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The enterprise move to global IaaS providers will squeeze the South African channel

Dec 06, 2019

South African enterprises are beginning to accelerate their move to the cloud, as international cloud providers start to go live with their local data centres. This trend is likely to bring profound disruption to the South African service provider and IT integrator landscape over the next 18 months.

That’s according to Tarsus Technology Solutions MD, Mike Rogers, who says that many organisations start the transition by moving near-real time storage and archival requirements to cloud before looking at computing. “Storage is a low-hanging fruit for migration,” says Rogers.

“It’s perceived to be less complex to migrate storage to a public or hybrid cloud model than computing, and it can deliver a rapid return on investment. Taking advantage of a cloud provider’s economies of scale can deliver significant cost-savings as well as enable a company to achieve near limitless scalability.”

Rogers says that aside from a handful of early adopters, South African organisations have held back from cloud adoption because of concerns about availability and latency across international connections and about compliance with local data privacy laws and regulations when data is hosted offshore.

But with the recent launch of Microsoft’s enterprise-class South African Azure data centres and the imminent launch of local Amazon Web Services data centres, these concerns have diminished. “We’re already seeing many companies planning to move even mission critical applications to these cloud platforms – including some big names in financial services,” says Rogers.

This trend is likely to accelerate the consolidation of South Africa’s service provider and reseller landscape, he adds. “Many resellers that still depend on selling and servicing hardware infrastructure for a large portion of their revenues will come under severe pressure as the move to the cloud picks up pace,” says Rogers.

“But even the big telecom players and integrators that have built large data centres of their own with a view to competing in the cloud space will face a challenging competitive landscape. They will no longer be able to claim the advantages of lower latency and data sovereignty, and will find it difficult to compete with the international players based on price, scale and capacity.”

Cloud services – whether infrastructure-, platform- or software-as-service – is shaping up to be a winner-takes-all-market and the global, hyperscale data centre companies such as Google, Amazon and Microsoft have a distinct advantage over local players, says Rogers. There are no local players that can afford to plough tens of billions of dollars into data centre infrastructure, he adds.

According to Gartner, Amazon currently has a market share of close to 50% in the infrastructure-as-a-service (IaaS) market. Next in line are Microsoft, Alibaba, Google and IBM. Between them, these five companies control nearly 80% of the IaaS market, which includes storage in the cloud. At stake is a global market Frost & Sullivan believes will be worth $150 billion by 2023. *

“The trends in the market favour the global companies, which have massive scalability and proven technology and processes,” says Rogers. “Local providers will most likely need to merge and scale up; offer differentiated services or find niche markets to survive against global competition in the longer term. While end-users will benefit from the cost advantages the global providers can offer, they will also see their number of choices shrink as local competition diminishes. Over time, computing power and storage will become a mere utility.”

* https://www.techcircle.in/2019/07/30/amazon-continues-to-dominate-cloud-storage-biz-gartner 

ENDS.

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