Sizing up Australia’s vibrant cloud market

Australia’s public cloud market is dotted with global and domestic players, with maturing adoption across public and private sectors

As one of the most mature cloud markets in the world, Australia has been a forerunner and early adopter of cloud services in both public and private sectors. Major cloud providers including Amazon Web Services (AWS) and Microsoft have all established cloud regions in the country, along with local datacentre providers such as NextDC that add to the market’s vibrancy.

But what is the state of Australia’s cloud market? According to Gartner’s research vice-president Michael Warrilow, Amazon still rules the roost in infrastructure-as-a-service (IaaS), as is the case for many cloud markets in the world, apart from China.

The analyst firm’s latest market share figures for IaaS showed that AWS continues to lead the pack with a 32.3% market share, followed by Microsoft (23.6%) and Google (12.7%) – even as Microsoft’s share of the market is growing faster than AWS’s.

Warrilow noted that Microsoft’s Azure cloud appeals to the public sector, partly because its Australia central region in Canberra is connected to the Intra-government Communications Network (Icon) network, and these customers have Microsoft skills.

“It’s interesting to see how this plays out,” said Warrilow, observing that in general, government clouds mean fewer services, delivered later. This is a somewhat captive market for Azure, he suggested, adding that AWS running in NextDC’s C1 Canberra datacentre ticks more boxes for government users.

According to Ahmed Hassan, Accenture managing director for government and health, Microsoft and AWS are going head-to-head in the public sector arena. He sees more use of AWS in citizen-serving agencies, with Azure being used by more security-related agencies, although there will always be exceptions.

Hassan agreed with Warrilow that this probably reflects Microsoft’s investment in Canberra to provide a dedicated environment for government and critical infrastructure, adding: “That investment is paying off.”

Data sovereignty and security issues are no longer major concerns for decision-makers in the public sector, partly because the Digital Transformation Agency is certifying clouds and datacentres. “That’s giving comfort to agencies,” said Hassan, as the process is clear, and agencies know what they need to do.

But as public clouds are not certified beyond “protected”, there is some use of Azure Stack in conjunction with highly cleared providers, he said, and also of Oracle [email protected] or Dedicated Region through suitable partners.

AWS’s computer vision capabilities are of interest to the government market, said Warrilow, adding that Gravitron (Arm processors in EC2 instances) provide “a particular value-add”.

Amazon as a competitor

On the other hand, retailers regard Amazon as a competitor, and so look to Microsoft or Google, said Dhruv Dhumatkar, NetApp’s director of solutions engineering for Australia and New Zealand.

As for Oracle Cloud, it is becoming “more technically complete”, according to Warrilow, and is always a strong choice for large Oracle customers, whether for software-as-a-service (SaaS) or IaaS. Oracle understands business, but while Oracle Cloud is narrowing the gap on each Gartner evaluation, it is probably not attracting Azure or AWS customers, he said, although it is “progressing better than IBM Cloud”.

Warrilow believes it is still too early to tell what the impact of Oracle [email protected] will be, but Oracle appeals to a smaller number of large customers who may be more interested in Dedicated Regions, which cost $10-20m and can be put wherever they want.

That’s the path being taken by Australian Data Centres (ADC), which is on the federal government supply panel, and provides traditional datacentre and colocation services to the government and its contractors.

ADC’s Oracle Dedicated Region [email protected] is expected to go live in mid- to late July, said its managing director, Rob Kelly. It will offer a full range of Oracle Cloud services to government and related customers from the company’s secure datacentre in Canberra, which is connected to the government’s Icon network.

As government organisations require enhanced security, ADC is working with Australian-owned cyber consultancy Aegis9, which operates a security operations centre within ADC’s datacentre. It is thus able to provide a layer of security as a service, over and above Oracle Cloud’s native features.

Kelly anticipates that at least one or two other cloud providers will locate infrastructure within ADC’s Canberra datacentre. “A healthy ecosystem is very valuable, and it spreads the risk,” he said.

Matt Cudworth, cloud practice lead at DXC in Asia-Pacific, said: “The destination hasn’t changed, but the way people are getting there has. The concept of cloud is pervasive and the question now is whether to use public cloud, cloud at the edge – AWS Outposts, Azure Stack, Google’s Anthos, or Oracle [email protected] – giving you the benefits of the cloud ecosystem on your own hardware, or some other flavour or blend.”

Covid-19 has brought a new urgency to cloud adoption, and while this often involves SaaS offerings such as Microsoft 365, it is also driving platform-as-a-service (PaaS) projects. Cudworth predicts even greater use of PaaS thanks to trends like the rise of citizen developers.

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He believes the market is at an inflection point where “cloud native” will quickly become the norm. Organisations using cloud application programming interfaces (APIs) and functions for mainstream workloads are achieving 60%-90% savings. “That’s going to drive the next wave of adoption,” said Cudworth.

Serverless is becoming pervasive too, even for systems processing high-value, low-volume transactions. But it remains an ongoing challenge to apply controls in a serverless environment, he warned. Even though serverless reduces the attack surface, security standards keep rising, so the controls have to keep changing in response.

There are also some reverse migrations from cloud to on-premise environments. “That is a trend we are seeing,” said Dhumatkar, sometimes because on-premise setups are likely to be cheaper for applications with stable loads, but the growing pace of cloud adoption will remain.

Then there are situations where lift-and-shift cloud migrations have not given the expected financial benefit, said Cudworth.

In Australia and elsewhere, multicloud strategies have been talked about. In the public sector, Accenture’s Hassan said the conversations are mainly happening in larger agencies, allowing for competitive comparison, while keeping open the option of using any function or service that is only available in one cloud.

Only a small number of projects are spread across two clouds, he said, because it is mostly about having the flexibility to pick one or the other. The decision often boils down to where a particular application is available. For example, Salesforce is a single-source SaaS, but Pega is available in the Pega Cloud, AWS, Google and Azure, and can also be used in private clouds.

Three clouds

Some of the largest agencies use three clouds, but that is usually Microsoft Azure, AWS and a local provider that has particular security clearances and certifications, or that can offer a more flexible commercial model than the big players.

But organisations with very large datasets need to consider how to place them to extract maximum value, said Dhumatkar. One strategy is to locate the storage in Equinix’s colocation centres which have direct connections to the hyperscalers and use NetApp’s private storage capability to make data available to applications in any of those clouds.

Hassan recommended small to medium-sized organisations to pick one cloud and take full advantage of it, because that avoids duplication of effort when it comes to managing multiple commercial agreements, network connections and skillsets. However, it is important to weigh these issues against the benefits of forcing competition between suppliers, he warned.

To date, Cudworth has not seen any organisation that has gone all-in on one cloud provider, adding that the usual practice is to have a primary and a secondary provider.

In fact, there is a real maturity now that makes it possible to move applications between cloud providers, said Cudworth, pointing to the use of Terraform as a multicloud layer, and the way providers are offering multicloud capabilities, as well as the fact that developers have matured.

But “it doesn’t occur that often”, he said, but he expects things to get easier as more systems are built with that portability in mind.

ADC’s Kelly said there is a growing realisation that organisations should use the applications that suit them – and run them in the cloud that best suits the applications. This reduces and spreads risk, prevents lock-in and optimises the benefits of cloud. ADC is working with a local company to develop and operate a multicloud management platform as part of its offering.

There are some early signs of organisations shifting from multicloud to single cloud, said Warrilow, but they tend to be high-mid-market to small enterprises – especially in the construction, engineering and legal sectors – moving to Microsoft Azure. Multicloud is becoming less about risk mitigation and more about running applications in the best place for them, he said, but the fear of lock-in is still strong in some quarters.

But what do users have to say?

Bendigo and Adelaide Bank

Andrew Cresp, CIO of Bendigo and Adelaide Bank, said his company was “probably a little late to the cloud party”. Its open banking system is going live on AWS by the end of June 2021. AWS will be used for primary workloads around this project, including identity and consent management.

For new workloads, Cresp said the plan is to go cloud-first on AWS, with planned projects such as document management and collateral (as in security for a loan) management.

Cresp noted that AWS has a broad and deep range of services, and that it understands the importance of transformation, adding that the cloud giant has been a coach in terms of providing ideas for fast-tracking cloud adoption and helping to build excitement among employees through upskilling and certifications.

Also, he said AWS has strong knowledge of the financial services industry and its regulatory issues, and has been “walking alongside us” as the bank goes through approval processes. “AWS has been a critical component in fast-tracking our control and compliance efforts,” he added.

Still, there remains a supply risk with a sole provider, so the bank is looking for a second provider and using SaaS products from other providers.

“We want to retain the ability to port [to a different cloud],” said Cresp, adding that an architectural decision was made to avoid using native services for critical workloads. The bank has also created a “landing zone” on Google Cloud Platform.

Frisk

Frisk offers an enterprise-scale product that onboards data from multiple systems and makes it available to thousands of users through a “business user-centric” interface that supports better decision-making and more effective procedures.

Its flagship customer is the Australian Taxation Office (ATO), and the company is preparing to expand into the defence, mining and manufacturing industries, as well as other government agencies.

The company selected Oracle Cloud after a six-month evaluation that also included AWS and Azure, among others. Oracle came out “a clear winner”, in part due to the level of support provided, the degree of understanding of Frisk’s activities and flexible cost structures, said Steve Farrimond, Frisk’s founder and director of technology and delivery.

Oracle Cloud was 77% cheaper than the incumbent hosting provider, as well as being easier and more flexible when setting up new projects, he said.

Given the sensitive nature of its activities, the ATO runs Frisk on-premise, but Farrimond said Frisk is ready to deliver SaaS offerings running on Oracle Cloud Infrastructure for commercial clients.

“Oracle Cloud infrastructure is extraordinarily good to deal with,” said Farrimond. “It has good management tools which improve efficiency and reduce Frisk’s time to market – it’s the only vendor constantly tracking ‘all green’ at the ATO.”

Pizza Hut

The pizza chain chose to build its new platform – which went live in August 2019 – directly on AWS’s technology stack. According to its CIO, Wayne McMahon, the new system started Pizza Hut’s turnaround (it had been seriously affected by the emergence of Domino’s) and has driven the business since, helping achieve seven quarters of double-digit growth and seven quarters of being the fastest-growing fast service restaurant in Australia.

“AWS is in my mind the leader,” said McMahon, and it has exceeded Pizza Hut’s expectations of a high-performance, flexible, cost-effective, scalable and secure platform. “They’re the right partner for us.”

When Pizza Hut ran its 50th year promotion offering 10,000 pizzas a day for five days, it anticipated 10,000 orders in an hour but received that number in 70 seconds as the system scaled to accommodate the demand. “I came out of that a true believer [in AWS],” he said.

On the question of lock-in, McMahon acknowledged that it is a real issue that can be a significant barrier to migration. Having moved between clouds in previous roles, he knows it’s not easy and that extensive testing is necessary.

But Pizza Hut gets massive benefits from AWS, and the alternative is to forgo having such a reliable, secure and scalable system, so “the upside mitigates the risk”, he said.

“AWS is very easy to work with... and very cost-effective,” said McMahon, and that’s important because “digital is now about 80% of our business”, but that doesn’t include phone orders, which are entered into the platform by contact centre agents.

RMIT Online

A wholly owned subsidiary of the Royal Melbourne Institute of Technology, RMIT Online is responsible for most of RMIT’s online experiences.

It delivers accredited courses as well as short “future skills” courses and credentials in areas such as cyber security and digital. “Demand is really ramping up as people recognise the value of micro-credentials,” said Will Calvert, its director of technology and enablement.

Enrolments have grown from 12,000 in 2017 to 26,000 in 2020, with 30,000 expected in 2021, but AWS accommodated this rapid growth with ease, he said. “We are 99% in the cloud with a composable, modular stack,” he added.

RMIT Online uses the Canvas learning management system, which it runs on AWS, with Salesforce (also on AWS) for marketing and student support purposes. Data and analytics work is carried out on AWS, and the contact centre uses AWS Connect. This allows the institution to identify students at risk of dropping out, and then call them to discuss any issues and, hopefully, prevent them becoming disengaged.

It also has some custom applications that run on AWS – services such as AWS Elasticsearch, EC2, CloudFront and Shield – and RMIT Online has adopted the learning tools interoperability standard to simplify integration.

Technology is critical to RMIT Online, and it has been able to take advantage of what AWS has to offer to help it scale and connect, said Calvert.

But it is more than just a customer-supplier relationship – all RMIT Online courses are built and delivered in partnership with industry, and where appropriate (such as artificial intelligence), AWS helped build and deliver courses, as well as providing the technological underpinnings.

RMIT Online has about 50 industry partners – a term it does not use term casually, according to Calvert – and “AWS was a natural fit” alongside others, including Accenture, Adobe, Apple and Salesforce.

“Students get real-world, hands-on experience,” he said, thanks in part to AWS’s contributions to course content and mentoring. The AWS skills gap means demand for upskilling and reskilling, and employers recognise this. There is about six times more demand from businesses for courses than there is from self-enrolling individuals, said Calvert.

Unit4

Unit4 offers a cloud-based enterprise resource planning (ERP) system aimed at people-based markets such as not-for-profits, public sector, professional services and higher education.

Unit4 ERP runs on Azure, largely because it was originally an on-premise Windows application. Andrew Brockhoff, its APAC regional president, said that with Azure, Unit4 can take advantage of much of the PaaS capability it offers, including machine learning.

The fact that Unit4 ERP runs on Azure is considered a plus by public sector customers. Microsoft has a “fantastic reputation” in that market, said Brockhoff, so this is a key differentiator for Unit4.

Organisations that want to keep their systems on-premise are showing some interest in adopting Azure Stack, but Brockhoff said that is reducing as people become more educated about public cloud. Some large organisations have their own relationships with Microsoft and other providers, which may affect how and where they want to run the software, he added.

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