Africa Set for Cloud Market Expansion

Transcription

1 SAP Africa Survey Significant Opportunities for Service Providers Targeting Large Enterprise Customers in 2014/2015 Africa Set for Cloud Market Expansion Survey conducted by IDG Connect on behalf of SAP Organisation size: Enterprise Buying Stage: Business Case Development Audience Type: Business and Technical Functions Decision Role: Decision Maker

2 Summary of Research Infographic Summary 1 Concerns around Security, Data Protection, Control, SLAs and Vendor Lock-in Must be Addressed 43% 33% 13% 8% 3% 37% 29% 19% 8% 7% Concerns about Security and Data Protection Concerns about Lack of Control Over Data and Services Infographic Summary 5 (A major barrier) (A barrier that is small) 28% 25% 27% 15% 5% 20% 30% 35% 9% 6% 27% 24% 28% 12% 9% Concerns about Compliance and Governance The Challenge of Sourcing the Right Kind of Service Levels The Threat of Vendor Lock-in Access to Cloud Applications from Mobile Devices is Most Important Business Objective Cloud Computing Adoption Expected to Accelerate Accessibility from Anywhere 4.2 Improved Security/ Governance 4.2 Reduced Hardware/ Software Capex 4.1 Agility 4.0 Better Return on Investment Reporting Significant Progress Expected Transition under Consideration or Preparation Little or No Progress Expected 47% 28% 25%

3 Significant Scope for Growth But Barriers to Adoption must be Surmounted Introduction 2 Introduction Many organisations within Algeria, Kenya, Morocco, Nigeria and South Africa appear poised to increase their spending on cloud hosted infrastructure (IaaS), platform (PaaS) and software as a service (SaaS) in and beyond, with the economic outlook for the wider region looking strong. The International Monetary Fund (IMF) predicted in April 2014 that the growth of gross domestic product (GDP) in sub Saharan Africa is likely to increase to 5.5% in 2014, for example, up from 4.9% in 2013, despite warnings that fiscal deficits would hit 3.3% of that GDP, a significant decline from the surplus of 2.5% in The economic outlook for the wider region is looking strong. Whilst there is no doubt that Africa as a whole lags behind Europe and North America in terms of current cloud service usage, the scope for growth is significant if specific barriers can be surmounted. Fixed telecommunications infrastructure problems relating to the availability, reliability and security of wide area network (WAN) and broadband links may be partly responsible for relatively slow take up to date, as are fluctuating electricity supplies to data centres and other hosting facilities. Many telecommunications companies - including Neotel in South Africa (shortly to be acquired by pan-african telco Vodacom) and MTN in Nigeria - are working to expand fibre optic coverage and increase the reliability and quality of service of their networks, however. It is perhaps Africa s rapid adoption of mobile network technology which represents the greatest opportunity for cloud service providers (CSPs). National markets are characterised by high levels of investment from regional and global mobile network operators (MNOs), expansion and improvements in 3G/4G mobile data bandwidth, and growing volumes of low cost smartphones, tablets and other mobile devices. With the exception of Kenya, four of the territories surveyed currently have high mobile penetration rates according to the GSMA, with further growth expected through to As more employees access consumer applications and data from these devices, demand for centrally hosted, business orientated cloud services is likely to increase in parallel. Africa s rapid adoption of mobile network technology represents the greatest opportunity for cloud service providers. The absence of mature regulatory frameworks which dictate how and where sensitive commercial data relating to individuals may also have prevented some African companies from migrating applications and services to the cloud. Whilst South Africa, widely perceived as the most advanced country on the continent in terms of its cloud service adoption, started to implement its Protection of Personal Information Act (POPI) bill in 2014, data privacy laws elsewhere remain piecemeal and underdeveloped, though proposals are on the table in many territories, including Morocco and Nigeria. Calls for the African Union to establish European Union style data privacy legislation could have mixed effects however - too strict a regime could actually slow growth if CSPs are forced to store information in the country of its origin rather than elsewhere within the continent, with few providers likely to see economic sense of building data centres in every territory.

4 Nigeria, South Africa Furthest Advanced Current Cloud Activity 3 How Would You Describe Your Organisation s Overall Approach To Cloud Computing (aggregate)? 29% Significant Progress 41% Preparing a Transition 30% Little or No Activity Current Cloud Activity Kenya saw the highest percentage of respondents whose employers had undertaken little or no activity in terms of cloud migration The majority of organisations within Algeria, Kenya, Morocco, Nigeria and South Africa have either already moved some virtual workloads, applications or services into cloud hosted infrastructure (IaaS), platform (PaaS) or software as a service (SaaS) environments, or are preparing to do so. Yet a sizeable minority have yet to engage in cloud migration strategy on any meaningful scale. Whilst this suggests a relative immaturity of the wider African market for cloud services compared to Europe, where current usage is roughly double in comparison, it also highlights the scope of the commercial opportunity for cloud service providers (CSPs) in the region looking for potential customers. There are marked variations of adoption within individual territories of which CSPs must be aware however, indicating some countries have embraced the cloud earlier than others. Kenya saw the highest percentage (42%) of respondents whose employers had undertaken little or no activity in terms of cloud migration, substantially higher than the average across all five countries (30%). Nigeria and South Africa appear furthest advanced in current adoption, with 35% and 30% saying they have already made significant progress with cloud implementation strategies, though respondents from these two countries also recorded the lowest number of organisations to have undertaken little or no activity (24% and 27%). The figures show that a cloud strategy and cloud transition is certainly planned for, if not already implemented in, around two thirds to just under three quarters of businesses. A report from IDC published in April 2014 Cloud and Hosting: Trends, Priorities, and Insights in Kenya 2013 based on a survey conducted in October 2013 supports these findings. It estimated that a third of enterprises in that country see either cloud migration or expansion of existing cloud infrastructure as a key priority for the future, forecasting significant traction in the coming years as long as connectivity prices fall and improved and consistent bandwidth is maintained across the region.

5 Service Definitions and Stratifications Not Fully Understood Market Immaturity Type of Cloud Services Currently in Use (aggregate) 4 Using Public Cloud Services Without IT Approval Using Private Cloud Solutions Running One or More SaaS Applications Using Off-Premise CSPs Using Hyperscale CSPs 43% 34% 11% 10% 2% Market Immaturity That market immaturity is further suggested by an apparent unfamiliarity with the cloud delivery model within the region, underlined by the type of services respondents currently perceive their organisations to be using. Despite the best efforts of standards bodies such as the US National Institute of Standards and Technology (NIST) the definition and stratification of cloud services remains complex and often misunderstood, only marginally less so in the USA, Europe and other parts of the world where cloud service provision is already well established. Whilst 43% across Algeria, Kenya, Morocco, Nigeria and South Africa reported that employees were using public cloud services independently without the approval (or knowledge) of the IT department, only 10% and 2% said they were utilising the services of off-premise (10%) and hyperscale (2%) cloud providers for example, despite the high degree of crossover between the three categories. Hyperscale cloud services are generally defined as those with large amounts of servers and storage capacity spread across multiple data centres in different countries and regions of the world which offer high-performance server instances designed for more demanding web-scale workloads, big data computations and cloud-native applications built specifically to run on cloud architecture. Example providers include Amazon Web Services, Google and Microsoft, with provision leaning towards IaaS rather than SaaS or PaaS services. Wide variations in the deployment of SaaS for the delivery of customer relationship management (CRM) and other applications were apparent: South African respondents indicated they did not currently use SaaS at all, with Kenya (6%) and Algeria/Morocco (19%) also very limited in their use of on Only 10% and 2% said they were utilising the services of off-premise demand, pay as you CRM and productivity applications,compared to 30% of organisations in Nigeria which said they do. In the case of all five territories, it is clear that ample sales opportunities exists for SaaS vendors able to highlight the benefits of cloud hosted versus on-premise, licensed software delivery.

6 Further Cloud Migration Widely Anticipated in 2014/ % Little or No Progress Expected Progress Expected 5 Describe 47% Significant Progress Expected Your Organisation s Approach to Cloud Computing in Months Time (Aggregate) 28% Transition Under Consideration or Preparation Progress Expected Certainly, organisations in all five countries anticipate that they will ramp up their cloud migration strategy in 2014 and Nigeria and Kenya appear set to lead investment respondents to the IDG Connect survey from both territories demonstrated higher than average expectations (47% on aggregate) that their employers would have made additional, significant progress in implementing a cloud strategy during the 24 month period. These findings correlate with a study published by Cisco in November 2013 Cloud in Africa: Reality Check 2013 which surveyed medium and large businesses in Kenya, Nigeria and South Africa. In Nigeria, 44% of respondents said they would embrace the cloud in 2014, bringing the total to have implemented cloud services in that country to 80% by This compared to 24% of organisations in Kenya and only 16% in South Africa which told Cisco they would be migrating to cloud services in the same period. The results of the IDG Connect survey found respondents from Algeria and Morocco least confident that their employers would migrate additional services or applications to the cloud during 2014 and 2015 (33% felt little or no progress will be made). This suggests that very definite barriers to the adoption of cloud computing in many territories remain. Respondents may feel that irrespective 44% of respondents said they would embrace the cloud in 2014 of any benefits such a migration may bring, simple logistics may stop them being able to make the move, with network connectivity and reliability highlighted as a specific obstacle in many cases (explained in more detail in tab 10) whilst fluctuations in power supply may also affect confidence in data centre hosting and remote service and application access. Certainly, cloud service providers operating in these territories will need to be confident that available network infrastructure is up to the job of supporting customer expectations around availability and reliability, and work hard to provide additional reassurances around performance and security to overcome entrenched attitudes in order to win business in many cases.

7 Access to Cloud Applications and Services from Mobile Devices Rated Highly Mobility and Flexibility 6 Accessibility from Anywhere 4.3 Importance of Objectives for Implementing Cloud Solutions (Top 5) Improved Security/ Governance 4.2 Reduced Hardware/ Software Capex 4.1 Agility 4.0 Better Return on Investment Reporting 4.0 Mobility and Flexibility Where Africa does mirror other regions of the world in its appraisal of cloud computing is expectations around benefits. As with other countries in Europe and the USA, accessibility to applications and services from mobile devices (most likely to include but not limited to smartphones, tablets and laptop PCs) is ranked the highest expected benefit of cloud migration. This is perhaps unsurprising given the higher instance of multi-nationals involved in mining, oil and gas, petrochemicals and other utility industries located in dispersed geographic areas where mobile cellular networks are often more pervasive and reliable than fixed line equivalents. As with all regions of the world, improved security and governance concerning data privacy and compliance with government and industry regulatory frameworks score highly in all five countries, with the agility which on-demand resource utilisation enables by speeding up new application and service creation also scoring highly. Reduced capital expenditure on hardware and software was rated equal fourth in terms of priority. But whilst cost savings (including potentially lower spending on in-house IT staff salaries) are an inevitable facet of leasing CPU, storage, network and application resources from third parties, these expenditure and licensing costs have to be weighed against the fees for cloud service subscriptions before accurate return on investment figures can be derived. Reduced capital expenditure on hardware and software was rated equal fourth in terms of priority Evidence from elsewhere suggests that SaaS providers will need to work hard to prove the ROI for on demand, pay as you go cloud application hosting compared to licensed, on-premise equivalents specifically. A report from IDC published in April 2014 Cloud and Hosting: Trends, Priorities, and Insights in Kenya found that companies in Kenya see IaaS as more attractive than SaaS for example, with the former perceived to offer a more clear and quantifiable return on investment (ROI), especially compared to expanding in-house data centre IT systems.

8 IT Managers Trust Cloud for Provisioning, Maintenance and Reporting Cloud vs Traditional Client Server Model Areas Where Traditional Client-Server Computing Models are Preferred Security and Data Protection Performance 50% 56% 7 Testing and Development 49% Customisation/ Configuration 44% Reporting 42% Availability 35% Client server computing was preferred for security and data protection by only 45% of South African respondents Maintenance, Patching and Upgrades Provisioning 35% 33% Cloud vs Traditional Whilst the relative cost of leasing cloud hosted services and applications compared to owning and maintaining the infrastructure to furnish equivalent levels of provision in-house is clearly an important consideration, there are other reasons organisations may prefer the traditional on-premise client server delivery model. Clearly security and data protection concerns over the integrity of commercially sensitive and/or mission critical information, applications and virtual workloads stored within off-premise infrastructure remains a significant deterrent to cloud adoption: 56% of all respondents preferred the traditional on-premise client server computing model in this respect. There were again wide regional variations on this point: onpremise, client server computing was preferred for security and data protection by only 45% of South African respondents, indicating greater trust in cloud hosting environments in that country, compared to 70% in Algeria and Morocco and 65% in Kenya, for example. On aggregate exactly half (50%) of all respondents felt that the performance of applications and services would be equally as good, or no better, in both delivery models and roughly the same (51% versus 49%) favoured cloud based PaaS against on-premise systems for application testing and development projects. With the majority of respondents (80%) working in the field of IT, rather than business, management or occupying boardroom roles it is perhaps no surprise to find that they see the cloud being better suited for everyday operational tasks such as application and service provisioning (33%); maintenance, patching and upgrades (65%); reporting (58%); and customisation and configuration (56%), the outsourcing of which is likely to substantially lessen their daily workloads. Where the preference for on-premise client server model exists, providers able to demonstrate they can host and deliver applications and services based on a more secure hybrid cloud infrastructure which spans both external, off-premise hosting facilities and on-premise systems located in the customer s own data centre, are likely to have a distinct competitive advantage.

9 Further Doubts Around Lack of Control, Compliance and Governance, SLAs, Integration and Vendor Lock-In/Solvency Security and Data Protection Top Concerns 8 Cloud vs Traditional Security and Data Protection 4.0 Data Security and Protection 3.8 Lack of Control Over Data and Services 3.5 Compliance and Governance 3.5 Right Kind of SLAs 3.5 Vendor Lock-In 3.3 Vendor Going Bankrupt 3.3 Integration with Existing Infrastructure and Applications Again, concerns around security and data protection are listed as either the biggest or second biggest barrier to cloud adoption in all five countries, and especially strong in Kenya where 71% of respondents listed it as the most significant deterrent. That so many respondents fear that a cloud service provider may go bankrupt (listed as the biggest obstacle by 35% of respondents in Nigeria and the second biggest by 35% of those in South Africa) also reinforces those concerns about data security/ protection and compliance/governance. Organisations subject to regulatory scrutiny may need to know exactly what happens to any information stored on either on- or off-premise cloud infrastructure when systems are retired, be able to demonstrate how and when that information is deleted and be certain they can get it back when they need to. It also indicates that there are many smaller, national or regional CSPs in the five territories which may not be perceived to have long term financial viability. This presents a significant opportunity for global brands with proven, multi-national cloud service operations and hosting facilities which may be less Top 7 Major Barriers to Cloud Computing Adoption vulnerable to regional market volatility. So many respondents fear that a cloud service provider may go bankrupt Cloud providers must also address extant doubts around service level agreements (SLAs) and vendor lock-in (rated as the joint third barrier by all respondents). Being able to customise SLAs with guarantees around availability, security, performance and reliability for individual workloads or applications will go some way to alleviating those concerns. Vendors delivering hosted applications and services based on open, interoperable cloud architecture which enables workloads to be quickly and easily migrated between on and off-premise data centres, and different CSP hosting facilities are likely to glean an advantage here. Platforms such as OpenStack and CloudStack, both based on open source software distributions, may provide more appeal than alternatives which are perceived to be tied to individual vendor server and storage hardware, for example.

10 Cloud Solutions Perceived as Corporate Sell Customer Profile 9 When It Comes to the Applicability of Cloud Computing, Which of These is Most Applicable? 56% Large Enterprises 40% SME/SMBs 4% Individual Users Customer Profile There is strong evidence to suggest that most IT managers in Algeria, Kenya, Morocco, Nigeria and South Africa consider that cloud computing services are most suitable for larger, rather than smaller enterprises, with those in Kenya least likely (29%) to see cloud as suitable for SMB/SME customers. This is good news for all cloud service providers addressing the corporate market given that 50% of those polled work for organisations employing people, a further 31% between 1,000 and 4,999 and 19% over 5,000 all of which demonstrate a strong belief that cloud computing is more relevant to organisations of their size than those employing 500 people or fewer. Adoption is likely to follow trends in other parts of the world, where the requirement for flexible, scalable compute and storage resources first prompted many large organisations to move virtual workloads into IaaS services, followed by the migration of database management systems and application development tools into PaaS. SaaS migration patterns are more difficult to gauge given the broad diversity of software in use, with office suites, business intelligence (BI), enterprise content management (ECM), enterprise resource planning (ERP), supply chain management (SCM), customer relationship management (CRM) and accounting software often migrated to on demand, pay as you go or subscription based cloud services. No CSP can afford to ignore the cloud requirements of smaller organisations which may spend less on individual services, but account for larger portions of provider revenue in terms of volume however. Whilst other Those in Kenya are least likely (29%) to see cloud as suitable for SMB/ SME customers. regions have seen larger companies lead adoption of private, on-premise and hybrid cloud services perceived to offer better security, governance and compliance options, the SMB/SME sector has increasingly adopted off-premise, public cloud services, notably IaaS for backup and recovery and SaaS based applications such as , office suites and unified communications.

11 Internet Connectivity and WAN Access in Africa Considered Unreliable Networks Doubts Around Network Performance and Availability Persist 11 No barrier 13 Not significant Significant 39 Big Barrier Networks Almost all cloud services rely on fast, reliable network connections between on and off-premise data centres and other locations to deliver applications and services on demand, and their suitability for individual organisational requirements depends in no small measure on the availability and performance of IP based Internet, wide area network (WAN) and virtual private network (VPN) links to customer locations. Connectivity in many African countries is not perceived to be ideal however, with an aggregate of 39% of respondents across all five countries listing network availability and performance as the biggest barrier to cloud service adoption, and a further 37% listing it as a significant impediment. The wide variation in answers from those surveyed in the different countries suggests marked differences in the state of requisite telecommunications infrastructure in each territory however, which individual CSPs must take time to research and understand before engaging in marketing activity. Those in Kenya are far more likely to trust their local networks (18% saw connectivity as the biggest barrier to cloud service adoption compared to 55% in South Africa) for example, whilst 30% in Kenya and Nigeria felt network availability and performance was either no barrier at all, or largely insignificant, compared to 20% in South Africa. Only 25% across all three regions were neutral on cloud reliability. Cisco s Cloud in Africa: Reality Check 2013 study was more optimistic, suggesting that 73% of respondents across Kenya, Nigeria and South Africa had high confidence in cloud service reliability though it is not clear if those findings relate to the hosting facilities, network connectivity or both. Only 25% across all three regions were neutral on cloud reliability. That fixed, wired network reliability in Africa is poor in comparison to Europe and the USA is not disputed however. A review of the state of Internet connectivity in Africa published by the International Telecommunication Union (ITU) in 2013 surmised that wired networks were underdeveloped in almost all Sub Saharan countries compared to mobile, wireless equivalents. But it noted that the planned construction of new submarine cables and telecommunications backbones by fixed telecoms operators in the region, coupled with changes to legislative and regulatory frameworks to promote greater competition, would improve connectivity in many territories going forward.

12 Cloud Service Providers Must Adapt Flexible Service Models to Address Customer Concerns Conclusion 11 Conclusion The majority of respondents in every territory (50% of whom worked for organisations employing between 1,000 and 5,000 people) see the cloud as more relevant to larger, rather than smaller companies Overall, the survey results paint a mixed picture for cloud service adoption in Africa, with clear gaps in current IaaS, PaaS and SaaS usage within Algeria, Kenya, Morocco, Nigeria and South Africa serving to underline the extent of the commercial opportunity for cloud service providers (CSPs) in those territories. Pronounced fears around the financial viability of hosting providers suggests the market favours larger CSPs which may be deemed less likely to enter liquidation, more so given a broader preference for leasing backup and disaster recovery services which will require multiple, geographically dispersed data centres to deliver maximum resiliency. The majority of respondents in every territory (50% of whom worked for organisations employing between 1,000 and 5,000 people) see the cloud as more relevant to larger, rather than smaller, companies typically those more likely to migrate applications, services and virtualised workloads into cloud hosted models on a more expansive scale. If Africa follows patterns of cloud service adoption already established in Europe and North America, those larger organisations are likely to show a strong preference for either a single-tenanted private, on-premise cloud approach, or a hybrid model that integrates in-house data and application hosting with off-premise, public cloud services as they look to assuage ongoing unease over data privacy, security and compliance with evolving legislation and regulation which vary from one territory to another. CSPs which can successfully address these concerns, offer customisable SLAs, demonstrate interoperability and virtual workload migration capabilities, and give customers close visibility into and control of applications, data and services within cloud hosted infrastructure are likely to establish a clear competitive advantage over their rivals. Many African countries are affected by poor network connectivity, reliability and security in specific areas or territories, though telcos and mobile operators are investing heavily to expand and upgrade both wired and wireless broadband links to homes and offices within the target territories. Cloud providers must be aware of these regional limitations and tailor their services to accommodate them. They should place particular focus on embracing the growing use of smartphones, tablets and other portable devices for application and service access by workers for both personal and business use, likely to emerge as a key sales strategy for winning corporate contracts. Managing end user expectations around cost savings associated with the on-demand, pay as you go cloud model compared to on-premise hardware capital (capex) and operational expenditure (opex) will be tricky in many cases given the wide variation in spending on internal system maintenance and inhouse IT staff. As such CSPs will need to be ready to emphasise the parallel advantages of flexibility, speed of provisioning and lower management overheads if and when anticipated return on investment calculations fail to materialise. IDG Connect is the demand generation division of International Data Group (IDG), the world s largest technology media company. Established in 2006, it utilises access to 38 million business decision makers details to unite technology marketers with relevant targets from 137 countries around the world. Committed to engaging a disparate global IT audience with truly localised messaging, IDG Connect also publishes market specific thought leadership papers on behalf of its clients, and produces research for B2B marketers worldwide.