Despite much attention from the ICT industry, cloud adoption in the local market has been slow, but is that now changing? Migration to cloud computing services in South Africa is steadily picking up, after a slow start, but still lags front-running markets in north America and Europe.
Increasingly aggressive marketing by big cloud vendors such as Amazon Web Services (AWS), IBM and Microsoft as well as strong support from product suppliers, like VMware and SAP, and local systems integrators appears to be encouraging South African enterprises to test the potential of cloud services.
More than 50 percent of organisations in South Africa that responded to a recent Gartner survey reported using or piloting Software as a Service (SaaS) offerings delivered on cloud platforms. Around 38 percent are using cloud facilities to access Infrastructure as a Service (IaaS).
Alessandro Misiti, who leads the firm’s cloud computing consulting in Europe, the Middle East and Africa, points to bandwidth constraints, lack of local datacentres, lingering reservations about security and regulatory restrictions on moving critical data out of the country as likely inhibitors to early growth in the South African market. However, interest in cloud computing as well as spending are definitely increasing, says Misiti.
The size of the local cloud computing market remains hazy. Frost & Sullivan last year put combined South African and Kenyan revenues for 2013 at US$114.6 million and reckoned the figure would more than double in five years. South Africa commands the lion’s share of the current market but is expected to slip behind its African counterpart by 2018. These revenue estimates are based on forecasts supplied by cloud computing vendors and exclude customer investments in ancillary services and products. International Data Corporation (IDC) was more bold. It valued cloud services in South Africa at US$230 million at the end of 2014.
Slow SME adoption
Much of the rapid growth anticipated by analysts hinges on cloud computing suppliers’ penetrating the small business sector – an enormous potential market in South Africa, Kenya and elsewhere in Africa. Jonathan Kropf, CEO at Cloud on Demand, points out that small and medium-sized enterprises (SMEs) were the early targets of cloud computing vendors. However, take-up in this sector appears to have been slow and large enterprises are now in the forefront of vendors’ sights. “The focus of big vendors, particularly Microsoft, on marketing cloud services to their traditional enterprise customers has certainly affected the shift,” he says.
Financial institutions, the traditional pioneers of ICT innovation in South Africa, are leading the local move to cloud computing although several telecommunications firms, manufacturing conglomerates, healthcare providers and academic institutions are also taking the plunge. The promise of reduced costs and greater financial control as well as increased flexibility and agility in the provision of IT services are big attractions. The most common applications to be outsourced to the cloud are e-mail, payroll, back-up and disaster recovery. Some ERP and CRM applications are beginning to be hosted in the cloud, says Kropf.
However, Gartner’s Misiti points out that many of the ERP and CRM cloudbased systems running in South Africa are discrete or specialist applications rather than comprehensive integrated production systems. “The vast majority of them have been implemented because a business wants to supply a digital service or capitalise on social media,” he says. “There’s still a lot of reluctance from IT departments to move critical systems into the cloud,” adds Misiti.
Caution among local adopters of cloud computing is further reflected in the predominance of private cloud implementations in South Africa. Around 64 percent of cloud computing users questioned by Gartner described their cloud services as private cloud. The security and control offered by onsite datacentres is one of the major attractions of such private clouds. Many South African corporations also have big investments in IT infrastructure and are reluctant to jettison these assets before they have been fully depreciated.
Take-up drives uptake
Growing experience and confidence in cloud computing among local organisations is likely to boost demand for more extensive public and hybrid services. Microsoft-specialist Avanade expects hybrid cloud implementations to rocket. Around 72 percent of respondents to its recent survey of 1 000 senior executives across 21 countries anticipate adopting hybrid cloud solutions within the next three years. Similar, if slower, take up is expected in South Africa.
Increasing demand for cloud computing services, particularly hybrid cloud solutions, offers enormous opportunities for local systems integrators and value-added resellers (VARs). Misiti says more than 70 percent of respondents to the Gartner survey that plan to migrate to cloud computing are looking to make the journey with a partner. “There are considerable opportunities for companies offering advisory services, migration support and ongoing managed services,” he says. “Future demand for hybrid cloud solutions will require systems integrators that possess the skills necessary to help organisations migrate to, and then manage, diverse and often complex computing environments,” adds Misiti. He advises service providers to identify and develop ‘vertical skills-sets’ in niches such as e-commerce and web services that can be ported to a variety of customers. Such customers will include traditional IT departments as well as the growing number of corporate business units that have responsibility for their own IT budgets and services.
Where’s the demand?
The escalating number of large enterprises moving to cloud computing in South Africa offers attractive pickings for channel vendors eager to capitalise on the market. Demand for key skills and services is likely to be high for the next three to fi ve years. longer term, the huge and largely untapped SME market offers enormous potential rewards. Cloud computing has the ability to provide entrepreneurs and small business owners across Africa with efficient, cost-effective and easy-to-use digital services. Opportunities to supply business applications on cloud platforms as well as supporting services to these customers are likely to be substantial, says Misiti. IT resellers will also be able to broker cloud services on behalf of infrastructure and service providers and offer customers aggregated cloud services from a single online portal.
“The biggest challenge facing VARs will be to make sure they keep providing their customers with added value. If they stop, their customers will cut them out and go straight to the big cloud computing service providers,” warns Misiti.”
Pull quote:
“There are considerable opportunities for companies offering advisory services, migration support and ongoing managed services.” Alessandro Misiti, Gartner