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The race for the Australian cloud

Steve Hodgkinson | Nov. 6, 2009
Cloud computing is a scale business and the race is on in Australia to build critical mass locally before the global players set up shop.

Cloud computing is a scale business and the race is on in Australia to build critical mass locally before the global players set up shop. Managed services and hosting companies are seeking to transform themselves into cloud computing providers. However, market leadership will require deep operational capabilities particularly security and an ability to aggregate demand fast by winning corporate and government accounts.

The race is on for an enterprise cloud service in Australia

Ovum logoCloud computing in Australia is at the which comes first the chicken or the egg? stage: the chicken is demand, the egg supply. Compliance concerns make enterprise and government buyers reluctant to allow data to go into offshore clouds, but Australia doesnt yet have mature local clouds of its own.

The pay-as-you-go elasticity of cloud computing requires a build it and they will come bravado, which is challenging in a relatively small economy. Australia is conspicuously lacking an Amazon, Google or Salesforce equivalent with the mindset and ready cash needed to launch pure as-a-service offerings.

Instead, local cloud services at the infrastructure layer are evolving from the managed services and hosting companies. Telstra announced a five-year private cloud services deal with Visy earlier this year. Melbourne IT is one of the first off the block with a genuine pay-as-you-go infrastructure service, recently launching its beta vCloud Express service based on VMwares vCloud. Other hosting services with early-stage cloud offerings include Macquarie, MD and Ultra Serve. Optus/Alphawest also plans a cloud-based offering for launch early next year, working with Cisco, EMC and VMware as part of their Virtual Computing Environment coalition.

However, hosting providers are saddled with legacy technologies, processes, skills and contractual commitments. They face significant change management challenges as they seek to transform themselves mid-flight, with the global cloud providers breathing down their necks with their greenfield cloud technology.

Scale and speed are of the essence

Cloud computing is by definition a scale business with trust as its basic currency. Cloud computing is not a cottage industry. If you are big, you can afford to invest in the latest machinery and systems and the smartest people and nowhere is this more important than in the area of security. One thing that we can count on is that cloud providers will be prime targets for the mischievous and the criminal. Failure of security, as they say, is not an option.

The challenge for Australian cloud providers, given their relatively modest capital resources, is to invest upfront. They need to get big enough fast enough to win leadership of the local market and attract sufficient revenues to invest ahead of the rising security threat curve. This speed will also be vital to attract the global cloud players. Verizon has stated, for example, that it is considering opening an Australian node of its computing-as-a-service offering as early as 2010. Another threat is that the global players will develop virtual service-partitioning solutions to reassure enterprise buyers that their data is, after all, safe offshore.


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