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IDC sees strong cloud growth in META region

Read time 7min 30sec
Mark Walker, Associate Vice President for Sub-Saharan Africa at IDC Middle East, Africa, and Turkey.
Mark Walker, Associate Vice President for Sub-Saharan Africa at IDC Middle East, Africa, and Turkey.

While it should come as no surprise that cloud adoption is growing in South Africa, what is remarkable is the steep rate of uptake.

Wilson Xavier, IDC’s research and consulting director for IT and telecom services in the Middle East, Turkey and Africa (META), said hybrid multicloud will become the norm for most medium and large organisations in the region over the next 12 to 18 months.

Speaking at the IDC Directions conference last week, he said 45% of those surveyed in the region said they’d prefer to use private cloud over the next 12 to 18 months, while only 9% indicated they will mostly, or exclusively, use public cloud services.

He said a significant portion of applications and data will continue to reside on-premises or in private clouds over this period.

While enterprise IT investment in South Africa is expected to be positive this year, and will grow at 6.6% ahead of GDP, he said there were a number of decisive actions that needed to be taken by countries in the region to achieve sustainable recovery, given the magnitude of the impact of the pandemic. These included the rollout of vaccines at scale. He said the economies of South Africa and Turkey had been battered by weak exchange rates and that he expected their economic recovery to be slow.

Having a digital business has become a priority for all sectors, said Xavier, which has led to incremental investments in cloud-based services to support digital and online business priorities.

He believed this shift from physical to digital was one of the few positives from the pandemic, which will drive growth in enterprise IT in the region. And, governments and organisations that were digitally ahead of others were in a better position to cope with the pandemic.

He said cloud-based deployments will become the primary mode of investment in technology. In line with the digital strategies of governments and enterprises to support the business shift from physical to digital or online, private and public sector organisations are expected to scale up their investments in cloud services. This will have an adverse effect on on-premises non-cloud technology investments. Xavier said organisations will over the next five years trade-off their investments in non-cloud hardware and software with cloud services, but, to be sure, they will still need to manage their existing investments in non-cloud infrastructure and applications.

He said the hardware and software cloud services market is expected to grow in the range of 20% to 30% until 2024.

Professional services around cloud, meanwhile, are expected to grow at a slower pace, but will be almost double the rate for non-cloud IT investments.

“Importantly, the ease in which cloud services can be remotely delivered and monitored will have a significant impact in services spending in particular.”

Xavier said IDC had asked CIOs across the region about their approach to cloud over the next 18 months. Those in highly regulated sectors such as financial services and resource industries indicated their investment would be in mostly in private cloud. CIOs in healthcare and government meanwhile said they’d follow a hybrid approach. He said investments made by global public cloud service providers on in-country nodes had helped the highly regulated sectors to evaluate their investments in hybrid cloud services. On the other hand, sectors that are less regulated have been experimenting with public cloud services for a couple of years, and were now ready to explore its full potential. He said CIOs in these sectors, such as media and communications, transportation and education, told IDC they were now engaged in data classification and segregation exercises and are now poised to adopt more hybrid cloud services. These organisations were also planning mass migrations of critical and non-critical workloads on to cloud services.

IDC predicted that spending on public cloud services in the region will grow at 27% year-on-year, surpassing $3.7 billion by the end of this year. It also predicts the hybrid multicloud ecosystem to evolve, and public and private cloud will coexist with traditional on-premise IT infrastructure.

Infrastructure-as-a-Service and Platform-as-a-Service will grow at 30% this year. Software-as-a-Service will see slightly lower growth of 24.5%, given its larger install base.

CIOs in the region are also planning on refactoring, rearchitecting and replacing legacy apps with off the shelf cloud apps.

Global public cloud service providers are also continuing to roll out more nodes in countries in the region, thus fulfilling data sovereignty regulations. The big four – South Africa, UAE, Saudi Arabia and Turkey –will account for two-thirds of the spending on cloud this year and will see strong growth until 2024.

Digital transformation

Speaking to ITWeb on the sidelines of the virtual conference, Mark Walker, the local associate VP for the research company, said companies are accelerating their digital transformation programmes.

“Stuff they were planning to do in three years’ time is already up and running, and obviously that’s created a huge demand for data centres and cloud. All the stuff has to move onto cloud; and it’s got to be stored somewhere.”

“Cloud by its nature is data centre-driven, so company’s like Teraco, and the hyperscalers, they just clip on more servers and racks, and it doesn’t really matter where they are.”

Walker says the initial demand for cloud services at enterprise level had, by now, peaked.

“The next big thing is going to be making sure they’ve got the right apps for the business’ requirements. This will mean either adding more apps, to sharpen the saw, as it were, or to rationalise the apps that they took on in anticipation of more customers. They created capacity, which is possibly not needed or relevant anymore.”

Walker said there would be a continued drive towards remote working, or ‘remote everything’, and this was not likely to change in the foreseeable future.

IDC expects about 22% of the global workforce to be working from home permanently in 2023.

“What we’re seeing in South Africa will most likely be a higher percentage, especially in white collar-type and back-office employment.”

I’ve heard of instances where companies have deployed cloud services, and spent a bomb of money, and half of the stuff isn’t switched on...

Mark Walker, IDC

He said the financial sector is leading the charge in cloud adoption, with a particular focus on security.

Still, cloud skills are in short supply.

“I’ve heard of instances where companies have deployed cloud services, and spent a bomb of money, and half of the stuff isn’t switched on, either because they don’t know it exists, or they don’t understand how it can translate to their business outcomes.

“In future, cloud is going to be the name of the game. I have had inquires from Europe and England for investment into data centres in Africa. There is investment available, either to buy outright, or to provide the capital to build data centres.”

Asides from Teraco, Walker says Liquid Intelligent Technologies (formerly Liquid Telecom) is expanding their East Africa data centre and players in West Africa were also growing their presence.

Government spend

What about IT spend in the South Africa public sector?

“The cupboard is bare. They would love to spend more on IT, but they don’t have the money. We’re on a needs basis, and the projects that will be invested in will talk to citizen upliftment, things like improving the ease of access, and mobile access, to government services. 

"The president has mentioned it’s going to spend a lot more on infrastructure this year, but it’s not clear what he means: is it roads and bridges, or fixing the rail network? But the spectre of corruption hangs over this, and state capture, and that will impede the spend.”

The cupboard is bare. They would love to spend more on IT, but they don’t have the money.

Mark Walker, IDC

He added there was also ‘disconnect’ between what 4IR means and its execution by the public sector.

Walker said there seemed to be more government tenders being put out, and the cancellation rate was lower, which he said was a good sign.

“But we’ve got to see who the tenders are being awarded to and what the success rate is. Full transparency is missing. A tender might be awarded to a technology company, there’s no metric that shows the success of that implementation later. And that’s a big problem."

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