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Australian startups find their way in the cloud

Public cloud services have empowered Australian startups to scale up and go global from day one

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Australia’s public cloud services market is tipped to grow 15% to reach A$6.5bn (US$5bn) this year, but the rosy forecast may not last for long.

According to technology research firm Gartner, the growing demand for cloud services will taper off at some point, with some organisations still figuring out where cloud fits in their overall IT strategy.

However, one sector of Australia’s economy that seems certain of the role the cloud can play is startups, which have attracted some A$2.4bn worth of investments over the past two years.

Like other startup hotbeds such as San Francisco and London, access to capital has bolstered the startup scene in Australia.

But so has access to public cloud services from global suppliers such as Microsoft Azure and Amazon Web Services (AWS), which provide affordable access to computing and storage resources that enable startups to spread their wings overseas from the get-go.

According to the 2016 startup muster survey, 92% of startups in Australia are generating international revenues.  

At a recent roundtable event in Sydney, AWS said its approach to startups, while emerging companies detailed the role the cloud had played in their business.

Paul Migliorini, AWS’ managing director in Australia and New Zealand (ANZ), said since the cloud supplier started operations in 2006, it wanted to offer startups the same computing resources that were once available only to large multinational companies.

This was valuable to startups backed by venture capital business Reinventure. “Most of our businesses are on AWS,” says its managing director Simon Cant. “It gives business the basis to switch on early and scale without headaches.”

For agricultural payments platform Agridigital, the cloud has enabled its developers to experiment for “an hour at a time”, according to its executive chairman Bob McKay.

Mike Rogers, chief technology officer of Siteminder, a cloud platform for hotels, says cloud services also allow startups to “treat servers as cattle, not pets”.

Rogers’ analogy is spot on, since companies that owned and operated their own servers had to take good care of them – like one would with pets – and make sure resources were not depleted. With the cloud, all servers are like cattle to be used, with more available at the swish of a credit card.

While Siteminder is still a startup, it has the ability to expand its business when it moved to AWS’ EC2 five years ago. Its usage of the service has grown over the past 18 months, enabling it to handle two billion transactions a day in 160 countries.

Read more about cloud computing in Australia

To Elanation, a fast-growing supplier of internet of things (IoT) technologies and wearables that encourage healthy habits in children, AWS is a “foundational utility”, says CEO Katherine Pace.

While Elanation – which also leverages AWS’ cloud-based IoT services – only launched its product in Australia recently, it attracted 2,500 users in the first month. “Amazon is a great growth partner for us,” Pace says, adding that the company has set its sights on the larger US market.

To be sure, the scalability afforded by cloud services comes at a cost in a market that is dominated by three major cloud suppliers. Participants at the roundtable, though, were not concerned about the impact of the market situation on pricing.

For one thing, Siteminder’s Rogers believes there is enough competition in the market to keep current market leader AWS honest, while Instaclustr, a supplier of open source data infrastructure in the cloud, would not have been able to serve its global customers without AWS.

“Our messaging app went viral overnight, so we had 100,000 new users in a couple of weeks,” says Doug Stuart, chief marketing officer at Instaclustr, whose cloud bill grew from US$100 in 2014 to more than US$100,000 in 2017.

“We can provision a node in our environment in two to three minutes and [customers] are ready to interface to the application. From day one, we were global and we provision services out of every AWS datacentre,” Stuart says.

For young upstarts, seeing the success of businesses such as Instaclustr and Siteminder in using cloud services to scale globally reinforces the confidence in the approach.

Smaller players eyeing the cloud pie

To AWS, the bigger the cloud community, the more it can invest in its platform. That generates even greater economies of scale that can be reaped as profits, or ploughed back to customers to build loyalty.

It is a cycle that is hard for other cloud players to crack. But they still try, and services continue to emerge, with smaller rivals on the hunt for the giants’ Achilles heels.

Nimble Storage, for instance, will be targeting AWS cloud storage users with its Nimble Cloud Volume service that will be offered out of datacentres in Australia later this year. It will provide access to adaptive flash block storage starting at US$0.10 per GB per month.

Bede Hackney, Nimble’s ANZ managing director, says the service is a way to separate cloud compute from cloud storage, and that the service would be initially offered to AWS and Microsoft Azure users. One of the selling points of the service is the promised 99.999% uptime, which Hackney says is essential to enterprise users.

At present, he says AWS cloud storage offers only 99.5% uptime, which he describes as “prohibitively low resilience for enterprise applications” since that means “one in 500 workloads will experience data loss this year”.

While Nimble’s cloud product has been designed with enterprises in mind, offering backups, snapshot capabilities and thin provisioning, it could be equally attractive to startups that deliver enterprise-grade cloud services.

So, while the three global cloud giants continue to dominate, there is still room for innovation and competition at the fringe. ... ... ... ... ... ... ... ... ...

This was last published in March 2017

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