Kiwi firms “steadily embracing the cloud”

closeThis article could be out of date, as it was published 10 months 15 days ago.

Organisations in New Zealand are becoming increasingly aware of the numerous benefits cloud computing offers and are progressively adopting cloud solutions to reduce IT costs, improve business agility, increase flexibility and enhance collaboration with stakeholders through community cloud environments.

Frost & Sullivan’s new research, State of Cloud Computing New Zealand 2013 reports that of organisations in New Zealand currently using cloud computing services, 47% spend more than 10% of their total IT budget and 32% spend more than 20% of their total IT budget on cloud solutions or services.

Phil Harpur, Senior Research Manager, Australia & New Zealand ICT Practice, Frost & Sullivan says, “There is a marked increase from 2012′s figures, indicating a growing shift to the cloud.

“Though larger organisations generally spend more on cloud computing services, smaller and medium sized enterprises investing significant amounts of their IT budget have also increased.”

63% of organisations in New Zealand currently using cloud solutions plan to increase their cloud-based solutions budget over the next year, an increase from 57% in 2012.

33% of organisations indicated flat spending on cloud services, a decrease from 40% who indicated no change in spending previously. “All these reflect a market very much in a growth phase,” states Harpur.

E-mail and storage & office productivity solutions are most accessed via the cloud. “88% of New Zealand organisations access e-mail via the cloud – 33% via public cloud, 38% via private cloud and 17% via a hybrid model.

In a private cloud environment organisations favour server computing solutions, e-mail security, office productivity solutions and storage, while in a hybrid cloud environment CRM is the most widely deployed application,” Harpur elaborated.

Andre Clarke, Country Manager, New Zealand, Frost & Sullivan says, “Overall IT cost reduction, reduced risk of IT disruption from external factors such as natural disasters, greater overall business agility and flexibility, enhanced IT infrastructure efficiency and faster deployment time are all factors driving adoption of cloud computing.”

Organisational understanding of cloud computing is maturing, and interest is observed across all sectors in the New Zealand market, with no one vertical dominating demand.

Software-as-a-Service (SaaS) still accounts for the largest portion of cloud revenues, although the adoption of Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) has been very strong over the past two to three years.

SaaS offers several benefits over on-premise software such as lower upfront costs, standardisation and ease of upgrade, ubiquitous access and seamless integration with in-house infrastructure. Other driving factors for SaaS adoption include the Ultra-Fast Broadband (UFB) rollout, falling broadband prices, rising data cap limits on broadband plans and increasing enterprise mobility.

However, data sovereignty remains a prominent issue in New Zealand, particularly in the public sector where the government cloud strategy mandates that all data remains in New Zealand, thus limiting the number of potential suppliers.

SaaS application adoption rates are positively correlated with the size of the organisation which are more likely to use software applications accessed via the cloud, especially for Office Productivity Applications, CRM, HRM and ERP.

“Multinational SaaS vendors, Salesforce.com, SAP, Microsoft, and Google have had good growth in the New Zealand market and a new area of “cloud first” applications is growing as demand is emerging for custom built SaaS offerings,” mentions Clarke.

NZ founded SaaS providers continue to emerge, offering innovative, competitive services to both local and international clients. Xero is the technology success story of the year and currently the flag bearer for the NZ SaaS industry, leading the way and proving that NZ can create valuable, global software brands.

With Infrastructure as a Service (IaaS), the use of compute instances is much higher than storage due to low barriers to entry, attractive pricing and well publicised implementation case studies.

“IaaS has seen a huge spurt in adoption in the last 12 to 24 months due to an increasing number of local market participants such as Datacom, ICONZ, Gen-i/Revera, Maxnet and Web Drive” added Clarke.

Over the next 12 months, at least 25% of organisations not currently accessing office productivity applications (e.g. Google Docs) via the cloud are likely to do so. CRM, Desktop and Analytics and Business Intelligence are the SaaS applications most likely to be migrated while HRM, e-mail security and ERP are less likely to be migrated to the cloud.

Challenges in adopting cloud-based services include data / security threats and risks as well as integrating existing systems and legacy applications with cloud data. Private cloud deployments are more widespread than both public and hybrid cloud deployments for all types of software and applications, with the exception of conferencing.

Companies that implement private clouds can face challenges when they try to gain extra scale in the future. Network Security is the most important ICT component when building a private cloud followed by application security and access control and IT service management tools third.

“Also, the sales processes of cloud service providers are more complex, very different and far more solution oriented than traditional menu driven transactions.

“To overcome this challenge, many providers are investing in training and up-skilling their sales professionals,” Harpur explained.

Security is the most important criteria when selecting a cloud vendor, followed by reputation, trust, service and reliable support, price and ROI success. Vendors must also have sufficient SLAs, offer sufficient product scalability and offer a range of value added services” Harpur added.

59% of organisations currently outsource their data centre hosting, largely due to cost and security factors, and 78% expect their data centre requirements to increase over the next 12-18 months.

Cloud computing growth is driving demand for data centre capacity and providers are expanding local presence as well as building new capacity in multiple locations nationwide.

New data centre space is in response to the strong growth in data usage, demand for local data centres and increasing propensity of toward outsourcing data centre operations.

Frost & Sullivan believes that the growth rate of data centre outsourcing and the need for greater data centre space will continue to stimulate demand, providing significant growth opportunities for most service providers.

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