Adoption of cloud services in South Africa is growing predominantly within the small to medium-sized enterprise (SME) sector, according to Ovum research.
Although uptake is slower than in the more developed parts of the world such as North America and Europe, Ovum forecasts that total revenues for cloud services in South Africa will rise to $374-million in 2017 from $190-million in 2013 at a CAGR of 18%.

In new research the global analyst firm reveals that key drivers of the South African cloud services market will be the increase in international and local long-distance and metropolitan bandwidth, an oversupply of data centre space, and the move by South African enterprises to an opex-based model.

Ovum estimates that, over the next three years, as cloud services become increasingly competitive and cost-effective, South African companies will shed 25% to 30% of their ICT assets.

“Enterprises are finally taking tentative steps towards cloud, following some hesitation surrounding areas such as privacy and security,” says Richard Hurst, senior enterprise telecoms analyst at Ovum.

“The charge is being led by SMEs, which are subject to fewer restrictions in terms of internal procurement and compliance, and which also possess less legacy infrastructure and so approach cloud services from a more ‘greenfield’ scenario.”

Meanwhile, large enterprises are expected to begin adopting cloud services using hybrid public/private cloud models.

“Cloud service providers looking to tap into the South African market should work on alleviating enterprise concerns surrounding security and the perception that the sharing of infrastructure leads to a compromise in data confidentiality, which are key concerns for the larger enterprises,” explains Hurst.

As this trend continues, Ovum expects new entrants to appear in the South African cloud market, followed closely by an increase in merger and acquisition activity as the market consolidates over the next two to three years.