It's time for local technology firms to leverage the power of the global platforms, rather than go toe-to-toe with them.Four multinationals announce plans to build hyperscale datacentres in South Africa, dramatically shaking up the local ICT channel.
The introduction of local cloud computing datacentres from global heavyweights IBM, Microsoft, T-Systems and Amazon will accelerate cloud adoption in South Africa and spur greater levels of digitisation for companies in every vertical.
With most of these local hyperscale cloud operations expected to come on-stream later in 2017 or in early-2018, Jon Tullett, IDC's research manager for IT services for Africa, says the local clouds offered by top-tier global players will have a ‘profound’ impact on South Africa’s channel, the IT sector and wider economy.
These top-tier global cloud services are markedly better than anything available locally, he argues (Amazon added 1 200 new features in just the past year), adding that local services ‘start to look very provincial’ in comparison with these global heavyweights.
Tullett says local IT players looking to bolster and diversify existing revenues through cloud computing have been ‘riding a very large bow wave’.
“At some point, it was going to turn against them,” he adds.
Speed is crucial
It’s time for local technology firms to leverage the power of these global platforms, rather than try to go toe-to-toe in competition with them. Tullett believes the local winners will be those that address uniquely South African needs in areas like cloud orchestration, cloud brokering, hosting, disaster recovery, backup, and compliance with local legislation.
“The focus (for local players) will be to build solutions and align them to business needs, to leverage the power of the global platforms,” says Tullett. “One has to be able to spot opportunities, monetise them quickly and then know when to drop them.”
Claude Schuck, regional manager for Africa at Veeam, agrees that the rollout of hyperscale datacentres will create massive market opportunities for forward-looking IT firms. In fact, he feels the impact will extend further: “Announcements like that of Microsoft could herald a new age of investment in the continent – as other multinational organisations are likely to follow suit with their own datacentres.
“Connectivity concerns are taken care of thanks to the datacentres being local,” Schuck adds, "so instead of providing broad solutions, local IT companies can specialise in niche value propositions.”
Explosion of demand
But just how does the new wave of ‘local’ cloud services affect the structure of the local channel?
Peter Reid, MD of Intervate (a key partner of Microsoft in the local market for over a decade), says there are three important trends that are now converging: “The introduction of local hyperscale clouds, the maturity and appetite in the local market for cloud, and Microsoft’s restructuring of channel relationships.”
Until now, Reid says, there existed something of a dichotomy – where Microsoft was pushing cloud offerings, but didn’t have all the capabilities at a local level to deal with data sovereignty, legislation, latency, cost and other issues.
Overall, he believes new cloud platforms will spur greater demand for cloud services, as more organisations look to benefit from the business transformation that the cloud enables.
Clifford de Wit, Microsoft South Africa’s DX director and chief innovation officer, echoes these sentiments – predicting the local cloud market will explode over the coming years and will redefine channel relationships. “There are incredible opportunities for our partners, especially those with strong IP, solutions, consulting capabilities, and accelerators,” he tells the Margin.
Adding that with local partners owning the direct relationships with local clients, having a local version of Microsoft’s global Azure platform brings a number of advantages over smaller, stand-alone clouds. Microsoft’s globally-distributed database, Cosmos Azure, for example, allows for data to be written and made available in local servers anywhere in the world.
De Wit says, ultimately, South African clients will be able to pick and choose services across the entire spectrum of on-premise, customer-owned datacentres, hosted datacentres and open public clouds. Local partners need to adapt to these new value chains and see opportunities to use cloud services to solve clients’ business challenges.
Catalyst for international growth
Globally, T-Systems was one of the pioneers of cloud computing, and its South African head of IT Portfolio and Solution Sales, Mpumi Nhlapo, says its local cloud will soon see a proof-of-value programme with a number of key clients. Known as Open Telekom Cloud, the local commercial rollout will likely be in Q4 of this year.
Nhlapo believes the cloud could be the catalyst for international expansion for a number of home-grown companies. “If we can prove a service works in South Africa, we can help clients grow internationally, stimulate and support the ICT economy, and develop new technical skills locally.”
He notes that T-Systems will be invigorating and redefining its partner approach, looking for partners that will build new applications and solutions in its cloud environment, ‘co-creating value’ with T-Systems and with clients.
The German-based multinational expects to leverage the cloud platforms of other players, where it makes sense for clients to do so, acting as an orchestrator and placing a heavy emphasis on ensuring the overarching management and security of clients’ data.
Henk Olivier, MD of Ozone IT, says the local channel will benefit from the availability of top-tier global cloud providers, as the market benefits from greater awareness of cloud’s advantages, and local partners enjoy more options to provide customers with varied cloud solutions.
“Until now, there have been challenges in accessing international cloud services from South Africa. At times, there are speed latency issues, and concerns around the price tag attached to exchange rate volatility,’ he says.
The coming years will certainly be a boon for cloud computing, giving forward thinking channel partners greater scope to innovate with their clients and provide a rich array of services.
Staying relevant in a cloud world
Local technology firms need to ask themselves some tough questions as global competitors for cloud come to town: What value am I adding? How quickly will it be eroded? How can I quickly innovate, capture value, and move on to the next service?
Jon Tullett, IDC, believes that competing head-on with AWS, Microsoft and other global heavyweights could well end in tears. Speaking to the Margin, he offers five potential strategies for local tech firms looking to carve out their own niche:
Brokerage
Orchestrate and coordinate services from various cloud platforms, giving clients a single point of contact into their cloud environments. Where local players can provide an edge is in accommodating local cloud platforms and local services into these offerings.
Migration and management
Many organisations (and particularly very large enterprises) require complex and long-running application consulting programmes to effectively migrate hundreds, or thousands, of applications into the cloud.
Local extension and customisation
Look to add locally-focused components to top-tier lobal cloud environments. For instance, a financial services software player could customise its offering to consider tax, compliance, HR and other laws for each country within the African continent. Global players are unlikely to offer this kind of deep specialisation in the near-future. In South Africa, many sectors – such as mining, energy, public sector and financial services – have some unique legal requirements.
Shift towards outright infrastructure hosting
For many local organisations, there will be a need to maintain control and ownership over aspects of their infrastructure, even if it’s deployed in a hosted location. With longer cloud migration timelines expected in the infrastructure space, outright infrastructure hosting will remain a viable local business for some time to come.
New opportunities in the SME sector
Cloud computing is certainly not the exclusive domain of corporate giants. The opportunity for local tech players is to onboard smaller, fast-growing customers as quickly as they can (and before the company starts using global Software-as-a-Service and cloud offerings).