Taiwan Cloud Computing Business Models

Review

Kenny Huang, Ph.D. 黃勝雄博士

Executive Council Member, APNIC

Member, Board of Directors, Mind Extension

huangksh@gmail.com

2015.Aug.30

Research Questions

• What kind of business models exist in the local market of cloud computing ?

• What is best practice among these models?

• Business strategy recommendations

• Government policy recommendations

2

DefinitionNIST Cloud Computing

• Service Models

– IaaS : Infrastructure as a Service

– PaaS: Platform as a Service

– SaaS: Software as a Service

• Deployment Models

– Private Cloud : system integration, solution providers

– Community Cloud

– Public Cloud

– Hybrid Cloud

3Source : NIST

Competition Theory

• BCG (Boston Consulting Group) Matrix

– The growth–share matrix

• Five Forces of Competitive Position Model

– Michael Porter

• Is the internet driving competition or market monopolization

– Justus Haucap

• Two-sided Market

4

Taiwan Cloud Computing Companies Highlight (Selected)

5

Service ModelsDeployment

ModelsSolution

id Taiwan-based Company SaaS PaaS IaaS Private Public

1 Chunghwa Telecom Co. (中華電: hosting, security, storage) v v v v

2 Taiwan Mobile Co., Ltd (台灣大哥大: hosting, security, storage) v v

3 Far Eastone Telecommunications (遠傳: hosting, security, storage) v v

4 Taiwan Secom Company Ltd.(中興保全中保無限: IoT) v

5 HTC Corporation (宏達電)

6 MiTAC Information Technology Corp. (神通) v

7 Quanta Computer Inc.(廣達) v

8 Advantech Co.Ltd (研華科技) v

9 ASUS Cloud Corporation (華碩: storage) v v v

10 Hope Bay Technologies (和沛科技) v

11 Syscom Computer Co. (凌羣) v

12 Stark Technology Inc. (敦陽) v

13 Gamania Digital Entertainment Co., Ltd (遊戲橘子) v v

14 KKBOX Taiwan Co., Ltd. (願境網訊) v v

15 Spring House Entertainment Technology (春水堂) v v

Source : TW Cloud Association; firm websites;

Observations and Clustering

A. Public IaaS (online storage especially) is preferred for telecom operators (id 1,2,3), new cloud service provider (id 9).

– New product vs. new market

B. PC/Notebook manufacturers (id 6,7,8) develop customized niche solutions– Old product (auxiliary features) vs. old market

C. IT companies (id 11,12) introduce new solutions to the existing clients– New product vs. old market

D. Application Service providers (id 13,14,15) rebrand business model (from ASP to CSP)– No Change

6

Constructs and Types of Data

7

Market Share Market Growth Rate

Quantitative Data Quantitative DataType of Data

N/A N/AData Availability

Expert Interviews Expert InterviewsAlternative Research

Method

Likert Scale Data AnalysisMarket Share vs. Market Growth

Market ShareMean S.D.

Market Growth RateMean S.D.

Expert A Expert B Expert C Expert A Expert B Expert C

Cluster A 3 1 3 2.3 0.94 4 6 3 4.3 1.25

Cluster B 2 4 3 3.0 0.82 3 2 3 2.7 0.47

Cluster C 2 4 2 2.7 0.94 4 2 3 3.0 0.82

Cluster D 4 5 4 4.3 0.47 2 2 3 2.7 0.47

7 Point Likert Scale : 7: Very High ; 1: Very Low

Cluster A : Public IaaS providersCluster B : PC manufacturersCluster C : IT and solutions providersCluster D : Application Service Providers (ASP)

1

2

3

4

5

6

7

1 2 3 4 5 6 7

Mar

ket

Gro

wth

Rat

e

Market Share

Value Proposition of Cloud Business Model

9

A

CB D

StarsQuestion marks

Cash cowsDogs

Source : BCG

Cash Flow Implication

10

Relative Market ShareHighLow

Mar

ket

Gro

wth

Rat

eH

igh

Low

Cash used - - -Cash generated +++

0

Cash used - - -Cash generated +

- -

Cash used -Cash generated +

0

Cash used -Cash generated +++

++

Cluster A

Cluster B,C Cluster D

Source : Olivier Furrer

Business Models Review 1/2

• Cluster D seems to be the most lucrative model– Cash cows market : less cash used, more cash

generated, least innovative industry

– Seamless transition from ASP to CSP model

– Sustain competitive advantage to the local market

• Cluster A seems to be the least attractive model– Question marks market: more cash used, less cash

generated, most innovative industry

– Low probability of success : New product, new market, new business unit under conglomerate.• Vulnerable business unit as its revenue is much smaller

than other units

• It’s better to be exercised as an entrepreneurial model

– Severe market competition (IaaS)• Google Drive, One Drive, Dropbox, Box

• Price war : extremely price sensitive market

11

Business Models Review 2/2

• Cluster B, C : no significant impact to the market

– Dogs market : less cash used, less cash generated• compete with the common pool of corporate IT

spending

• Conflict with the existing service offerings

• Price sensitive market

– Business value : customer intimacy • Consultancy, system integration, solutions deployment

– High COGS (Cost of Goods Sold), no leverage to capital market

12

Business Strategy Recommendations

13

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Government Policy Recommendations

14

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15

“When a resource becomes essential to competition but

inconsequential to strategy, the risks it creates become

more important than the advantages it provides.”

Nicholas G. Carr