Executive Summary: ISG Provider Lens™ Next-Gen Private Hybrid Cloud - Data Center Solutions & Services - Australia 2022
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The growth of cloud computing is accelerating in Australia, regardless of the end model deployed.
The 2022 Next-Gen Private/Hybrid Cloud – Data Center Services and Solutions study evaluated 72 hybrid IT, colocation and managed hosting service providers that operate in Australia and provide a range of IT services. From the analysis, ISG Provider Lens™ has identified the key service providers and the main trends driving the markets for hybrid IT, colocation and managed hosting across the region.
The Australian data centre services and solutions markets is a dynamic market with a substantial number of providers across each of the three targeted quadrants. It is a highly developed market with both local and foreign providers playing significant roles in the development of the local ecosystem. Australia is arguably the most competitive market globally.
From a data centre point of view, whilst five to 10 years ago, it was sufficient to have a data centre in Sydney or Melbourne, in 2022, the market has changed. We have seen the rise of national providers and local regionalised providers. The national providers, both locally and foreign-based have footprints that cover many of the state capitals and Canberra. To be a leader in the space, you need to cover at least four of the major markets.
At the same time, we have seen the rise in the localised providers. Whilst these local providers did not achieve leadership in the ISG Provider Lens study, they are relevant for the local market. Locations such as Newcastle, Townsville, Tasmania and the Gold Coast all have their own local providers with capabilities as required for functional reasons, or for local pride.
Historically, Australia has been a global leader in IT outsourcing, which led to the growth in cloud data centres. As a result, integrated solutions are common across applications and infrastructure. This is more successful than the majority of the enterprise-wide outsourcing deals were in the 1990s and 2000s for a myriad of reasons.
There are several key trends driving the shift towards the hybrid cloud model and accelerating data centre uptake.
The accelerated shift to digitisation is at the top of the list. Even without the impacts of COVID 19, change was coming to Australian enterprises and government agencies related to the speed of their migration to digital technologies and services. As a result of the transformations related to changing customer patterns, supply chain issues and every other factor altered due to COVID, this has only accelerated. This acceleration has meant that the demand for the range of data centre solutions to enable enterprises to be truly digital has only accelerated in the past two years. It will continue to accelerate because the shift to digital is a one-way street. There is no turning back.
Some of the trends observed over the last year and building toward the future are:
Sustainability initiatives – integrated across industry and government: Enterprises are looking for providers that are as committed to sustainability as they are in their strategies and operations. In Australia, the shift to sustainable outcomes was driven by enterprises and state governments. Now with a change of government at the federal level in Australia, it is anticipated that sustainability will accelerate from a requirements and acceptance perspective. Data centres will be at the front and centre of this, with a shift to even greener locations, energy and management than what was expected in 2021.
Platform led automation: There is a rapid increase in use of proprietary or third-party platforms and tools (by both service providers and the enterprise community) for automating cloud operations. AI and machine learning technologies are being widely used to create a differentiation in automating day-to-day operations, with the level of efficiencies varying from 30 to 60 percent. Some providers are leveraging automation to improve customer experience, leading to increased revenues and repeat business.
Growing popularity of edge computing: Although still evolving, edge computing is seeing a rapid adoption among enterprises of all sizes for various existing and new use cases such as software-defined solutions, IoT processing, hybrid cloud connectivity, firewall and network security, branch and micro data centres, Internet-enabled devices and asset tracking. Edge technologies are also being used to address the latency challenges in the present highly distributed environments, by removing network barriers and bringing processing to the edge.
Smarter and darker data centres: Many enterprises are aiming to increase productivity and efficiency, but with minimal human resources. As a result, there is an increase in investments toward intelligent remote monitoring and automation, where real-time information is assisting organizations to effectively predict requirements and manage problem areas. The goal is to deliver cost efficiency by reducing staff or by enhancing the ability to operate for a sustained period with a limited workforce.
Comprehensive security measures in hosting environments: As organizations adopt digitalization and expand their remote workforces and hybrid IT solutions, there is a high demand for agile security systems to protect sensitive data, workloads and applications. Hosting providers are offering a unique combination of physical and cybersecurity practices to combat ransomware and distributed denial of service (DDoS) attacks. In 2022, this trend is expected to gain more traction among organizations for which security is a critical component. Most or all providers are offering security as a part of the bundled deal to secure the end-to-end infrastructure of enterprise clients.
Ongoing build-out in regional areas: As highlighted, there was a time when it was acceptable to just be in Sydney or Melbourne. Now a national strategy is required for vendors that wish to be considered truly Australia-wide in their coverage. We expect that as the cost of networks and equipment reduces, and regions continue to grow as a result of demographic shifts, the increase investment in localised regional solutions will continue to increase. It may be realistic to expect that at one point in the future, no region will be too small to have a localised capability.
Joint solutions and active partnering: To ensure national coverage and global connectivity, as well as realize the benefits of scale, it is expected that a highly integrated and complicated pattern of solution development and partnering will accelerate in the future. This will enable the national scale and regional reach required as well as increased access to skills.
A lack of skills will be a major issue: Unemployment in Australia is currently at, or near, record lows. Migration has slowed as a result of the COVID-19 pandemic. A focus on employee skills is required to grow the market. Skills growth requires companies to rethink and create more innovative ways of developing and attracting new talent. However, Australian companies will also be required to increase their investment in automation across the technology landscape for there to be even a remote chance of meeting the skills gap in Australia and beyond.
Increased industry targeting: In the financial services sector, and to an extent the public sector, especially the federal government, we are seeing trends toward targeted industry solutions for data centre and cloud-related services. This will accelerate in these industries, as well as other highly regulated industries such as utilities and state government. We also expect that there will be growth in point solutions in those industries with specific requirements and those that have significant capabilities in regional areas.
Despite the economic challenges imposed by the COVID-19 pandemic, the international uncertainties created by the Russia-Ukraine war and the 2022 presidential elections, the IT market continues to grow in Brazil, attracting foreign investments to expand the country’s infrastructure.
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