sector has many reasons to turn towards cloud adoption. 

Low Latency is one of the basic requirements for the following sectors

Low latency requirements are essential for organisations that have large amounts of data that is frequently accessed. The education and research institutes as well as the technology enterprises are among the top sectors looking for clouds with almost on-premise performance.

Education & Research

A successful adoption of cloud computing in education and research institutes includes easy access to educational and research content, training facilities for educational innovation, ease of collaboration and more. Cloud computing is today, a part of day-to-day teaching – with virtual classrooms, remote file exchange, collaboration and the requirement of secure data storage. Education institutes are looking at high performance and cost-effective means to implement cloud solutions.

Software Enterprises & Technology Enterprises

Software and technology enterprises are among the early adopters for cloud services. They realise that cloud is the way to keep the costs low and yet get a highly scalable solution for their IT infrastructure requirements. This makes them the best candidates for cloud services. 


Local billing is what some businesses are looking for

Many times, local businesses and startups are looking for local currency billing that will reduce the complications of currency conversions and make the process smoother.

Start-ups and traditional enterprises

Startups and traditional businesses many times operate in local currencies. Some traditional enterprises have legacy processes that require it. Apart from this, start-ups are usually on the look out for quick go-to-market IT solutions that do not require a huge upfront investment. They are also looking for means to coordinate with teams in different cities or countries. Cloud infrastructure helps tackle both of these problems. Cloud services offer a pay-as-you go model where you are billed only for the resources used. These resources can be scaled up or down as needed. With cloud infrastructure, start-ups get a high performing infrastructure and need not concern themselves with the daily operations and maintenance of IT systems. Public cloud services are in demand from the local start-ups.


Technology stack that powers some high-performance clouds

High performance of clouds depends on the performance of the underlying layers – the base infrastructure, the virtualisation, orchestration and the cloud management platform.


Understanding the functional blocks of cloud architecture

The cloud architecture and design begins with designing of the key modules and infrastructure components – storage, network and compute to prepare the base infrastructure that is optimized for the highest performance.

For the virtualisation and the orchestration layers there are a number of options available. To bring it all together, a cloud management platform such as apiculus is used.

Here is an overview of the preferred technologies that we work with while setting up a public cloud.

Cloud Management Platform – apiculus

The selection of a cloud management platform (CMP) is also a critical decision while setting up a public cloud service. The CMP should offer ease of use and an excellent buying experience for customers.

Apiculus is an all-in-one cloud management platform built for regional cloud service providers. It is built on open-source technologies and offers you full control without any vendor lock-in. Robust to the core, it is secure and can be scaled at any time to meet your customers’ growing workloads. It is based on a subscription billing model and has many built in monetisation features. It acts as an experiential layer on top of systems and ensures that users can perform operations and business functions via a single pane of glass.


To sum it up

ISPs, telcos and data centres are rightly placed to start regional cloud services that offer enterprises, local businesses, government organisations etc. the scalability, agility and performance they require from their IT infrastructure. All this can be achieved with data localisation and sovereignty compliances too. With minimum investment, calculated risk and foreseeable ROI, it’s an opportunity to explore!

If you are looking for some help in building your public cloud services, do reach out to us and our experts will be happy to discuss your requirements. You can also schedule a call to discuss your business case with us. In the meantime, to get a clearer picture, you can download our sample business case template and in case you have any questions, we shall be happy to answer them!

Simply drop us a line here or call on this number to speak to our experts.