The South Korean cloud computing market has been dominated by global players such as Amazon Web Services and Microsoft, whose combined market share is currently as high as 80 percent. South Korean IT companies are trying to make a breakthrough with multi-cloud attracting much attention these days and new cloud markets opening in the public and financial sectors.
At present, global cloud service providers are trying to further increase their market shares in South Korea. For instance, Amazon Web Services announced last month that it would open its third data center in the country soon with the number of its clients increasing fast. Amazon Web Services currently has two data centers in Seoul and about 50 percent of South Korean companies adopting cloud services are working with Amazon Web Services. Microsoft, which is running two data centers in Seoul and Busan, is planning to build its third and fourth data centers in South Korea in Busan. Google and Oracle are planning to open data centers in Seoul, too.
South Korean companies have failed to increase their presence in the domestic market as well as overseas markets in that the cloud business is basically based on economy of scale and global players overwhelm them in size.
However, an opportunity came to them in the second half of 2018, when a system failure occurred in Amazon Web Services’ data centers in South Korea. A lot of its clients had to experience inconvenience and they realized the necessity of multi-cloud. Since then, KT has released VMware on KT Cloud and LG CNS has initiated a pilot test for its integrated cloud management platform CloudXper.
Major South Korean companies are currently accelerating their cloud service adoption and the South Korean cloud market is expected to be boosted this year although only 12.9 percent of South Korean companies are currently using cloud services. For reference, the OECD average is 30.6 percent.
Samsung Electronics recently turned its database systems for Samsung Account, which allows Bixby and Samsung Pay, into cloud systems based on a conclusion that the existing databases are not enough to handle authentication for hundreds of millions of mobile and IoT devices. Hyundai Motor Group is adopting cloud for key enterprise resource planning software and LG CNS is going to help LG Group use cloud services for at least 90 percent of its business in 2023 and later. Samsung SDS already turned most Samsung Group subsidiaries’ IT systems into cloud systems and Lotte Group is releasing products, recruiting new employees and communicating with customers based on cloud services. Korean Air is following suit as well.
In the meantime, the South Korean government released new guidelines in December last year on the use of private cloud services by public and administrative institutions to bring another opportunity to local IT companies. According to the guidelines, important financial information and data can be stored in cloud storage starting from this year. In addition, in the public sector, cloud is emerging as an alternative to network separation for security enhancement. Under the circumstances, more and more cloud services are likely to be adopted in the financial and public sectors.
Also, the guidelines stipulate companies that obtained the South Korean government’s cloud security authentication can provide cloud services. Only five companies (KT, Naver Business Platform, NHN, Gabia and LG CNS) have obtained the Infrastructure as a Service (IaaS) authentication. Foreign companies are refraining from opening their source codes in order to get the authentication and, as such, the local public cloud market can be led by South Korean companies for a while.
In the financial sector, companies prefer local cloud service providers partly because of many preconditions for cloud service adoption. The service providers are already concentrating on the local financial cloud market. For example, Naver Business Platform is working on a financial cloud system with Koscom to launch a financial cloud zone in Yeouido in August. NHN formed a partnership with KB Financial Group to expand its Toast cloud solution.