The cloud computing market in South Africa is expected to grow at a compound annual growth rate of over 26% between 2023 and 2028, expanding to R113 billion.
This is according to a report published today by Africa Analysis, an ICT market research and analysis firm based in SA.
The firm notes the growth is being driven predominantly by many businesses and government institutions implementing digital transformation to become cloud-first organisations to improve their business priorities and outcomes. Large investments made by global cloud hyperscalers in SA also contribute to the market’s growth.
Chris Ngwenyama, director of Africa Analysis, says: “The findings of the 2024 SA Cloud Market Growth Report illustrate the rapidly-growing criticality of cloud services to the private and public sector organisations in SA, as they strive to improve their operational performance and drive better organisational outcomes.”
Surging spend
Ngwenyama tells ITWeb via e-mail that among the drivers of cloud growth in SA are in-country data centre investments, implementation of data sovereignty regulation and the country’s drive to transform into a digital economy.
“For example, South Africa has experienced an accelerated investment in data centres (in-country data centre investment) in the past few years, coming from major data centre operators, such as Africa Data Centres, NTT, Open Access Data Centres, Teraco (Digital Realty) and Vantage Data Centres,” he says.
“There has also been an increase in investments from hyperscalers like Alibaba, AWS [Amazon Web Services], Huawei and Microsoft Azure. As a result of these investments, the demand for wholesale co-location data centres in the country surged.”
According to Ngwenyama, AWS, Microsoft and Google Cloud dominate the South African cloud market, accounting for the largest share.
“As the competition in the cloud market intensifies, the hyperscalers and many other cloud providers are working very hard to strengthen their market positions and maintain competitiveness by growing their partnerships with third-party local cloud service providers to expand their cloud reach in the country.”
He explains that the increasing demand for data storage by South African organisations has led to an increase in demand for data centres.
“As a result, South Africa began to see unprecedented growth in data centre investments from global data centre operators, and regional as well as local operators that sought to expand their data centre facilities.”
To serve the growing demand for cloud services, Ngwenyama points out that global cloud providers, such as AWS, Google Cloud, IBM, Microsoft, Oracle, SAP and others, have targeted SA.
He says several have established cloud regions in the country, enabling the localisation of services and applications for rapid deployment of cloud solutions. These investments and initiatives have significantly contributed to the growth of the cloud market in the country.
Public cloud dominance
Describing the trends in the local cloud market, Ngwenyama says the South African cloud computing market is dominated by public cloud services.
“However, we are seeing that more enterprises are shifting to a hybrid cloud model where they are using on-premises or hosted IT resources in co-ordination with public cloud services, which enables them to accommodate future peak capacity and comply with data residency requirements.”
He notes that a hybrid cloud environment offers the enterprises with a dynamic IT environment where users can deploy resources to suit their application demands, giving them the best of both worlds – public and private cloud.
“Resulting from this shift, many cloud operators are increasingly offering fully-managed IT stacks located in the customer’s premises and operated in the same way as public cloud infrastructure would.
“This is common among large organisations that have existing IT equipment they have heavily invested in. A hybrid strategy confers benefits of cost, agility and resilience to organisations when their technology supplier or cloud service provider can help them reduce the cost of operating their IT resources in a diverse environment.”
Nonetheless, he observes there are several inhibiting factors to the adoption of cloud services, particularly by SMEs in South Africa.
These include the country’s weak economy, which has led to a weakened local currency against the US dollar, impacting negatively on consumer and enterprise spending on technology services such as cloud computing.
“Another inhibiting fact is budget constraints, which impacts other aspects of cloud adoption successes, particularly the SMEs, such as management skills, training and regulatory issues. Also, lack of credit is a major challenge for SMEs in SA, and having to try and balance these expenses, while ensuring a smooth transition to the cloud, is difficult for these businesses,” he concludes.
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