Cloud Computing in the Philippines

The Philippines is a nation in which the idea of cloud technology sparked growth and transformation in Information technology firms. With partnerships with companies such as Microsoft, the country is set to achieve more within the field of cloud computing. However, there is still more to be done as companies such as Globe and Microsoft Philippines tend to focus more on communication and entertainment primarily. Salesforce as a new Company seeks to acquire a sufficient share of the Philippine market as a way of achieving its goal of being an outstanding cloud service provider. Therefore, this paper aims to determine the market size of cloud computing, market share and target demographics with reference to existing competitors to Salesforce.

Estimation of the Market Size and Market Share

According to the 2012 Census of Philippines Business and Industry (CPBI), the total number of establishments across the country as at 2012 stood at 219,184 with the number of Services sector businesses dominating the economy at about 86 percent (188,502) of the total establishments (Authority, 2012). Our group took into account the assumptions that 90 percent of the Services sector businesses would opt to secure a subscription into the CRM software services.

Therefore,

Considering that each enterprise translates to two subscribers;

With 90 percent subscribing to the economic encompassing service @ $150:

Total revenue earned from the subscribers at $150 each

Computed annually, the total revenue per year:

Assumption: only 90% of the subscribers subscribe to the package.

However, it is evident that, Philippines has an initiative to drive up the market expenditure on cloud computing to grow at an annual revenue growth rate of 31.7% from 2015 to 2020 with a growth of 13.3% coverage of information and telecommunication services (IT) as compared to the 6% in 2015 (“Business World | Cloud computing to account for 13% of Philippine IT services market by 2020”, (2018).

Therefore, assuming that the 2012 revenue remained constant till 2018, the increment in annual sales by 2023 will be as stated in the table below which shows the gross and net revenue computed yearly. The net revenue is calculated by deduction government taxes calculated at 12% of the annual revenue for respective years. Besides, the 31.7% revenue growth rate estimated by the Philippines government is put into consideration.

Projected Gross and Net Revenue Computer Yearly Up to 2023

Year

gross Revenue

Net Profit

2018

549673200

1840042030

2019

2640630053

8839561914

2020

2640630065

8839561955

2021

12685586831

8839561955

2022

22730543598

76090949305

2023

109198000000

36554100000

Assumptions

Cloud computing services are charged a tax of 12% for every purchased package in the Philippines (”Cloud Computing Taxation Issues and Impacts,” 2018). Therefore, by 2023, the firm would have made a profit of an amount which is reasonable taking into an account a minimum capital investment considering that the company already has the required infrastructure. However, the growth of the last two years will not be used in the computation of market base and customer acquisition rates with an assumption that there will be stagnation after the first three years. Therefore, $12685586831 will be used as the maximum gross revenue realized in the first three years of market entry.

Consequently, to achieve the threshold, there is a need to make a strategic plan for customer acquisition. The strategy involves dividing the market into one-year segments. The segments will determine the expansion and increase of the customer base per year. This can be computed from the projected gross revenue of the year 2021.

Therefore, the monthly earnings for the year 2023 will be computed as:

Hence, the company needs to generate monthly to achieve the gross revenue stated in 2021. The number of customers can thus be determined from the revenue by dividing the total amount by the $monthly subscription which is $150

By the year 2021, the company would have achieved a customer base of 7047549 clients. Therefore, from the projected number of customers, we can determine the increase or rate of subscription per year over a 3year period considering an initial customer base of in the current year 2018.

We thus determine the number of new subscribers from 2018 to 2023 by subtraction:

From the number of clients, we can determine the percentage increase and annual growth rate

The figure is calculated based on the assumption that the growth rate will be accelerated and client-centered. Therefore, the company targets an increase of 2247392 clients per year till 2021. However, since it is a free market, some new companies may arise and cut down on the annual revenues.

The annual market growth rate can, therefore, be determined by expressing the annual increment as a ration of the total to obtain an approximate percentage.

The figure is approximately equal to the 31.7 projected yearly revenue growth rate determined by the Philippine government after a market survey and study on cloud technology in the future. However, the figures are subject to further manipulation in case of changes due to market dynamics. Anticipated changes may occur as a result of a change in market policies as well as market flood which results when more firms join in the business with similar strategies and efforts. However, differentiation will be applied for the organization to survive, retain customers and attract more customers.

Primary Competitors

The toppers in the Philippine cloud technology market are Globe Telecom, IP coverage Data services incorporation and ePLDT), (Business Wire, 2018). Globe Telecom is the largest with several telecommunication networks in the Philippines. In 2017, the company had 60.7 million subscribers. At the end of June 2018, Globe had a revenue of 3.8 billion (”Globe.”, 2018). Therefore, this is the target company upon which all strategies must be devised to counter and share in the overall market share.

Globe as well as other cloud service providers major in communication platforms especially android phones and IOS phones. Thus, there must be a way of further segmentation to provide more tailored software to attract more customers. However, Since the Philippines has many youths, it will be significant to focus on the needs of the youths to maximize profits. As of 2018, the total population of the Philippines is 107,063,582

with a third being youths below the age of 24 (”Philippines Population (2018) - World meters”, 2018). Therefore, one of the ways to utilize the enormous population will be the introduction of subsidies on platforms. For instance, the company can offer free only games as an added advantage for subscribing to their services.

Conclusion

Salesforce is set to compete in the Philippines market. However, further analysis is required to come up with more robust strategies to combat giants like globe and Microsoft Philippines. Therefore, the company will enter the market cautiously so as to avoid impulsive growth that may lead to sudden failure of the firm due to poor planning and unworthy strategies. However, once the company establishes all the infrastructure in place, it will have nothing but to survey the market further to find unoccupied segments for exploitation.

References

Business World | Cloud computing to account for 13% of Philippine IT services market by 2020. (2018). Retrieved from http://www.bworldonline.com/content.php?section=Corporate&title=cloud-computing-to-account-for-13-of-philippine-it-services-market-by-2020&id=131601

Cloud Computing Taxation Issues and Impacts. (2018). Retrieved from https://www.ey.com/Publication/vwLUAssets/EY-cloud-taxation-issues-and-impacts/$FILE/EY-cloud-taxation-issues-and-impacts.pdf

Globe. (2018). Retrieved from https://www.globe.com.ph/

Philippines Population (2018) - Worldometers. (2018). Retrieved from http://www.worldometers.info/world-population/philippines-population/

WIRE, B. (2018). The Philippines Cloud Computing Services Market, forecast to 2022: Disaster Recovery Solutions and Cloud-based Contact Centers to Drive Market Momentum - Research and Markets. Retrieved from https://www.businesswire.com/news/home/20170413005963/en/Philippines-Cloud-Computing-Services-Market-Forecast-2022