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Cloud Catches Fire in Brazil, but Pricing is a Mystery

By Dennis Barker

Cloud computing is picking up steam in Brazil faster than in any other Latin American country. But there’s currently some confusion and uncertainty about the real cost of using cloud-based services. Some customers are seeing bills that are higher than what they expected, according to research by IDC in Brazil.

“In some cases, business components such as service levels and responsiveness are not described correctly in the contract,” says Célia Sarauza, research manager for IDC Brazil. “It is impossible to know how much some service or application costs today because it is considered in a big contract with other services.” Not all customers are aware of the resources (both machine and human) required to run an operation in the cloud, or how much of those resources they are really using. As a result, in some cases, she said, “cloud customers are being surprised by the bills.”

It’s difficult to conduct an ROI analysis of a cloud-based business model, Sarauza says, but IDC believes all cloud providers need to be able to present this kind of information “in a simple and correct way to their clients.” Customers need to know how much they are consuming and how that affects the bottom line.

“In Brazil, all businesses are price-sensitive, so cloud providers have a  hard job to show the aggregate value of their services,” she says. Providers have to be able to compare past results with the results the client will see with the cloud, including factors such as CPU consumption, technical support, amount of data stored, backup time, etc.

Besides pricing, IDC says, security remains a concern among CIOs considering putting their data in the cloud. Brazilian security companies are working to move their traditional offerings to the cloud environment, and “smaller providers are developing security solutions specifically for the cloud,” Sarauza says.

But some companies are also concerned about having sufficient infrastructure. “In some regions of Brazil, we don’t have an appropriate infrastructure to provide services in the net,” she says. “And sometimes the infrastructure is not robust enough to support demand.” Currently, only about 18% of medium and large Brazilian companies use some type of cloud computing application, according to IDC data. That number indicates Brazil is lagging behind the U.S., where nearly half of the companies that size already use some cloud services, and Europe, where the rate is about 40%, IDC says.

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But in a new report, IDC predicts that cloud adoption in Brazil will grow by 60% between now and 2013—meaning that about 35% of medium or large businesses will be using cloud applications within two years. And by 2015, a hearty 80% of Brazil’s IT funds will be invested in implementing cloud environments, IDC strategist Richard Villars says.

IDC suggests that uncertainty about pricing is not likely to derail cloud adoption. It will be interesting to see if that’s the case. Lower costs is one of the things attracting companies to the cloud. But if those costs are shrouded in uncertainty—and if no one can guarantee a savings of x% or a monthly bill of a certain reasonable amount—that’s going to make some bean-counters hesitate. As a rule, accountants all around the world do not like to hear, “Our expense estimates were low.” Especially when it applies to some newfangled way of doing things.

As Gabriel Cogo, a Brazilian SAP consultant with a degree in business, has observed: “The biggest challenge for a CIO who wants to use cloud computing is actually changing the culture in the company…. It’s the hardest thing to do—especially in Brazil. The growth in Brazilian IT over the past few years has been stunning. Yet in many ways it’s still old fashioned and opposed to innovation.”

 

About Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.
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