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Google SA stirs in-country cloud, AI competition

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 01 Feb 2024
Google’s new cloud region in SA is expected to help firms address data governance concerns.
Google’s new cloud region in SA is expected to help firms address data governance concerns.

Google South Africa’s new cloud region, in Johannesburg, is expected to intensify the cloud artificial intelligence (AI) race in the country’s increasingly competitive cloud market.

This is the word from industry pundits, commenting on the internet search giant’s newly-launched cloud region, which was yesterday declared ready for use by Niral Patel, director of Google Cloud in Africa.

The company first announced its plans to open a cloud region in SA in 2022.

In a statement, Patel notes that with the new facility – Google’s first in Africa – businesses across the continent now have access to high-performance, secure and low-latency cloud services.

Google Cloud services have, however, been available locally for years, via services and support provided through its partner network, which includes Digicloud Africa, Saicom, Opennetworks and DotModus in SA.

Derrick Chikanga, IT services research manager at market analyst firm IDC, says the new Google SA cloud region could potentially “cannibalise” the market share of niche or specialised market players in the platform-as-a-service (PaaS) and software-as-a-service (SaaS) markets.

“The Google Cloud region will intensify competition in a market that is characterised by hyperscalers, such as Amazon Web Services (AWS) and Microsoft Azure,” comments Chikanga.

“It will provide local customers with additional products and services to enable them to undertake their digital transformation initiatives, especially during a period when AI is expected to cause significant disruption to existing business models.

“However, market players like AWS and Azure are well-established, with a loyal client base,” he points out.

Commenting on Google’s competitive advantage, he says the company provides its own set of products, so while the internet search giant already has a presence in the PaaS or SaaS markets in SA, its product offering differentiates it from its existing competitors.

“This will provide local customers with the freedom to choose from a wider range of cloud products and services, depending on their business requirements.”

All things AI

Google is looking to gain a large share of the global AI market, having invested in and developed AI-based solutions over the last few years, including Google AI and DeepMind offerings.

Last February, Google announced Bard, a conversational generative AI chatbot powered by Language Model for Dialogue Applications. The ChatGPT rival has the ability to interact in conversational dialogue form, allowing users to ask questions and receive detailed answers.

As the rush to adopt AI spread across the globe last year, Google in October committed to invest up to $2 billion in AI start-up Anthropic, according to CNBC. The pledge came six months after Google invested $300 million in the company, taking a 10% stake.

In December, Google took another step to accelerate its AI journey, introducing Gemini, which it described as its largest and most capable AI model.

Christopher Geerdts, MD of BMIT, says Google has always had a significant customer base globally, particularly in the analytics space. Its direct entry into the local cloud market will add value to the company’s existing base and help it compete for new customers, including in areas such as emerging technologies.

“BMIT's understanding of the local market is that data analytics is a growing area of demand and the company does have a significant local following. Large enterprises are unlikely to change their primary suppliers, but may use niche services. Google is also investing heavily in AI capability and this will likely impact the market, as uptake of these services grows,” comments Geerdts.

In addition, having in-country capability will enhance Google’s value proposition regarding customers that wanted to use its capabilities but were worried about the data domicile issue.

“Obviously, local hosting will improve latency, and this is important for particular applications, such as those which require large data transfers, as well as other applications where latency is a factor,” he adds.

Strong smaller contenders

The growth in Africa’s cloud sector is leading to more international players choosing to invest in the market.

IDC estimates public cloud services adoption in Sub-Saharan Africa will accelerate at a compound annual growth rate of 25% year-on-year between 2020 and 2025, with this momentum expected to continue.

In February 2019, Huawei started offering its commercial cloud services in SA, billing itself as the world's first cloud service provider with an operational data centre in Africa.

In March 2019, Microsoft opened two data centre regions in SA – Johannesburg and Cape Town. In April 2020, AWS announced the opening of the AWS Africa (Cape Town) Region.

Since then, other players have opened data centres locally, including Oracle, Dimension Data and Teraco Data Environments, among others.

Jon Tullett, IDC associate research director for IT services and cloud, Sub-Saharan Africa, explains that a local region isn’t only about the technical upsides, but “it also provides better resilience, helps address data governance concerns and demonstrates commitment to the local market”.

He notes that while competition is intensifying in the local cloud space, the market is still maturing and there remains plenty of room for further competition, especially for the smaller cloud players, such as Oracle, IBM, Salesforce, BCX-Alibaba and Huawei – which continue to invest in product innovation and development.

“The cloud market is very competitive and growing in complexity; there are plenty of opportunities for the broader ecosystem of cloud providers in SA and across Sub-Saharan Africa.

“There are many significant cloud players active in SA, many of which have investments in local infrastructure. Each of them has specialist infrastructure and application areas where they offer differentiation, as well as baseline services which compete for core cloud computing, storage and so on. And they have local partners who add value with local IP, verticalisation, customisation and other professional services,” explains Tullett.

Geerdts adds that while hyperscalers Microsoft Azure and AWS dominate SA’s cloud market, the smaller players that rank behind them remain strong contenders.

“Google Cloud is third globally in terms of market share, but there are a few other strong players in SA, depending on the service category one is considering. Google will try to emulate its overall position but there will be no likely dramatic shifts with traditional business.”