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Microsoft Launches its Cloud Data Centres in South Africa

Microsoft launches two data centres located in Cape Town and Johannesburg.

The South African cloud data centre market has started gaining traction as demonstrated by the recent launch by Microsoft South Africa of two regional cloud data centres in Johannesburg and Cape Town. Companies have started realising the benefits of cloud adoption, which include reduced costs of managing and maintaitng IT systems as well as the scalability and agility of cloud services. Furthermore, various sporting bodies have also started adopting cloud services, notably the South Africa Rugby Union (SARU), to monitor and improve player performance. This is a demonstration that cloud solutions will not only have an impact in the work space, but across various sporting disciplines as well.

Market Overview

On 6 March 2019, Microsoft SA announced the official launch of its two regional Azure cloud data centres, located in Johannesburg and Cape Town. It is one of the first global cloud data centre providers to provide cloud services on the African continent. 

The newly appointed MD for Microsoft SA, Lillian Barnard, highlighted that these enterprise-grade data centres will support cloud, artificial intelligence and edge computing innovations across the continent. Further, key sectors of the economy that the company is looking at supporting through its cloud data centre infrastructure, include agriculture, financial services, healthcare, manufacturing, mining and the public sector. 

Microsoft’s cloud data centres are expected to enable skills development through the creation of a Cloud Centre of Excellence (CCoE) by companies migrating towards the cloud. The CCoE is a cross-functional team of executive support that leads other employees through cloud adoption, migration and operation. In addition, after cloud migration, employees will be required to upscale their skills to align them with the new cloud services.

Key Drivers and Inhibitors of Cloud Adoption in South Africa

Various drivers and inhibitors are currently influencing the uptake of cloud services in SA. Microsoft highlighted that some of the key drivers to cloud adoption include digital transformation and increased innovation by businesses.

The key drivers and inhibitors to the adoption of cloud services in SA are provided below.

Drivers

  • Reduced costs of managing and maintaining IT systems, i.e., lower total cost of ownership (TCO).
  • Scalability and agility of cloud services.
  • Business continuity in cases of natural disasters, power failures or infrastructure breakdown.
  • The need to develop local skills and transform existing capabilities, in accordance with emerging global trends.
  • Ubiquity of broadband connectivity and the availability of faster connectivity at lower prices.
  • Cost savings through the reduced costs of updating or replacing legacy software.
  • Mobility and the ability of employees to work remotely.
  • Business innovations that require new digital capabilities
  • Increased collaboration and efficiency through the cloud.

Inhibitors

  • Limited skills across most local organisations.
  • Data residency requirements within some organisations, particularly those that handle certain forms of personal information e.g., financial institutions, is limiting the uptake of cloud services.
  • Discomfort with the adoption of new technologies by end-users.
  • Concerns around potential security issues related to personal and company information being managed by a third party.
  • Latency associated with connectivity to data centres offshore and relatively slow connectivity speeds. (These constraints are being alleviated.)
  • Perception by smaller organisations that cloud services are meant for large corporates.

Microsoft’s Customer Experiences for Data Centre Migration

Microsoft SA highlighted various customer experiences influencing the current Azure cloud migration by businesses. These are:

  • Expiry of existing data centre contracts
  • End of support for existing software
  • Quickly integrating new IT infrastructure acquisitions
  • Software and hardware refreshment and upgrade
  • Urgent capacity upgrading
  • Cost optimisation
  • Business innovations requiring new digital capabilities
  • Unsupported legacy IT infrastructure
  • Security protection of business assets and customer data
  • Increased focus on core business operations

These drivers of cloud migration by Microsoft’s customers are closely related to the digital transformation currently being undertaken by these businesses in SA.

Key Vertical Sectors

While the cloud market in SA is currently in the growth stage, some verticals have emerged as early adopters of cloud solutions.
The public sector is a key sector demonstrating the biggest potential for cloud adoption in SA. This has been mainly due to the limited IT skills within most government departments. As such, most public entities are looking at outsourcing their IT infrastructure through cloud services.

Early adopters:

  • Banking/financial sector
  • Healthcare
  • Manufacturing
  • Mining
  • Public sector

Microsoft’s Partnership with the South African Rugby Union (SARU)

In February 2019, Microsoft SA formed a cloud partnership with the SARU. This partnership is aimed at transforming SA’s rugby through the use of cloud capabilities to unlock new opportunities.

To develop its new platform, SARU partnered with Accenture and incorporated various technologies.

Technology used by SARU uses GPS to track player performance during a match. This technology compiles performance statistics such as the number of shots and tackles achieved, as well as the distance covered during a match. Subsequently, SARU uses software, provided by Microsoft, to analyse player performance to identify areas of improvement.

This analysis helps SARU prepare for upcoming matches and helps identify weaknesses in the opposition players, allowing for development of strategies to improve their performance on the field.

Microsoft’s Partnership with Team Dimension Data

Since 2014, Microsoft has partnered with the professional cycling team Team Dimension Data for Qhubeka in the Tour de France, using the Office365 package as the collaboration platform for the cycling team.

This platform is used to manage its global team through a central repository to communicate, collaborate, share information and manage the team’s operations.

In addition, the Office365 package enables the team members to communicate with each other via Skype during racing events, as well as maintain communication with the administration bodies.

Further, they are also able to access emails with event updates and time changes, which is aligned to their events calendar. The OneDrive application allows them to save data and information which they can share with other team members.

Microsoft’s Partnership Network

Microsoft SA leverages a broad network of partners located both locally and internationally. This network is characterised by a vast network of independent software vendors (ISVs) and systems integrators (SIs).

In 2018, Microsoft SA had 6 000 registered partners, of which 1 200 were registered during the same year. Furthermore, 470 partners were classified as either gold or silver partners. The number of partners that attained gold or silver partner status increased by 31% in 2018.

During the same year, the number of data centre migration certified partners amounted to 24. These are the partners tasked with modernising and migrating Microsoft’s customers from the traditional legacy infrastructure to the modern Azure cloud infrastructure.

As such, partnerships have been key to Microsoft’s operations in ensuring smooth migration to the latest Azure cloud infrastructure.

Typical Cost-Savings through Azure Cloud Adoption

According to Microsoft, the adoption of Azure cloud has resulted in tangible benefits for businesses, with most companies reporting various cost savings from the migration to the cloud services.

Some of the benefits that could be realised through the adoption of the Azure cloud services include:

  • 15% reduction in total cost of ownership (TCO): the migration to cloud services could result in a 15% reduction in the total direct and indirect costs of acquiring and operating IT infrastructure by organisations.
  • 25% cost-reduction from reserved instances: Reserved instances (RIs) are reservations in resources and capacity within a particular region for future usage. RIs are generally cheaper than on-demand purchases, therefore resulting in significant cost savings.
  • 25% cost-reduction from exact IT requirements: By purchasing the exact IT infrastructure and avoiding excess capacity, some organisations have been able to achieve up to 25% cost savings on IT infrastructure.

Summary

During the recent launch of Microsoft’s Azure cloud data centres, key drivers were highlighted that influence cloud migration. Most businesses have started realising the cost benefits that result from cloud adoption, which include approximately 15% reduction in TCO and 25% cost reduction from reserved instances.

However, inhibitors remain in the market. These include limited skills availability across most organisations and data residency requirements in some sectors, such as the financial services and public sectors. Nonetheless, the landscape is shifting as more organisations in both government and financial services start embracing cloud data centre migration in accordance with their digital transformation initiatives.

Central to Microsoft’s cloud data centre migration has been the formation of partnerships with various players, including independent software vendors (ISVs) and systems integrators (SI). In 2018, Microsoft SA had approximately 6 000 registered partners, of which 470 were classified as either gold or silver partners. Twenty-four of these companies are data migration certified partners, who will play a critical role in migrating customers to the Azure cloud infrastructure.

Various sporting disciplines have partnered with Microsoft, including SARU and the Team Dimension Data for Qhubeka, allowing them to enhance their performance and achieve more efficient information sharing.

This is a demonstration that Microsoft’s cloud solutions will not only be critical in the work space, but also provides vital services to sporting disciplines.

More Information

Please contact Derrick Chikanga (derrick@africaanalysis.co.za) for further information about the data centre and cloud markets.

2018 Microsoft Tech Summit Review

Cloud Key Take-Outs

The tipping point has arrived for cloud services in Africa. The barriers to adoption have been eroded and delivery models for IT have changed forever.

  1. Companies will adopt cloud services at a faster rate. Through the use of local data centres, barriers to cloud adoption such as data protection, reliability and latency are being addressed.
  2. Pivotal to the development of Microsoft’s cloud strategy is Microsoft’s commitment to the African continent. Microsoft has taken great strides in improving the quality of service for companies in South Africa and on the continent, by building two of their own data centres in SA and forging relationships with Internet Solutions, Liquid Telecom and Teraco.
  3. Any company – vendor or end-user – that does not have a commitment to the cloud will be left behind.

Demand for Cloud Services

A recent study, presented at the Microsoft Event, found that 93% of South African companies are developing a cloud strategy.

The major drivers of this trend are: (1) economic imperatives, (2) technological advancement and (3) societal changes.

On the societal side, key research findings by Microsoft include:

  • New generations have new expectations: +50% of the workforce will be millennials by 2020. They have new expectations in terms of how and where they want to work.
  • Employees increasingly want the flexibility to work from anywhere. It is estimated that +42% of the global workforce will be mobile by 2022.
  • Employees demand to be “untethered” by routine tasks and to be free to tap into their own creativity, as they believe it fuels success.
  • Cyberthreats are at an all-time high. 74% of businesses expect to be hacked in the next year, therefore security needs to be built into every touchpoint.

Driving Cloud Adoption

To drive cloud adoption in the region, Microsoft is establishing an Azure cloud region in South Africa to offer locally hosted cloud services to South African businesses. This entails providing technical skills and deploying infrastructure in co-located data centres in Johannesburg and Cape Town.

In terms of global scale, Microsoft operates twice as many hyperscale cloud data centres than the combined count of its global competitors. South Africa, through Microsoft’s distributive data centre deployment model, will become part of this global network.

Africa Reach

Microsoft Azure’s hyperscale data centres (Johannesburg and Cape Town) are due to launch in 2018. With this launch, Microsoft will increase the number of globally announced Azure regions to 42.

The new SA data centre facilities will provide highly available, scalable and secure cloud services, with the option of data residency in SA, to companies operating across the African continent. The cloud services include Microsoft Azure, Office 365 and Dynamics 365.

This is a strategic development that will boost cloud adoption. Currently many companies in Africa rely on cloud services delivered from outside the continent – either via locations from within the European Union or elsewhere.

About the Event

Microsoft held its second South African Tech Summit in Cape Town on 13 and 14 February. Approximately 3 000 people – ranging from end users of Microsoft products to developers and partners – attended the event. The summit included an exhibition floor “the Hub”, multiple breakout rooms and labs, and keynote speeches presented by prominent Microsoft executives.

  • Microsoft speakers outlined the company’s vision for Microsoft 365 and Azure.
  • Partners showcased their latest offerings in the Microsoft enterprise and cloud-based services space. Partners included: Axiz, Britehouse, Checkpoint, Citrix, EOH, Liquid Telecom, StorTech and Veeam.

Look out for more information on the event in the coming weeks.