A COVID-19 era boost to the adoption of collaboration apps has fed into a boom year for the Australian cloud computing market, which is poised to crash through the $1 billion mark for the first time in 2020, new research has found.
An annual study of the Australian hyperscale cloud market by research firm Telsyte found that the lion’s share of that spending has gone to US giants Amazon Web Services and Microsoft’s Azure, with AWS the significantly larger of the two.
Hyperscale vendors provide the infrastructure and platforms that have replaced inhouse servers and data centres over the past decade. Although Australia has created a number of global success stories like Atlassian and Canva that run cloud-based services on top of hyperscale infrastructure, it does not have an infrastructure-as-a-service (IaaS) provider that can closely compete with the world’s largest.
Telsyte found that the five largest IaaS providers – AWS, Azure, Google Cloud, IBM, Oracle and Alibaba Cloud – combined to make up around 82 per cent of local IaaS cloud spending, with the first two well out in front.
Its report said total cloud IaaS spending reached $907 million in Australia in 2019 and is expected to hit $1.1 billion in 2020, before growing at a forecasted compound annual growth rate of 15.8 per cent to reach $2 billion by 2024.
“The lockdown and work from home period has had a massive impact on the amount of cloud services being used … this is true for almost all business applications, but the biggest impact is the uptake of collaboration tools and video conferencing, which are all built on cloud platforms,” Telsyte managing director Foad Fadaghi said.
“Video conferencing has been ‘waiting to happen’ for 20 years and the pandemic finally made it a mainstream business tool. Overall, the most immediate change is the uptake in cloud software-as-a-service apps which will then have a flow on to infrastructure as a service.”
Mr Fadaghi said Australian companies like Telstra and Macquarie Telecom were benefiting from the surging adoption of the cloud as they could provide managed services in areas like cyber security and hosting where data sovereignty was a key concern.
Data centre providers like ASX-listed NextDC and New York Stock Exchange listed Equinix are also big beneficiaries of the ongoing increase in corporate and government cloud adoption.
Earlier this month, Macquarie Telecom announced it would build a new data centre in Canberra in order to tap into increasing government demand for its cloud and cyber security services.
In April, Macquarie Group’s infrastructure arm invested in data centre operator AirTrunk, and now owns an 88 per cent stake of the company, which is run by former NextDC executive Robin Khuda and is valued at about $3 billion.
Aside from the pandemic lockdown, Telsyte said demand for cloud services was going through the roof already due to a combination of high levels of IT spending on digital transformation and continued movement of organisations off in-house infrastructure to cloud providers.
Its study found nearly half (45 per cent) of organisations are looking to increase cloud infrastructure spending in 2020, and 46 per cent of Australian businesses now have “cloud first” policies when it comes to making new investments.
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Mr Fadaghi said he believed the pandemic had highlighted a gap in Australia’s local cloud industry capability – although it is well stocked in services running on IaaS platforms, the country is missing out in the boom being led by AWS and Microsoft.
“Information technology, like the manufacturing sector or others, can be seen as a strategic capability that the government could invest in to ensure we are not solely reliant on foreign-owned companies,” he said.
“Even though the industry is large and continues to mature, there is no reason why Australia could not develop a standalone capability for national security reasons.
Paul Smith edits the technology section and has been a leading writer on the sector for almost 20 years. He covers big tech, how businesses are using technology, fast growing start-ups, telecommunications and national innovation policy. Connect with Paul on Twitter. Email Paul at email@example.com