Communications report series Report 2 Cloud computing in Australia

Communications report series Report 2 Cloud computing in Australia MARCH 2014

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Background researchacma About this report Size and scale of the cloud computing market Business cloud computing services Personal cloud computing services Storage and backup services 11 Media sharing and streaming 13 Productivity software applications 13 Communications applications 14 Overview Consumer awareness of cloud computing services Use of cloud computing services Devices used to access services SME use of cloud computing services Positives and negatives to cloud computing services Methodology for commissioned surveys Other data Data analysis iii

Executive summary Cloud computing services are an emerging and increasingly important part of the Australian digital economy. These services are: becoming a storage and retrieval system for vast quantities of business and personal digital data facilitating the shift from the personal computer to off-site information storage, services and applications enabling growth in online participation and collaboration through the development of device-agnostic services. Key findings from this report cover developments in the supply and demand for cloud computing services, and the future of cloud computing services in Australia. Developments in the supply of cloud computing services Industry research indicates that the cloud computing market in Australia is likely to grow strongly over the next few years with compound growth rates for industry revenue estimated to be in the vicinity of between 19 and 25 per cent per annum. Most of the cloud computing consumer market relates to use of free services with only 17 per cent of consumers who have heard of and used cloud computing services indicating they had paid to use a service. However, there may be people paying for cloud computing services who are not aware they are using a cloud service, for example the use of itunes. The market is becoming increasingly competitive with a number of local providers competing with large global companies. The range of services on offer is diverse and includes storage and backup, media sharing and streaming, productivity tools and communications tools. Developments in the awareness and use of cloud computing services Nearly 14 million people in Australia aged 18 years and over had actively used cloud computing services in the six months to May 2013, equating to 80 per cent of the adult population. This is up from 12.6 million a year earlier, an increase of 11 per cent. In addition, 44 per cent of small and medium enterprises (SMEs) (approximately 900,000 businesses) had actively used cloud computing services at May 2013. Active use of cloud computing services is significantly higher than levels of awareness. Approximately 55 per cent of the total adult population were estimated to have heard of the term cloud computing while only 26 per cent of active cloud computing users were aware they had used a cloud computing service in the six months to May 2013. Awareness of cloud computing increased steadily with income levels, reaching 77 per cent for people earning $130,000 or more per annum. Awareness levels peaked at 69 per cent for those aged 35 44 before declining to 33 per cent of people aged 65 years and over. Of Australians who had actively used cloud computing services in the six months to May 2013, the most common services used were webmail services (88 per cent) followed by use of cloud-based software (40 per cent). Of SMEs that actively used cloud computing services, the most common services used were again webmail services (57 per cent) followed by file-sharing services (43 per cent). 1

Consumers who had actively used cloud computing services and knew about it (26 per cent of all cloud computing users) identified the main benefits as the ability to access these services across all devices (43 per cent), data files remaining safe if anything happens to their computer (33 per cent) and freeing up of space on their own computers (19 per cent). The main negatives identified by consumers who were aware that they had used a cloud computing service were: perceptions about a lack of security (52 per cent) a lack of trust in companies providing cloud computing services (14 per cent) the perceived reliability of services (12 per cent). SMEs actively using cloud computing services identified the main benefits from these services as easier/more convenient access to services (36 per cent), services accessible from multiple locations (15 per cent) and that data files can be saved if anything happens to business computers (11 per cent). Of SMEs not using cloud computing services, 48 per cent reported that these services were not suited to the nature of the business while 22 per cent reported not knowing enough about cloud computing services. The future of cloud computing services There are a number of current and impending developments that are likely to facilitate further growth of cloud computing services in Australia. These include: the rollout of infrastructure projects such as the NBN and 4G mobile networks the implementation of cloud computing strategies by state and federal governments increased use of complementary devices to access the internet, in particular wireless devices that allow consumers to access services anywhere at anytime increased competition in the Australian market between domestic and international service providers of cloud computing services, leading to new service offerings and reduced service costs. 2

Table 1 Cloud computing in Australia key indicators at a glance Consumers May 2012 May 2013 % of people aged 18 years and over Have heard of cloud computing services n/a 55 Actively used cloud computing services (in the six months to May) Cloud computing services used 71 80 % people aged 18 years and over that have actively used a cloud computing service Webmail 85 88 Accessed online software n/a 40 Streamed content n/a 36 Backed up and stored files online n/a 35 Shared files online n/a 24 SMEs May 2013 % of all SMEs Used cloud computing services 44 Cloud computing services used % of SMEs that have actively used a cloud computing service Webmail 57 Shared files online 43 Accessed online software 40 Backed up files online 39 Streamed audio/video over the internet 28 Paid to store data/files online 26 n/a=not available. 3

Introduction Background The Australia Communications and Media Authority (ACMA) has continued with its practice of releasing a series of targeted reports that complement its annual communications report which is produced in fulfilment of the ACMA s reporting obligations under section 105 of the Telecommunications Act 1997. These complementary reports focus in more detail on key aspects of the emerging digital economy. The two reports released as part of the 2012 13 complementary series are: Report 1 Australian SMEs in the digital economy, released 22 January 2014 Report 2 Cloud computing in Australia. The ACMA Communications report 2012 13 is available at www.acma.gov.au/commsreport. researchacma The communications report series is also part of the ACMA s research program. researchacma is the ACMA s research program that has five broad areas of interest: market developments media content and culture digital society citizen and consumer safeguards regulatory best practice and development. About this report The cloud computing market is evolving and becoming an increasingly important part of the Australian digital economy changing the way consumers and SMEs use and access products and services over the internet. This evolution is enabled by increasing network capacity and the growth in the take-up of internet access devices with increased functionality. While various forms of cloud computing have been available in the Australian market for around 20 years, adoption has been accelerating. Conditions are now conducive to a much wider take-up of cloud computing by consumers and businesses as a broader variety of activities are undertaken online. This report provides a snapshot of the cloud computing market in Australia for the year ending June 2013. It provides an overview from three key perspectives: The supply of these services, their delivery models and services available to consumers in 2013. The take-up, use and awareness of these services in 2013 and related drivers and barriers to take-up of cloud computing services. Market developments that are likely to facilitate greater use of cloud computing services in Australia. It also provides updated market data to that published in the ACMA occasional paper The cloud services, computing and digital data: Emerging issues in media and communications, Occasional paper 3, June 2013. 4

Source of information Unless otherwise stated, data presented in this report is from two ACMAcommissioned surveys of consumers and SMEs conducted in May 2013. Information about the survey methodologies used is provided in the appendix to this publication. Deriving estimates of users of cloud computing services Estimates of the total number and proportion of active users of cloud computing services in Australia was derived by asking survey respondents if they had undertaken a number of cloud computing functions such as used webmail, streamed content online, backed up and stored files online and shared files online. ACMA research snapshot series In addition to its annual communications report series, in 2013 the ACMA also developed the ACMA research snapshots series short fit-for-purpose research on key issues of relevance to the ACMA and its stakeholders. Snapshots released to date include: Australians cut the cord: becoming mobile only, 5 July 2013 The connected business, 15 October 2013 Home is where the work is: the digital worker, 16 October 2013 Mobile apps: putting the smart in smartphones, 26 November 2013. These and other reports can be accessed from the ACMA website www.acma.gov.au/theacma/library/researchacma. 5

What is cloud computing? Cloud computing is a term used for delivering hosted services over the internet to remotely store, process and share digital data. There are three main categories of cloud computing, although the delineations between service categories are not always distinct, as providers may offer more than one category of service type. These categories are: Infrastructure-as-a-Service (IaaS) IaaS providers offer data-centre capacity, processing resources and storage. Platform-as-a-Service (PaaS) PaaS provides an environment for the development and hosting of applications. Software-as-a-Service (SaaS) SaaS provides software services hosted from the cloud. Figure 1 Cloud computing service categories Source: ACMA, The cloud services, computing and digital data: Emerging issues in media and communications, Occasional paper 3. In the Australian market there are three main models of cloud computing in use with each of these service categories. They are: Private for the exclusive use of one organisation. It may be managed by the organisation or a third party with the cloud computing service existing onpremises or off-premises. 1 Public made available to the general public or a large industry group and owned by an organisation selling cloud computing. 2 Services offered by Apple, Google and Amazon fit into this category. Community shared by several organisations that wish to make use of a common cloud computing environment. The cloud may be managed by the organisation or a third party and may exist on-premises or off-premises. 3 For example, the Australian Taxation Office s (ATO) Standard Business Reporting project. The GovReports 6

business management and budget portal was launched in 2011 and gives the ATO, State Revenue Offices and the Australian Securities and Investment Commission centralised access to business reporting information. 4 7

Provision of cloud computing services The cloud computing market in Australia is continually developing and this analysis provides a snapshot of the market for the year ending June 2013. Size and scale of the cloud computing market Industry research suggests significant increases in the cloud computing market in Australia over the next few years with compound growth rates for cloud computing revenue estimated to be between 19 and 25 per cent per annum. For example: the International Data Corporation (IDC) reported that the total cloud computing market in Australia will increase from $884 million in 2012 to $2.7 billion in 2017 5 Forrester Research estimated that cloud computing market will grow from $732 million in 2011 to $3.2 billion in 2020. 6 Business cloud computing services Australian businesses are embracing cloud computing services and usage is increasing. For example, the IDC 2013 Australia End-User Cloud Survey found that 86 per cent of large Australian enterprises (with 500 or more employees) are currently using cloud computing, up from 71 per cent in 2012. 7 ACMA research shows that 44 per cent of SMEs actively used cloud computing services at May 2013. As outlined in the ACMA report The cloud services, computing and digital data: Emerging issues in media and communications, Occasional paper 3, some of the benefits of cloud computing include: scalability capacity is able to be scaled up or down on demand. accessibility available across multiple platforms and operating systems. task-centric services and products are able to meet specifics of all tasks. economies of scale with no fixed costs cloud computing services present businesses with limited set up costs and low overheads. Origins of cloud computing services Cloud computing services have been available in Australia for around 20 years. The range of services available in the Australian market is diverse with a number of local and international companies offering various cloud computing services. Typically, Australian cloud computing services providers come from the following industries: communications carriers information, communications and telecommunications (ICT) providers. There has been reported growth in demand for cloud computing services in Australia and carriers and providers have announced investment plans to increase product offerings. For example, Telstra has a five-year $800 million cloud investment plan that has seen revenue increase by 33 per cent and customer numbers grow by 68 per cent in 2012 13. 8 Communications carriers such as Telstra, Optus and iinet are offering cloud computing services alongside their traditional services. While carrier services are primarily focused on IaaS, some (for example, Telstra and iinet) have announced plans to expand into SaaS. 9 8

ICT providers offer a range of services across all levels of the cloud computing service market. They offer either cloud computing services on their own or alongside managed services from servers located in data centres across Australia. The majority of these companies offer on-demand cloud hosting pricing. Local players in the Australian market include Ninefold, Cloud Central, Australian Cloud, UltraServe, Brennan IT and BitCloud. An overview of some of these local cloud players can be found in Table 2. Table 2 Examples of Australian cloud computing service providers Provider Launch date Company overview Data centre locations Telstra 2009* A communications carrier offering enterprise grade cloud computing services and in 2011 announced it would invest $800 million to develop its cloud infrastructure over five years. Optus 2010* A communications carrier providing consumer telephony, internet and business services. Optus works with NEXTDC to provide business grade cloud computing services from NEXTDC data centres. iinet 2012* A communications carrier providing consumer and business services. Ninefold 2011 A cloud provider with infrastructure in both Australia and the US that offers on-demand pricing for cloud computing services. Backed by Macquarie Telecom. Cloud Central 2009 An Australian based cloud provider that offers on-demand pricing for cloud servers. Ultraserve 2009 An Australian based managed services and cloud hosting provider. Brennan IT 2009 An Australian based managed services and cloud hosting provider. Sydney, Melbourne, Perth, Adelaide and Canberra Canberra, Brisbane, Melbourne, Perth and Sydney Melbourne, Perth and Canberra Sydney x 2 and infrastructure in San Jose, USA Sydney, Canberra Sydney, Brisbane Sydney, Brisbane and Melbourne BitCloud 2009 An Australian based cloud provider. Sydney and Melbourne *Cloud computing services launched. Source: Znet, Australian clouds compared, 12 September 2012 and company websites. The established local cloud computing service providers in the Australian market are being challenged by large global providers like Amazon, Rackspace, Salesforce, Microsoft, IBM and Hewlett Packard which, if they do not already have a presence in Australia, have either announced or are currently building infrastructure in Australia to support their local customers. Table 3 provides an overview of global clouding computing service providers with a physical presence in Australia. 9

Table 3 Global cloud computing service providers Provider Service launch in Australia Service name Amazon Web Service Rackspace Microsoft IBM Sydney region establishment mid 2012. According to AWS's Asia- Pacific, the company already had 10,000 Australian customers prior to the Sydney launch and many of those are migrating from US services to its Sydney base. 10 Established an Australian presence in 2009 using its overseas data centres. Now has its own Australian data centre. Microsoft announced in May 2013 it would shift its Australian customers from its Asian data centre to two centres within Australia. 11 In 2012, IBM announced the arrival of its fully managed SmartCloud Enterprise+ service running out of its Sydney data centre. EC2 S3 Cloud Servers Microsoft Azure SmartCloud Hewlett Packard Source: Company websites unless stated otherwise. Launched cloud computing services in 2011 from a Sydney data centre. HP Cloud There are also a number of other providers servicing the Australian market that do not have a presence in Australia and offer data centre capacity in other markets. Examples include Salesforce, Google Computing Engine and Joyent, which have capacity primarily in the US. Personal cloud computing services Personal cloud computing services have been available for some time. However, it is only recently that the diversity of personal cloud computing services has emerged, encouraged by a number of key developments: 12 improved network capability, including increased availability of 3G and 4G mobile networks the subsequent growth and availability of mobile internet services, which require cloud-based services to support the increasing number of mobile applications growth in the number of internet devices owned and used by consumers, where cloud computing services enable users to access their content and services on all devices increased online participation both in terms of growth in numbers of internet users, frequency of internet use and the scope of activities performed online increased awareness and acceptance of cloud computing services as a viable platform. The growth of personal cloud computing services is meeting demand from consumers to be able to access content and applications from anywhere, at anytime, on any device. Personal cloud computing services offer a number of functions for users and many can be tailored to suit individual needs. Broadly, these services fall under the following categories: storage/backup this includes the storage of any content such as documents, pictures, movies, video or audio media sharing/streaming this includes the sharing of pictures and streaming video and music 10

productivity software (applications) this includes accessing online email, document creation and formatting/editing content communications this includes community websites, blogs and other communication tools. It should be noted that many cloud computing services provide multiple functions and cannot be confined to a single category. For example, itunes provides media storage and sharing as well as the ability to stream video and audio content. There are also applications that are not universally defined as cloud computing services but offer many cloud computing functions. For example, Facebook is a social networking site that offers a number of cloud computing functions as it allows users to post pictures and content online, share content online with friends and also provides a web-based email service. Storage and backup services Storage and backup services allow users to store content including documents such as pictures, movies, video or audio content on an external server that is accessed over the internet. ACMA research indicates that over five million consumers backed up files online in the six months to May 2013. The range of storage and functionality of backup services varies and includes: storage and backup of data and/or audio files collaboration tools allowing consumers to share data and audio files ability to access content from multiple devices. The major storage and backup services in Australia are set out in Table 4. Data from Nielsen suggests that the most used service in Australia is Dropbox, with a unique audience of 1.6 million during July 2013. 11

Table 4 Comparison of storage services Service Ownership Overview Free storage Maximum file size Annual subscription price Unique audience during July 2013 (000 s)* Dropbox Dropbox A sharing service for photos, documents and videos accessible from multiple devices. Starts at 2 GB; allows users to earn up to 16 GB space by referring friends. 300 MB cap on website uploads only From US$9.99 a month 1,648 Amazon cloud drive Amazon Storage and sharing tool for videos, photos and documents. 5 GB 2 GB From US$10 a year for 20 MB n/a MediaFire Mediafire A file and image hosting website. 10 GB 200 MB per file From US$4.99 a month for 100 GB 365 icloud Apple File storage allowing users to access files on all Apple devices. 5 GB 25 MB From A$21 a year for 10 GB 309 Google Drive Google Storage and file sharing tool. 15 GB 10 GB US$9.99 a month including 200 GB 309 SkyDrive Microsoft Storage tool that allows users to upload, sync and share files. Box Box An online file-sharing and cloud content management service. Sugarsync Sugarsync Allows users to sync, backup and share files online. 7 GB 2 GB US$10 a year for 20 GB 270 5 GB 250 MB for free account 1 GB for paid account From US$9.99 a month including 25 GB 5 GB Unlimited From US$7.49 a month 45 121 *Nielsen for unique audience counts. Base for this data is persons aged 2 years and over. Important note: Unique audience refers to the number of people accessing a specific site during a given month and not the number of site visits per month. Unique audience includes passive (people who land on the site but who do not actively use a cloud computing service from the site) and active users (people who actively use a cloud computing service from the site). Source: Company websites accessed June 2013 unless indicated otherwise. 12

Media sharing and streaming Media sharing and streaming services enable users to share media and stream audio and visual content. By using cloud computing services, content can be accessed from multiple devices while users do not have to store content on local drives and can customise the content they access. Examples of media sharing and streaming services are set out in Table 5. Table 5 Examples of media and streaming services Service Overview Unique audience during July 2013 (000 s)* YouTube A free video-sharing website. 9,682 itunes An online media storage and media player service. 4,768 Tumblr Pinterest A content sharing site where members can post and customise text, photos, quotes, links, music and videos. A content sharing site that allows members to pin images, videos and other objects to their pin board and share with the community. 1,701 1,367 Instagram An online photo and video management and sharing application. 1,235 Flickr An online photo-sharing and social-networking service that enables users to take photos, customise and share them on the internet. 889 ABC iview A free video-on-demand catch-up service for ABC TV. 599 Spotify A digital music streaming service providing DRM content from major and independent record labels. 597 BigPond Movies Allows customers to download movies online direct to the TV. 100 Pandora A free personalised radio station that plays recommended music based on user preferences. 99 *Nielsen for unique audience counts. Base for this data is persons aged 2 years and over. Important note: Unique audience refers to the number of people accessing a specific site during a given month and not the number of site visits per month. Unique audience includes passive users (people who land on the site but who do not actively use a cloud computing service from the site) and active users (people who actively use a cloud computing service from the site). Source: Company websites unless indicated otherwise. Productivity software applications Productivity software applications, which negate the need for users to purchase potentially expensive desktop software, are also becoming popular. With the wide array of productivity tools available, there are also more opportunities for people to use multiple applications targeted to their needs. ACMA research indicates that 12.3 million consumers aged 18 years and over used an online webmail service and 5.9 million used online software in the six months to May 2013. Examples of productivity software are set out in Table 6. 13

Table 6 Examples of productivity services Service Overview Unique audience during July 2013 (000 s)* Outlook.com Microsoft online mail service 4,538 Gmail Google online mail service 4,126 Yahoo!7 Mail Yahoo! online mail service 1,789 GoogleDocs Web-based office suite offered by Google 1,672 Evernote Online software designed for note taking and archiving 132 Xero An online accounting system 100 Microsoft Office 365 Web-based office and software suite offered by Microsoft n/a Adobe Creative Cloud Cloud services providing access to Adobe applications n/a *Nielsen for unique audience counts. Base for this data is persons aged 2 years and over. Important note: Unique audience refers to the number of people accessing a specific site during a given month and not the number of site visits per month. Unique audience includes passive users (people who land on the site but who do not actively use a cloud computing service from the site) and active users (people who actively use a cloud computing service from the site). Source: Company websites unless indicated otherwise. Communications applications There are number of cloud communications applications that allow people to connect and communicate with friends or people with common interests. Web-based email is an example of a common cloud communications service that also offers productivity applications. Other communications applications include blogs, communities and forums on a wide range of topics. Examples of communications applications are set out in Table 7. 14 acma

Table 7 Examples of communications applications Service Overview Unique audience during July 2013 (000 s)* Facebook A social-networking site that allows users to share comments, photos, videos and other content with other users. 11,500 LinkedIn A social-networking site for professional/career networking. 2,774 Wordpress An online blogging and content-management site. 2,564 Google+ Twitter Online social-networking site that allows users to carry out a number of cloud functions such as store and share content, share messages, video chat, tweet and share interests. Online social networking and microblogging service that allows people to send short messages that are referred to as tweets. 2,095 2,085 Slideshare An online slide-sharing service. 456 *Nielsen for unique audience counts. Base for this data is persons aged 2 years and over. Important note: Unique audience refers to the number of people accessing a specific site during a given month and not the number of site visits per month. Unique audience includes passive users (people who land on the site but who do not actively use a cloud computing service from the site) and active users (people who actively use a cloud computing service from the site). Source: Company websites unless indicated otherwise. 15

% of people aged 18 years and over Awareness and use of cloud computing services Overview This section provides an overview of current usage for cloud computing services in Australia, including level of consumer and SME awareness of cloud computing services, and the type of services currently in use. Main drivers and impediments to take-up of cloud computing services are also discussed. Information presented is taken from two ACMA-commissioned surveys conducted in May 2013: a survey of 2,400 Australian consumers aged 18 and over a survey of 1,500 Australian SMEs. Consumer awareness of cloud computing services During 2012 13, Australia s digital economy continued to grow strongly, with 80 per cent of Australian households and 94 per cent of SMEs indicating that they had internet access at May 2013. Just over half (55 per cent) of consumers aged 18 and over have heard of cloud computing. As might be expected, those with an internet connection had an increased awareness of cloud computing services with 60 per cent aware of cloud computing compared to only 23 per cent of those without an internet connection. In addition to connectivity, income and age also have an impact on awareness of cloud computing. As shown in Figure 2, awareness peaks for persons aged 35 44 with 69 per cent having heard of cloud computing, compared to only a third of those aged 65 and over. Figure 2 Consumer awareness of cloud computing by age, May 2013 69 55 57 61 59 53 33 Total 18 24 25 34 35 44 45 54 55 64 65+ 16 acma

% of persons aged 18 years and over Awareness of cloud computing services increased with income. Only 26 per cent of those earning under $20,000 per annum have heard of cloud computing compared to 77 per cent of those earning $130,000 and over (Figure 3). Those working full-time are more likely to have heard about cloud computing 68 per cent compared to 59 per cent of those working part-time, 62 per cent of casual workers, and 60 per cent of students not in employment. Only 32 per cent of retirees and 43 per cent of unemployed people or people undertaking home duties have heard about cloud computing. Figure 3 Consumer awareness of cloud computing by annual personal income, May 2013 77 65 70 58 47 35 26 Under $20,000 $20,000 $39,999 $40,000 $59,999 $60,000 $79,999 $80,000 $99,999 $100,000 $129,999 $130,000 and over Use of cloud computing services While awareness of cloud computing varies, the actual use of these services is high, indicating that many Australians are not aware they are actually using cloud computing services. In the six months to May 2013, 14 million 1 Australians aged 18 years and over indicated they had actively used a cloud computing service (account for 80 per cent of the total adult population), compared to 12.6 million (71 per cent) in the six months to May 2012 an increase of 11 per cent. Only 26 per cent of active cloud computing users were aware they had used a cloud computing service in the six months to May 2013. Of those who have: heard of cloud computing, only 38 per cent indicated that they had used a cloud computing service. However, when looking at the activities undertaken, 90 per cent actually used a cloud computing service. not heard of cloud computing, 65 per cent actually used a cloud computing service. 1 This figure was derived by asking respondents if they had undertaken a number of cloud computing functions such as used webmail, streamed content online, backed up and stored files online and shared files online. 17

% of people aged 18 years and over in each category There are a wide range of cloud computing services used by consumers. The most common services used were webmail services such as Hotmail, Gmail and Yahoo!7 Mail with 88 per cent of cloud users aged 18 and over having used this service in the six months to May 2013. Other popular services included: using online software (40 per cent) streaming content (36 per cent) backing up files online (35 per cent) sharing files online (24 per cent). Those who indicated they had heard of cloud computing services and those who indicated they had heard of and used cloud computing services were much more likely to have performed a diverse range of cloud activities, as shown in Figure 4. Figure 4 Cloud computing activities by level of awareness, May 2013 Used any cloud computing service Used webmail Used online software Streamed content Backed up and stored files online Shared files None of these 99 90 89 80 70 80 76 59 58 34 30 29 19 21 41 42 39 26 42 10 1 Total population aged 18 years and over* Heard of cloud computing and are aware or unaware they had used a cloud service+ Heard of cloud computing and used a cloud service# *Includes cloud computing service users who are aware or unaware that they used a cloud computing service. +Includes cloud computing service users who indicated they had heard of the term cloud computing service and who are aware or unaware they had used a service. #Includes cloud computing service users who indicated they had heard of the term cloud computing service and indicated they had used a cloud computing service. Note: Data relates to activities performed in the six months to May 2013. Of those who have actively used cloud computing services in the six months to May 2013, the intensity of use is diverse with 35 per cent using just one cloud computing service compared to 18 per cent using four of more services (Figure 5). Higher awareness of cloud computing services is associated with more cloud activities being undertaken. 18 acma

% of people aged 18 years and over that have used a cloud service Figure 5 Number of cloud computing services used by level of awareness, May 2013 6 9 12 16 19 19 22 27 Five services 26 Four servces 27 27 Three services Two services One service 35 27 18 9 All that have used a cloud service* Heard of cloud services+ Heard and used a cloud service# *Includes cloud computing service users who are aware or unaware that they used a cloud computing service. +Includes cloud computing service users who indicated they had heard of the term cloud computing service and who are aware or unaware they had used a service. #Includes cloud computing service users who indicated they had heard of the term cloud computing service and indicated they had used a cloud computing service. Note: Figures may not add up to 100 per cent due to rounding. Data relates to activities performed in the six months to May 2013. While the ACMA did not ask specific questions about awareness of cloud computing services in its 2012 consumer survey, it did canvass a range of questions relating to cloud computing activities. Table 8 shows that large numbers of people in Australia currently use clouding computing services and that there has been significant growth in the use of these services. The largest increase recorded was for backing up a hard drive to an online site increasing by 35 per cent in the 12 months to May 2013. Table 8 Select cloud computing activities undertaken by people Cloud based activity May 2012 ( 000s) May 2013 ( 000s) % change Used webmail services such as Hotmail, Gmail or Yahoo!7 Mail 10,619 12,282 16 Using social networking sites such as Facebook, LinkedIn 8,764 9,843 12 Stored personal photos online 7,077 7,226 2 Used applications such as Google documents or Adobe Photoshop Express 6,106 6,140 1 Stored personal video online 1,872 2,180 16 Backed up your hard drive to an online site 1,282 1,737 35 Paid to store computer files online 1,282 1,431 12 Note: Relates to usage in the six months to May. Base for this data is people aged 18 years and over. 19

% of SMEs that use cloud computing Although cloud computing service usage is high, the proportion of the population paying for cloud computing services is very low with only 17 per cent of those who have heard of and used a cloud computing service paying to use the service. However, there may be people paying for cloud computing services who are not aware that they are using a cloud computing service. For example, this may be the case with the use of some itunes services. Devices used to access services Consumers who used cloud computing services in the six months to May 2013 accessed these services from a variety of devices. Of those who were aware that they had used cloud computing services, 59 per cent used a laptop, 57 per cent used a mobile phone, 52 per cent used a PC and 47 per cent used a tablet computer to access these services. SME use of cloud computing services At May 2013, 44 per cent of SMEs actively used cloud computing services. This was more prevalent for medium-sized businesses (20 199 employees) with 51 per cent using cloud computing services compared to 44 per cent of small businesses (employing 0 19 employees). 2 The most popular cloud computing service used by SMEs at May 2013 were webbased email such as Gmail, Hotmail and Yahoo!7 Mail. This was followed by sharing files online, accessing online software such as Webapps, and Office 365 and backing up files online (Figure 6). Figure 6 SME use of cloud computing services, May 2013 57 43 40 39 30 28 26 Web based email Share files online Access online software Back up files online Use free online data/file storage services Stream video/audio content over the internet Pay to store data/files online SME use of specific cloud computing services varied somewhat by business size with medium-sized businesses more likely to use paid services with 31 per cent indicating they paid to store data/files online compared to 25 per cent of small businesses. Small businesses were more likely to use free services such as web-based email like Gmail, Hotmail or Yahoo!7 Mail (58 per cent) compared to medium-sized businesses (34 per cent) (Table 9). 2 Medium-sized businesses only account for seven per cent of all SMEs. 20 acma

Table 9 Cloud computing activities performed by business size, May 2013 Cloud-based activity Small business (0 19 employees) Medium business (20 199 employees) % SMEs that have actively used cloud computing services Web-based email such as Gmail, Hotmail or Yahoo!7 Mail 58 34 Shared files online 44 38 Access online software such as webapps or Office 365 40 37 Back up files online 39 34 Stream audio/video over the internet 27 30 Paid to store data/files online 25 31 Of businesses that have actively used cloud computing services, 55 per cent had used one to two separate services and 32 per cent had used three to four separate services (Figure 7). Figure 7 Number of cloud computing services used by SMEs, May 2013 8% 4% 2% 30% 1 service 13% 2 services 3 services 4 services 5 services 19% 6 services 25% 7 services Note: Figures may not add up to 100 per cent due to rounding. Base for this data is all SMEs actively using cloud computing services at May 2013. Positives and negatives to cloud computing services There are a number of positives and negatives identified by consumers and businesses in relation to cloud computing services. Both businesses and consumers recognised that cloud computing allowed them to access their files and data across multiple devices and highlighted that cloud computing kept data and files safe if anything should happen to a PC. Of the negatives highlighted, SMEs and consumers both noted perceptions of security issues and trust. 21

Consumer positives and negatives The 2013 ACMA communications consumer survey asked people who had indicated they were aware of cloud computing services and were aware they had used cloud computing services what they felt were the positives and negatives of using cloud computing services (Table 10). These people accounted for 26 per cent of the total number of active cloud computing users. At May 2013, the main positive mentioned by 43 per cent of respondents was the ability to use cloud computing services across multiple devices. The majority of those who had heard of cloud computing and were aware they had used cloud computing services used multiple devices to access the internet 96 per cent used more than three and 86 per cent used more than four devices to access the internet. The main negative of cloud computing services was the perceived lack of security 52 per cent of respondents. Table 10 Consumer perceptions of using cloud computing services, May 2013 Positives of cloud computing % of those who had actively used cloud computing services Ability to use across all devices 43 Your data and files are safe if anything happens to your computer 33 Freeing up space on your computer 19 Don t know what the benefits are 11 There are no benefits 4 Negatives of cloud computing % of those who had actively used cloud computing services Lack of service security 52 Lack of trust of service providers 14 Lack of service reliability 12 Don t know what the negatives are 13 There are no negatives 7 Service costs 5 Confusion over service features 5 Note: Base for this data is people aged 18 years and over who indicated they were aware of cloud computing services and were aware they had used cloud computing services in the six months to May 2013. Multiple responses allowed. SME positives and negatives At May 2013, the main positives cited by SMEs from the use of cloud computing services were that it was easier and more convenient to use (36 per cent), followed by the ability to use across multiple platforms (15 per cent) and data and files are safe if anything happens to the computer network (11 per cent). Twenty per cent of SMEs using cloud computing services were unable to identify a positive (reporting don t know ) from the use of these services. 22 acma

The main reason for SMEs not to use cloud computing services is that there is no need for it or it is not suitable to the nature of their business (48 per cent of SMEs not using cloud computing). A further 22 per cent reported that they did not know enough about cloud computing. A summary of positives and negatives are outlined in Table 11. Table 11 SME perceptions of cloud computing services, May 2013 Positives of cloud computing Total Small business (1 4) Small business (5 19) Medium business (20 199) % of SMEs actively using cloud services Easier/more convenient 36 37 35 28 Don t know 20 17 22 31 Can use across multiple locations 15 14 15 13 Data and files are saved if anything happens to your computer network 11 9 13 15 Part of a service I already use 6 7 6 0 Can use across multiple devices 6 6 5 2 Cost savings 5 7 5 2 Negatives of cloud computing % of SMEs not using cloud services No need for it. It is not suitable to the nature of the business Don't know enough about cloud computing services 48 48 45 30 22 26 21 15 Don't know 15 10 23 37 They are not secure 8 7 6 9 I don't trust service providers 4 4 2 4 We have no reason to change, it works fine 3 3 3 6 Services are not reliable 1 1 1 5 Note: Data relating to the top seven responses presented. Multiple responses allowed. 23

The future of cloud computing services in Australia There are a number of current and impending developments that are likely to facilitate further growth in use of cloud computing services in Australia. As discussed in the ACMA Communications report 2013 14, continued improvements in internet speeds and innovation in end-use access devices have the capacity to change consumer online behaviour. 13 This section outlines some of the developments that the ACMA anticipates will have the greatest impact on the cloud computing environment. Infrastructure developments There are a number of infrastructure projects underway in Australia that will have significant implications for the future development of the digital environment, in particular the cloud computing services market. These include the rollout of the National Broadband Network (NBN) and 4G mobile networks. Government cloud computing strategy The Australian government is committed to accelerating the use of cloud service in the public sector, to enhance efficiency and innovation. Specifically the government has committed to: Simplify Government ICT and eliminate duplicated, fragmented and sub-scale activities across agencies by requiring use of shared or cloud services where minimum efficient scale hurdles are not met. Set a default expectation that private or public cloud solutions will be used whenever efficient scale is not achieved at agency level. Trial the relocation of critical data to a secure government cloud using automated tools from 2014 (new tools and techniques being needed to help agencies migrate essential services across from older infrastructure with low risk and low cost). 14 The Department of Finance is leading the implementation of these commitments. Increased use of complementary devices Australians are increasingly using complementary devices to access the internet, and this is driving the take-up of cloud computing services as consumers demand access to their own content on any device from any location. ACMA research shows that at May 2013, 62 per cent of Australian internet users were accessing the internet using three or more devices while 21 per cent used five or more devices to access the internet. 15 The use of mobile devices has also increased with the number of Australians 18 years and over using smartphones increasing from 54 per cent at May 2012 to 68 per cent of mobile users at May 2013. Tablet usage has also seen a big increase in this same period rising from 29 per cent at May 2012 to 47 per cent at May 2013. 16 Increasing competition in the Australian market The market for cloud computing is continually evolving with new service providers entering the market both in Australia and emerging globally. 24 acma

Appendix Research methodology Methodology for commissioned surveys ACMA-commissioned consumer survey The ACMA-commissioned survey of consumers was conducted by Roy Morgan Research between May and June 2013. The sample was taken from the Australian population aged 18 years and over. The ACMA conducted computer assisted telephone interviewing (CATI) to both fixedline and mobile phone numbers. The quota sample included two subsets: fixed-line sample of n=2,000 sourced through Random Digit Dialling (RDD) mobile phone sample of n=400 sourced through Roy Morgan Single Source recontact. ACMA-commissioned survey of SMEs The ACMA-commissioned survey of SMEs was conducted by Woolcott Research between 21 May and 5 June 2013. Computer assisted telephone interviewing (CATI) was conducted to both mobile phone and fixed-line numbers sourced randomly from the Electronic Yellow and White Pages business listings. A sample of 1,500 SMEs was selected. The sample of businesses for CATI was drawn from all metropolitan and regional areas of each state and territory and results were weighted by selected ANZIC. 17 Other data Nielsen Online Ratings Online audience measurement using a hybrid methodology consisting of: website tagging where tracking tags are placed on websites to monitor activity a randomly selected panel of approximately 11,500 online computer users (at home and/or work) representative of the Australian online population. A panellist s online activity is metered by software installed on their computers. Data analysis Results from the survey were analysed using descriptive analysis techniques, and by socio-economic and demographic factors, to identify areas with significant patterns or differences. 25

Endnotes 1 ATSE, Cloud Computing: opportunities and challenges for Australia, September 2010. 2 ibid. 3 ibid. 4 Pallavi Singhal, Community cloud coming to the Australian Government, Intermedium, 5 August 2013. 5 IDC, Cloud Is Now "Business As Usual", IDC Says, press release, 16 July 2013. 6 Paul Mansfield, Cloud computing Heats up in Australia, businessreviewaustralia.com, 6 February 2013. 7 IDC, Cloud Is Now "Business As Usual", IDC Says, press release, 16 July 2013. 8 Telstra, Telstra Annual report 2013. 9 Cloud has a silver lining for telcos, The Sydney Morning Herald, 21 May 2013. 10 Brad Howarth, Bring it on: locals ready to fight as the global giants muscle in, The Australian, 9 April 2013. 11 Microsoft to add Australian shores to Azure, The Sydney Morning Herald, 22 May 2013. 12 ACMA, Communications report 2013 14. 13 ibid. 14 The Coalition s Policy for E-Government and the Digital Economy, August 2013. 15 ACMA, Communications report 2013 14. 16 ibid. 17 The Australian and New Zealand Standard Industry Classification (ANZIC) is an industry classification that was jointly produced by the Australian Bureau of Statistics and Statistics New Zealand. 26 acma

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