AWS' decision to build local cloud data centres poses an obvious threat to existing New Zealand data centre and infrastructure-as-a-service (IaaS) providers.
The two largest local providers, however, are talking up the growth opportunities the arrival of hyperscale could present.
New Microsoft and AWS public cloud regions in New Zealand effectively remove the key remaining barriers to the adoption of hyperscale cloud services: data sovereignty and latency. They can also help answer pressing cyber security challenges, as Wellington City Council found.
In response, Kiwi data centre operators are digging deeper into the opportunities presented by hybrid cloud -- the ability to mix and match public and private cloud services depending on both business and technical needs.
Announcing its 2021 results in July, Datacom said organisations across Australia and New Zealand continued to shift their operations to hybrid clouds, "careful to avoid an all-in approach to one cloud over another".
"Datacom offers the full suite of partnerships, whether the customer chooses AWS, Google, Microsoft, Dell or VMWare or a hybrid blend," it said, labelling the strategy "RightCloud".
After AWS announced its $7.5 billion, fifteen year investment in New Zealand cloud regions last week, Spark customer director Grant McBeath told Reseller News a focus on hybrid cloud and differentiating through local service were crucial for customers.
Research showed that only about 30 per cent of NZ data workloads were in the cloud today, he said. That was forecast to grow to 60 per cent over the next five years.
"We see plenty of growth opportunities across the industry," McBeath said.
A risk or an opportunity?
A presentation to shareholders in March, which opened the books on Spark's cloud and ICT services revenue for the first time, was more nuanced.
On the one hand, hyperscale cloud was described as an opportunity that required a response. A line later it was a risk that needed to be managed.
Spark planned to manage it through focusing on an end-to-end product and service portfolio "beyond cloud" to enable the delivery of solutions.
This included providing support and services onshore, partnering with hyperscalers to bring hybrid cloud to customers and collaborating with NZ businesses to design and deliver "next-generation" technology innovation, applications and solutions among other measures.
Most market growth was expected to flow from cloud, with strong growth in both public cloud and services that supported digital transformations, shareholders heard.
Tellingly, Spark conceded there would be pricing pressure across IaaS and co-location, but this was expected to be offset by opportunities for continued revenue growth across the portfolio as businesses transitioned to the cloud.
But what if local users have been waiting for the opportunity to change? What if they have been waiting and preparing for the arrival of the hyperscalers?
Auckland Council director of ICT Mark Denvir told Reseller News the AWS announcement was a real positive for the market which would hopefully quell some of the concerns around data sovereignty and the latency impacts on the performance of public cloud offerings.
"We are certainly pleased as our strategy for infrastructure is supported by this move and will allow council to continue to deliver great value and increased capabilities," Denvir said.
It would also deliver a "shot in the arm" to the skills and job market.
'Evergreen' in the cloud
In central government, many agencies are already shifting workloads from local IaaS to AWS delivered out of the Sydney region.
Children's ministry Oranga Tamariki, which was founded in 2017, appears to have built its infrastructure almost entirely in the cloud, operating no IT hardware, software systems or operating systems itself.
All of these are provided as-a-service on "evergreen" software platforms and cloud-based infrastructure.
"All new applications are implemented on a) cloud infrastructure platforms such as Microsoft (Azure and M365) and Amazon Web services (AWS), and b) Cloud software platforms such as Service Cloud (by SalesForce)," Oranga Tamariki reported to Parliament in June.
Computerworld reported last October that, in contrast with global trends, Kiwi IaaS providers were holding their own against the big public cloud providers.
Senior IDC analyst Prabhitha Dcruz said the global hyperscalers often accounted for 70 per cent to 80 per cent of IaaS market share across countries in Asia-Pacific excluding China and Japan.
In New Zealand, however, local providers were much stronger.
“Local vendors such as Spark and Datacom together account for 43 per cent of the overall NZ IaaS market share," Dcruz said.
Amazon Web Services had the largest public cloud IaaS market share of 23 per cent, followed by Microsoft at 19 per cent. Late entrant Google had just 1 per cent market share in 2019.
The question Spark, Datacom and others may soon face, though, is whether customers will continue to use local IaaS or embrace the global trend and migrate to the new local hyperscale public cloud regions.
If new and existing workloads start to land heavily in public cloud, overall market growth may not benefit the local incumbents.
Neither Spark nor Datacom is blinking.
Spark released the results of an infrastructure review last month that classed data centre capacity supporting IaaS and hybrid-cloud as assets that were important for competitive advantage and resilience.
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