Cloud computing received a major boost over the last few weeks, with two of the world’s largest public cloud providers officially opening data centres in South Africa.

Within days of one another, Huawei and Microsoft both opened their local data centres, offering South African customers the benefits of data sovereignty, reduced latency and – possibly most important – the assurance of just how strategic this market is to the major international players.

South African organisations have tended to lean towards private cloud deployments in the past, concerned about the implications of offshore storage and computing in terms of things like the Protection of Personal Information (PoPI) Act; and concerns over issues like security and privacy.

These issues will presumably be laid to rest with the new data centres, and local companies and government departments will be able to enjoy the many benefits that public cloud offers.

There is no doubt that the market is booming: IDC’s Worldwide Semi-annual Public Cloud Services Spending Guide indicates that global spending on public cloud services and infrastructure reach $210-billion in 2019, an increase of 23,8% over 2018.

Although annual spending growth is expected to slow slightly over the 2017-2022 forecast period, the market is forecast to achieve a five-year compound annual growth rate (CAGR) of 22,5% with public cloud services spending reaching $370 billion in 2022.

“Most organisations have adopted the public cloud as a cost-effective platform for hosting enterprise applications and for developing and deploying customer-facing solutions,” says Eileen Smith, program director: customer insights and analysis at IDC. “Over the next five years, IDC believes that cloud platforms and ecosystems will serve as the launchpad for an explosion in the scale and pace of digital innovation. The result will be ‘multiplied innovation’ with as many new applications deployed in the cloud as prior generations deployed over the previous four decades.”

Three industries – professional services, discrete manufacturing, and banking – will each spend more than $20-billion on public cloud services this year, accounting for more than one third of the worldwide total.

The process manufacturing and retail industries will round out the top five with spending of more than $15-billion each. These will remain the top five industries in 2022 due to their continued investment in public cloud solutions.

The industries that will see the fastest spending growth over the five-year forecast period are professional services (26,4% CAGR), retail (24% CAGR), and personal and consumer services (24% CAGR).

Software as a service (SaaS) will be the largest category of cloud computing, capturing more than half of all public cloud spending in 2019. SaaS spending, which is comprised of applications and system infrastructure software (SIS), will be dominated by applications purchases.

The leading SaaS applications will be enterprise resource management (ERM) and customer relationship management (CRM), followed by content workflow and management applications and collaborative applications.

Infrastructure as a service (IaaS) will be the second largest category of public cloud spending in 2019, followed by platform as a service (PaaS).

IaaS spending, comprised of servers and storage devices, will be the fastest growing category of cloud spending with a five-year CAGR of 33,7%. PaaS spending will be the second-fastest growing category (29,8% CAGR) led by purchases of data management software application platforms, integration and orchestration middleware, and data access, analysis and delivery applications.

Very large businesses (more than 1000 employees) will account for more than half of all public cloud spending this year, while medium-size businesses (100-499 employees) will deliver another 20% of the worldwide total. Small businesses (10-99 employees) will edge out large businesses (500-999 employees) for the third position. With the exception of the very large business category, all the other company size categories, including small office (1-9 employees) will experience public cloud spending growth greater than the 22,5% CAGR of the overall market.

Cloud computing is by no means new to the South African market, but the opening of locally-based public cloud data centres has re-ignited interest.

This is according to Natasha Bezuidenhout, Microsoft brand executive at First Distribution, who points out that the local data centres address some of the issues of data sovereignty and network latency that was holding some organisations back from implementing cloud computing.

“The availability of local data centres has taken much of the worry out of the equation,” she says. “Customers are now ready to start having conversations about public cloud.”

Jason Sharp, director: cloud and hosting at First Distribution, points out that the South African market is embracing cloud and has been for some time. “Challenges around widespread adoption have been the result of several widely-held misconceptions around cloud and global data centres.”

He points out that one of the biggest stumbling blocks to public cloud adoption was latency, but this has been effectively addressed with technologies like DirectConnect on Amazon Web Services (AWS) and similar technologies on Microsoft Azure. “These have already reduced latency from the offshore data centres to where they are not an issue any more,” Sharp explains.

Data sovereignty has been another issue for local organisations, with some local organisations reluctant to hold their data offshore.

This issue largely revolves around security concerns, Sharp points out. “But if you ask any of the cloud providers about their security policies and practices around data centres and location, you will realise that the security they provide is top class.”

With the arrival of the local data centres, these two perceived stumbling blocks have been removed, Sharp adds, so organisations can focus on the benefits that cloud offers.

Public cloud offers a number of benefits compared to the traditional hosting model, Bezuidenhout adds. “The first is that the customer doesn’t have to put in equipment now that may only be required in a few years’ time. So there’s no upfront investment on capital equipment that you can’t leverage immediately.”

“Instead, public cloud is consumption-based, so you only pay for what you use. This offers a lot of benefits in terms of flexibility: you can quickly start a campaign or spin up a server for whatever reason.”

Sharp elaborates: “There is huge benefit in converting capital expenditure (capex) on compute and storage to a true operational expenditure (opex) model that allows the organisation to scale out and down when needed, optimising their expenditure.”

Democratisation of technology and services is another huge benefit that public cloud offers, Sharp adds.

For example, he points out that an AutoDesk user just a few years ago would have had to invest tens of thousands of rands for the sophisticated hardware needed to run a compute-intensive system.

“Today, with the public cloud, even a university student can rent the most powerful computers without having to lay out any capital.”

The same goes for powerful technologies like machine learning, artificial intelligence and data analytics that would historically require the user to make major investments. “They can now provide services using those technologies, where the hardware requirements and capital costs are not a barrier.”

“So far, South African organisations seem to be using public cloud in the test and development environment,” Bezuidenhout adds, “and there are also opportunities to leverage the environment for data protection.”

“Overall, it is very much a compute conversation at the this stage,” she says. “Local organisations are not embarking on Internet of Things (IoT) or artificial intelligence (AI) projects at this time – although the conversations are starting.”

To date, First Distribution is seeing traction for public cloud services mostly from the traditional development organisations, who see the opportunity to leverage cloud to increase both revenues and the services they are able to offer to their customers.

The prospect of saving money is often the first reason that organisations turn to public cloud, but Bezuidenhout warns this might not necessarily be the case – but there are so many other benefits that cost-saving shouldn’t be the primary driver.

“Cost saving is relevant for every business, and especially with the current economic situation in South Africa, but is public cloud cheaper? No, but it’s a totally different model.”

It’s a mistake to talk about cloud – even public cloud – as if South Africa has only just discovered it, Sharp adds.

“Cloud is being used all the time. But often people don’t even see it.”

He stresses that there is a difference between private cloud and public cloud. “They are both significant factors in the South African market, and organisations have apps that will run on-premise, on a private cloud and in the public cloud.

“The public cloud is not the be-all and end-all of computing. Organisations need to be able to move between all three environments.

“Then there are multiple public cloud providers, all offering different services, and organisations will probably end up with different workloads running with different providers.”

Sharp adds that he believes the major benefit of more widespread cloud adoption is the advancement of the digital agenda. “Cloud will help organisations to advance from a technology point of view, but it will also help them grow their digital capabilities.”

“We are seeing an acceleration in cloud adoption through the availability of additional services,” Sharp explains. “New services and new workloads are being deployed on public cloud; and it is enabling the adoption of things that organisations wouldn’t traditionally have used technology for.”

Trent Odgers, cloud and hosting manager for southern Africa at Veeam, points out that businesses are progressively embracing a multi-cloud strategy to drive increased innovation, speed to market and to optimise cost.

However, the new challenge for organisations is creating an integrated data management strategy that will integrate disparate cloud services, automate the movement of data across multiple workloads when and where it is needed, while remaining compliant with the Protection of Personal Information Act (POPIA) locally and the General Data Protection Regulation (GDPR) in Europe.

He believes we’ll see the growth of various ‘as-a-service’ offerings as organisations look to free up resources and using IT infrastructure in a scalable way to quickly access higher computing power.

“South African businesses are embracing digital transformation and using the power and elasticity of the cloud to deliver rich digital experiences to their users.,” Odgers says. “In multi-cloud environments, it becomes more challenging to ensure that data and applications are always available, to all users and all devices, across all private, public, and hybrid workloads.

“To this end, companies need a more proactive approach to data management. An approach that will not only intelligently anticipate and meet the demand of data, but also enhance the value of its corporate data assets, deliver new products and services to market quicker and drive the digital transformation of the business.”

He believes the push to embrace intelligent data management will see many local companies use the cloud to automate processes.

This does not mean there are not challenges to overcome in the cloud ‘gold rush’, Odgers says. Last-mile connectivity is still not a reality for many areas in South Africa. And despite growing competition, data costs are still high compared to international markets.

“While the arrival of Microsoft Azure and Amazon Web Services data centres is good news for local business, it does put pressure on local providers. They will now have to re-evaluate their offerings and technologies to remain competitive and cost-effective.”

He believes on way local providers can add value is to embrace public providers, as they will be unable to challenge them on cost in some areas and in other areas they will be more cost-effective when the entire cost is considered.

“If they look at using the services offered by the big cloud providers as part of their services mix and keep some of their local cloud services that are more niche to themselves, this could present a unique blend that will appeal to sectors that have differing needs.

“All told, the market is ready for the next phase of cloud innovation. It now just needs the desire from providers to help meet the expected demand.”

Niral Patel, MD of Oracle South Africa, feels that cloud is no longer just a possibility for South African organisation, but a fundamental tool igniting innovation and disruption across industry, sector and enterprise.

“The adoption of cloud services is driving every organisation to consider speed and extent. C-suite leaders who are thinking of the future are looking to the financial and long-term benefits of cloud and understand its value and that cloud has become more commoditized,” he says. “They’ve already adopted the solutions and examined their potential and are now considering richer cloud engagement, driven by economy, investment and market demand.

“Organisations want technology that allows for a higher return on investment to minimise the pressure of economics, disruption and competition that press in on all sides.

“Cloud is dominating thanks to the impressive, commoditised rise of Infrastructure-as-a-Service (IaaS) and will continue to do so as this trend remains in effect.

“Digitalisation is permeating every industry, with cloud computing rapidly becoming an essential component of business transformation.”

As organisations make the move to cloud – be in private cloud, public cloud, hybrid cloud or multi-cloud – Patel says it’s important that they select the right technology that can bring actual value to the organisation, as opposed to simply following a fad or getting distracted in a niche space.

“The starting point is to find the right cloud model and vendor for the organisation – a vendor with breadth and depth,” he says. “Cloud is an enabler of innovation, but not all clouds are the same.”

Patel points out that some of the things companies need to consider to avoid niche lock-in include choosing a partner with a platform that includes the latest emerging technology – autonomous, IoT, machine learning, blockchain, artificial intelligence and robotics; a complete and integrated business suite of applications offering built on that platform; and emerging technologies already “baked in” to business applications – all on demand.

Craig Freer, executive head: cloud at Vox, agrees that the cloud is evolving quickly in South Africa. “We’re seeing an increasingly number of companies moving their infrastructure to the cloud, coupled with a highly competitive, feature rich applications offering from Microsoft. Businesses that go the cloud route in terms of applications receive value.

“That said, there are companies that are keeping their infrastructure on site due to data privacy or a lack of trust in cloud services,” he adds. “There is, however, no doubt that there is this move to cloud computing across the board in South Africa.”

Freer says businesses are moving to the cloud because it gives them the ability to run at a fixed cost despite the capacity used, they pay for what they use and don’t require IT resources. In addition, they can scale up and down on demand depending on what the business needs.

“We are seeing an uptake in requests for fully-managed services –  businesses want applications like ERP integrated into their environment and they want it managed without requiring dedicated IT resources of their own.”

There is currently a big drive around security, Freer adds. “Storing data in a data centre doesn’t mean the risk goes away. Companies do not take security seriously and the implications this can have if they’re engaging with a partner that doesn’t have a good security posture can be catastrophic.

“The business has to consider several factors – is the infrastructure safe, is there a solid firewall in place, is the network infrastructure safe and is it protected from a denial of service attack? An audit trail is essential so that when an incident occurs, the business has recourse and can take remedial action. “

Despite the global hype around multi-cloud, Freer doesn’t think South African companies are ready for it. “I don´t believe local companies are ready to embark on a multi-cloud strategy. VMware, Microsoft and AWS are completely different beasts and the perception is that companies will have a hybrid model across different cloud providers.

“This is not what we’re currently seeing in the market – it means they’ll need dedicated resources to support several cloud providers,” he says.

“What we are seeing is that businesses are consolidating with a cloud provider and sign various service level agreements for protection.”

Ozone’s Henk Olivier points out that cloud computing has gone beyond the hype and has now almost became a standard method for businesses when it comes to data storage, processing and systems.

“It is becoming easier for business to scale if they use cloud computing rather than local infrastructure and management.”

In South Africa, is it becoming an standard offering for most Internet service providers on a local level and option, where in the past many of the service offerings was from overseas hosting companies.

“It also give many resellers and IT companies the opportunity to create annuity business offerings to companies they support on a IT support level,” Olivier says.

Currently, corporates are still focusing more on private cloud as it empower businesses to quickly scale on resources, and it is very easy for a business to get a bespoke solution on a private cloud offering from a service provider.

“The big cloud providers in the industry are focusing to offer business a full cloud service solution, this is from, data storage, VoIP, CRM system, email server and communication to full managed security solutions,” Olivier explains,

“The biggest challenge for cloud providers currently is security, as they need to take full management on local security as well as the cloud security.  The biggest difference between local providers will be the actual managed security they can offer.”

Olivier thinks a number of local service providers are ready to offer multi-cloud options, enabling customer to easily increase and decrease resources, as well as the option where resources need to be on a location level.

“The biggest value add from cloud providers is the ability for companies to be able to change resources, as well as getting a proper managed security solution and reporting from the service provider.”

While there is little doubt over the hype attached to cloud computing and services, the reality is that South Africa businesses are embracing cloud, especially solutions that are being used to strengthen contact centres and enhance customer engagement, says Paul McIntyre, CX executive at Elingo.

McIntyre agrees with the idea that cloud computing has evolved beyond the hype and is now entering mainstream.

“We are also starting to see the adoption of cloud-based technologies in the customer engagement area of the business. This is being driven primarily by the benefits of cloud, including no downtime due to technology changes, no loss of investment when hardware becomes outdated, ease of deployment and no requirement for expensive in-house skills, and many more.”

McIntyre quotes a Cloud Transformation Survey, commissioned by Elingo’s technology partner Genesys and focused on small-to-medium contact centres across five countries in Africa, which found that over a period of 2-3 years, 56% of contact centres are undergoing cloud transformation, while 44% have not yet moved to the cloud.

It also found that CRM is where cloud has made a significant difference to call centres, specifically with voice recording in the cloud.

Customer experience is being elevated through the cloud and companies are increasingly looking to add more channels – including SMS, social media and mobile apps – to engage customers.

“Businesses have also adopted cloud technologies for voice based cloud phone systems,” McIntyre says.

Cloud has also impacted on employee experience (EX) and how an employee experiences working in an organisation and maximising their capabilities, as well as enabling the ability to resolve customer issues with a single view of the customer across multiple channels.

“This amplifies the customer experience … the two are connected, and cloud allows quick and easy access to functionality that can enable this,” McIntyre adds.

Looking ahead, as cloud becomes more pervasive and cloud solutions begin to dominate ICT infrastructure adoption, the business model will change, he believes.

According to McIntyre the advent of cloud will drive the restructuring of the business from capex to opex and the implementation of the pay-as-you-go model – a key mechanism for the delivery of technology and applications for contact centres.