Cloud adoption in Latin America has been slower than expected, but accelerated growth is anticipated over the coming years as software applications are simplified and customers become aware of the benefits to their businesses.
“A decade ago the prediction was that, by now, cloud use would be ubiquitous, accelerating transactions and company performance, but the software has not been user friendly,” José Antonio Barragán, senior sales cloud executive for northern Latin America at Oracle Corporation, told Nearshore Americas.
“As a result, Oracle has been transforming its software to make it more accessible to encourage companies’ migration to the cloud.”
He said he sees very strong growth in cloud adoption across the region during the coming years.
“The software no longer requires large inputs of data, and is more accessible and graphical, akin to the operating systems of smartphones and tablets.”
“The cloud is the future, as it increases efficiency and lowers costs,” Barragán said.
The growth in cloud deployment in Latin America will be partly driven by on-premise deployment, a segment which is anticipated to dominate the market, in terms of size, he said.
Other growth drivers are expected to be the Infrastructure-as-a-Service (IaaS) market, the growth of the fintech sector, and the proliferation of data centers in the region.
Cloud services are expected to generate US$7.4 billion in revenues in Latin America by 2022, at a compound annual growth rate of 31.9%, according to a report by Frost & Sullivan.
So far, cloud adoption has been slow even in Latin America’s largest economies, such as Brazil, Mexico, Chile and Peru, as many companies in the region are still using old IT systems in their operations, Barragán said.
“However, Mexico and Brazil are now the leaders in cloud adoption in Latin America, followed by Colombia, Chile and Argentina,” he said.
Barragán said that, in Latin America, cloud is most-relied on for Software-as-a-Service (SaaS) solutions, also known as ‘business cloud’, and which is designed to support applications geared to helping businesses streamline their operations, such as accounting and payroll.
He also identified the emergence of a ‘hybrid’ model, in which companies will not be reliant on a single configuration, but instead use a ‘pick-and-mix’ approach according to their needs, and which will include on-premise private cloud, public cloud and hosted private cloud.
Cloud is also being widely implemented for enterprise resource planning (ERP) in the region, he said, and which allows enterprises to integrate their business functionalities to achieve higher efficiency and productivity.
“The cloud-based deployment platform has given a significant boost to enterprise application software during the last few years,” according to Barragán.
The Latin America ERP software market is expected to reach US$2.73 billion by 2025, according to Research and Markets, driven by the business process efficiency and transparency.
However, despite it being the sector that most invests in technology, and particularly in security solutions, the financial sector in Latin America is lagging behind other sectors in cloud adoption, compared to healthcare, manufacturing, pharmaceuticals, although cloud is now spread across multiple sectors, according to Barragán.
“Some sectors are more reticent to cloud adoption than others, but little by little they are migrating operations to the cloud,” he said.
Oracle is among the leaders in Latin America’s business process management software market, according to Market Trends, and which also includes players such as IBM, Appian, Agile Point, Pegasystems and K2 Software.
Oracle was named a leader in Gartner’s ‘Magic Quadrant for Enterprise Integration Platform as a Service (iPaaS)’, published in May. iPaaS provides capabilities to enable subscribers (also known as “tenants”) implement integration projects involving any combination of cloud-resident and on-premises endpoints, including APIs, mobile devices and the Internet of Things (IoT).
Gartner’s Quadrant is led by Informatica, followed by Dell Boomi and Jitterbit.
Despite its high ranking however, Gartner warned that Oracle is still generally perceived in the overall market as a provider of expensive integration software, with a client base predominantly made up of large organizations with existing investments in Oracle products.
Oracle disputes this however, and said in its 3Q18 report that the company “is not just converting existing on-premises ERP customers to its cloud line. In fact, most of the current customers of Oracle ERP Cloud had never bought an application from Oracle before”.
And disputing the perceived expense as a barrier to cloud adoption, Barragán points to the longer term savings companies make by migrating operations to the cloud, and which, he said, have been reported to be up to 40% in operating costs by one of his clients, Mexican multinational food company Bimbo.