by Heath Muchena

African cloud use grows as CIOs seek flexible pricing, scalability

News Analysis
Sep 23, 2019
Cloud ComputingIT Strategy

Infrastructure issues remain, but tech executives see cloud technology as a way to optimize IT costs, speed time to market and grow their businesses.

distributed / decentralized global network / globe / Africa
Credit: KontekBrothers / Getty Images

Working under tight cost constraints, African CIOs are increasingly looking to the cloud as a way to curb capital expenditures and quickly scale up new services. Infrastructure problems are still holding back cloud usage in many African markets, but at this point it’s essentially a given among African senior technology executives that cloud technology is a necessary ingredient for business growth.

In one measure of how quickly African businesses are taking to the cloud, annual cloud services revenue is forecast to double during 2018-2023 to nearly US$3.8 billion, according to Xalam Analytics. This is a drop in the bucket compared to cloud usage elsewhere in the world, but represents a big change for African businesses.

“Cloud-based services will account for about 25% of African B2B ICT spending within three years, and around a third over the long term,” according to a market report, “The Rise of the African Cloud,” issued earlier this year by Xalam.

Cloud optimizes costs in emerging markets

Limited access to finance and the need to minimise costs are factors that leave most African businesses adopting cloud services as the best option for reducing capital expenditures, by moving spending on technology to more flexible operating-cost options for scalable computing, storage, and app development resources.

“Our core systems are cloud dependent. This has allowed us to renegotiate our contracts from the high capital-intensive models to friendlier opex based models,” said Tendayi Chirokote, CIO at Nyaradzo Group – a life insurance company in Zimbabwe.

Cloud adoption offers various benefits, Chirokote says.

“Funding is not required upfront but is spread over time. This also changes focus from high specialised IT skills, allowing the business to focus on its core capabilities, which is insurance,” Chirokote said.

Otherwise, a primary reason for the allure of cloud technology is the idea that it allows new businesses to quickly ramp up.

“In many emerging markets, infrastructure challenges pose a challenge for start-ups trying to scale,” according to Anthony Butler, chief technology officer of IBM Services for the Middle East and Africa “Cloud can level the playing field between mature and developing markets by lowering the barriers to entry for entrepreneurs and affording elasticity in pricing and capacity.”

CIOs in startups and mature businesses alike, in a variety of industries, expect markets to shake up as cloud technology paves the way to a quick ramp-up of new products and services.

CIOs look to speed time-to-market

“Better time-to-market and improved speeds of deployment make adoption of cloud desirable.” said Shayne Turley, CIO at Goldwagen, a vehicle after-market parts distributor. “Our organisation will be significantly impacted by cloud; and as infrastructure and connectivity improve across South Africa, it will be hard to ignore.”

The ability of the cloud to lower total cost of ownership in IT will bring innovation, and may present a double-edged sword for many businesses, according to Nyaradzo Group’s Chirokote.

“Cloud computing reduces high capex requirements and total cost of ownership in IT infrastructure. This will allow for innovation as models free up cashflows,” Chirokote said. “However, the flip side is that it reduces barriers to entry, allowing for market disruption.”

One enterprise looking to shake up the financial world is Tymebank, a South-Africa-based digital-only bank. Cloud technology is enabling the bank to offer low-cost digital banking services, said Tymebank CIO Dieter Botha during the AWS Cape Town Summit in July.  “Eighty-five percent of our bank’s core systems are from AWS’ cloud applications. Easy access and lower fees are the two elements informing our strategy behind AWS adoption.”

Cloud latency issues remain

Nevertheless, infrastructure problems, including unpredictable power and relative lack of industrial-strength data centers, still weigh heavily on cloud adoption. African enterprises are finding ways to work around infrastructure problems     — for example by using mobile services —  but big cloud data centers are still few and far between, compared to data center density in more developed regions of the world.

Ideally, the distance between an enterprise and a cloud data center should allow latency time of no more than 50 milliseconds, but in fact latency in many African markets is more 100 milliseconds, according to Xalam. Latency is one of the key attributes that Xalam used in calculating which African markets are “cloud-ready.” 

 Only five African markets can be considered cloud-ready: South Africa, Mauritius, Kenya, Morocco and Tunisia; these markets combine good underlying cloud-enabling infrastructure with broad enterprise awareness of cloud services, Xalam said in its cloud report.

Xalam calculates that another 10 African countries are “nearly cloud ready,” meeting key supply and demand conditions to be cloud ready, but continuing to face critical hurdles mostly on the supply side: Nigeria, Ghana, Zimbabwe, Zambia, Tanazania, Senegal, Egypt, Ivory Coast, Namibia, Uganda and Gabon. Other African nations are unlikely to provide conditions for rapid uptake of cloud services in the medium-term, though the Ivory Coast, Mozambique and Rwanda are making some progress, Xalam said.

The infrastructure and economic conditions particular to Africa mean that the cloud market — in terms of enterprise uptake as well as which vendors are leading the market on the supply side — is evolving differently from the way it has progressed in other regions.

SMEs fuel cloud growth

“Cloud isn’t a new concept, but its adoption in South Africa is fairly unique in that it is being driven bottom-up by SMEs, as opposed to in the US and Europe, where there is a top-down approach,” says Craig Freer, executive head of cloud and managed services for Vox Telecom..

As a result, Vox has adapted its approach. “We know that flexibility is critical – our customers don’t want a one-size-fits-all approach to infrastructure pricing and/or services,” Freer says. “So we developed a structured service level agreement programme, with flexible pricing, to allow organisations to grow and evolve their cloud services and requirements according to their business needs.”

Meanwhile, while globally enterprises are prioritizing public cloud, 60%-80% of cloud usage in Africa is hybrid public-private, Xalam reports.

In addition, while Amazon web services is the global public cloud leader, “our observations suggest Azure predominant across key markets, with AWS in second place. Oracle and IBM have a solid presence and VMWare is the primary challenger to pure cloud plays,” Xalam says.

 “There’s a reason why Amazon, Azure, Google, Oracle, IBM and Ali Baba have all started offering VMware based clouds,” said Phares Kariuki, CEO of Kenya-based Node Africa, a cloud infrastructure provider, in an email interview. “There’s a need for interoperability between existing private cloud environments. Most workloads are virtualized on VMware (the stat is around 80.7% of virtualized workloads are on VMware – how do you move them to the cloud without VMware?)”

Meanwhile, Microsoft Azure is now available from Microsoft’s new enterprise-grade datacentre regions in Africa, based in Cape Town and Johannesburg. The company’s pitch centers on providing a way for local companies to move their businesses to the cloud in a secure and reliable way while maintaining data residency and compliance requirements.

Amazon is making a similar move, planning to add Cape Town to its 21 global infrastructure availability regions in the early part of 2020.

As the major public cloud providers make inroads into Africa, cloud usage is likely to remain varied and complex, as Xalam notes, but also a fundamental infrastructure pillar of African digital transformation and business growth.