As the Ministry of the Interior and Safety’s public cloud conversion project budget for the new year is organized at 34.2 billion KRW, which is only about 20% of the original plan, an emergency alert was put in the cloud industry.
The public cloud conversion projects have been one of the main sources of revenue for domestic public cloud companies. Expectations were high as a market of about 800 billion KRW would be created by 2025. Cloud operators can not only improve product and business competitiveness through public projects, but also create a foundation for expanding private businesses.
As the budget for this year, which the third year of the project, is drastically reduced, the possibility of a downturn in the cloud industry is also raised. The majority of cloud companies who have set up their business strategies in line with the 5-year project plan for public cloud conversion projects are 'devastated'. In particular, companies that have expanded their manpower in line with the government's project plan are struggling to reorganize their newly secured manpower.
An official from a domestic cloud management service provider (MSP) said, “For MSP companies, it is difficult to come up with a plan for the reduced budget situation. It would be better to re-discuss the business plan as soon as possible in order to adjust the workforce. However, since this is still unclear, we are in a tight spot where we can’t do anything about it.”
It is an ‘adding insult to injury’ situation, as the government pushes for the introduction of the Good, Average, and Bad rating system of the Cloud Security Assurance Program (CSAP), and there are concerns that difficulties will be aggravated throughout the public cloud business. This is because even the reduced project order opportunities must be shared with global operators.
Another company official pointed out, “The overall business pie has decreased due to the reduction in the public cloud conversion project budget, but the promotion of the CSAP rating system has increased the number of companies participating in this project.”
In the aftermath of the economic recession, not only public but also forecast of private cloud business are 'cloudy'. It is forecasted that demand for cloud conversion will decrease as investor sentiment has contracted due to the global economic recession.
It is pointed out that the government's implementation of the digital platform government will lose momentum due to public cloud business conversion budget reduction along with concerns about the downturn in the private cloud industry. The digital platform government aims for a one-click customized service in which all data is connected based on the cloud, breaking away from the partitioned government service with each system. It is possible to secure a flexible information system environment through the public cloud conversion project.
However, as the cloud is considered a basic condition for the realization of a digital platform government, there is an opinion that the public transition to the cloud cannot be stopped. The majority of cloud companies are expecting new public cloud business demand related to digital platform government.
Starting with the enactment of the 'Information Resource Integration Standards for Administrative Agencies and Public Agencies' in June 2020, the Ministry of the Interior and Safety has conducted public cloud conversion projects through information system status surveys and conversion promotion plans.
From the first year project initiated in 2021, it succeeded in converting about 900 information systems to the cloud by last year. This year, it was planned to convert and integrate 2,167 administrative and public institution information systems and 13,004 servers into the cloud.
By Staff Reporter Hye-mi Kwon (hyeming@etnews.com)