ISG Provider Lens™ Public Cloud - Solutions & Services - Hyperscale Infrastructure and Platform Services - Australia 2022

Australian cloud solutions are accelerating rapidly

Cloud is the real thing

The provision of technology through the cloud dominates technology and some would argue, increasingly business in Australia and globally. Cloud computing as a dominating platform for technology delivery has been imminent for a long time. The internet service provider (ISP) market or XISP (with X representing many opportunities that the new technology was meant to represent such as infrastructure, applications and business process) started gaining traction in 2000. This was in effect, version 1.0 of the cloud. The dotcom boom busted in 2000, the bottom fell out of the market and people realised that XSPs did not even provide a fraction of what they had been claimed to do. So, version 1.0 of the cloud disappeared.

It only took a few years for the cloud to achieve success with improved and relevant modifications and a less ambitious solution. The cloud was expected to gain popularity through legacy IT outsourcers such as IBM, EDS or a telco. However, it gained popularity through an online bookstore from Seattle, Washington, that led to its tremendous growt h. As of 2022, cloud has been considered valuable for technology, business, and digital transformation.

Cloud is acknowledged as the lever for transformation across enterprises in every aspect, including customer engagement, security, storage and applications. Cloud hosts business-critical ERP platforms, and ISVs swiftly deliver a unique range of services to clients around the world in real time, along with exclusive solutions that can be global or local in nature. The public cloud market is dominated by three providers: Amazon Web Services (AWS), Microsoft Azure (Azure) and the smaller yet equally dynamic Google Cloud Platform (GCP). These three offer a range of services across infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS). AWS, Azure and GCP dominate the first two and facilitate the growth of the ISV environment in the SaaS solution stack. The market has also matured to the extent where customers do not buy from a single public cloud provider. The best practice here is to have a hybrid could approach across both public and private cloud solutions, as it enables optimised investments covering specific workloads, data, security and governance requirements, alongside a defined and structured approach to optimise outcomebased investments in cloud.

Why ISG looks at the public cloud market in Australia

This ISG Australia Provider Lens™ research study examines public cloud service providers that develop, enable and deliver capabilities needed by Australian organisations as they work to improve operations, reduce costs, address digital change, and improve their ability to serve internal and externa stakeholders.

This study assesses providers that offer business and IT cloud migration and transformation services, managed services, hyperscale infrastructure platform services, and SAP HANA infrastructure services. Each of these is described in more detail in the report.

ISG clients use this study for provider and vendor consideration, evaluation, and selection. ISG’s advisory and consulting teams can also help clients understand the scope of capabilities and offerings suitable to clients’ requirements. The report also provides competitive insights for vendor and provider positioning, key relationships and go-to-market considerations.

Sustainability matters

While the hyperscaler cloud platforms attempt to outbid each other on their sustainability pitches, they all are eventually helping organisations to achieve their sustainability goals. Following the COP26 Glasgow Climate Pact in late 2021, the achievement of netzero carbon emissions targets by 2030 has become the paramount sustainability goal for many large enterprises worldwide. All three providers have reported that their environmental performance has, over the past year, become a key consideration for enterprises looking to migrate from onpremises data centres to the public cloud. Despite massive increases in computing power, hyperscalers’ data centres have achieved remarkable improvements in energy efficiency over the past decade. Providers are also creating workspace solutions to support remote and hybrid working, which again has a beneficial environmental impact through reduced travel.

What does a hyperscaler leader look like

Effectively, there are two markets at play, the hyperscaler market and the service providers that support client investments in the hyperscalers. Though both are connected, each has a distinct way of operating. For the hyperscalers, AWS, Azure and GCP are the top three providers with no challengers from Australia or elsewhere on the horizon. They lead this space and have shaped the market as an oligopoly without any innovation pressure. The competitive tension between the three hyperscalers borders on the extreme, with each of them competing in terms of product, cost, ease of use and many other measures, including sustainability as highlighted. All of the discussed market dynamics eventually benefit the clients and the ecosystem. This accelerated innovation makes it difficult to track for customers and partners. New products and capabilities are announced seemingly daily.

The location from which services are delivered is another area that is highly competitive. All leading hyperscalers have invested in Australia. While GCP operates in Sydney and Melbourne, AWS invests in expanding its reach in Sydney, alongside launching in Melbourne in late 2022 (date correct at time of publishing, but subject to change). Microsoft raised the stakes in Australia when it opened a data centre in Canberra to add to its existing base in Sydney and Melbourne. Whilst another location in Australia is currently not publicly planned, Perth would be the primary choice. These three providers and their respective carriers and data centre providers have worked on increasing their bandwidth and eliminating the redundancy issue, while aggressively expanding their footprint in the existing locations by spreading across multiple sites

How the services market is structured

The services market is fragmented virtually across all technology sectors in Australia, with cloud being no exception. The Australian market is typically dominated by global system integrators and consulting firms, yet there are several local firms that have relevant capabilities in the sector. Although not all these firms claim leadership positions due to the scale and breadth of the offerings global vendors make, they do support the market from an outcome, skills and capabilities perspective. However, a drawback of their limited scale is that these local vendors become acquisition targets for the larger firms that seek to increase consolidation in the market and take advantage of the local capabilities.

In terms of the characteristics of a leader, there are a few capabilities that stand out. The first is relationships with multiple hyperscalers and SaaS leaders. Whilst focus on a single cloud provider is a relevant offering, it limits the vendor reach as the market shifts to a hybrid cloud world. Capabilities in change management are overlooked but they are essential as the shift to cloud is a genuine business transformation, and poor management of it can have strong negative outcomes. Likewise, security, governance and application integration skills are all relevant. With the requirements of customers of the cloud providers increasingly shifting to an industry-based focus, it is essential for a leader to have a strong functional capability in industry solutions.

The future is still cloudy

Despite being a global leader in terms of cloud adoption, Australia has a long way to go before it is a saturated market. While the local market will continue to grow, it is difficult to see any changes in the hyperscaler network. From a services point of view, capabilities will increasingly be automated, and business value will need to be measured more objectively. The market will witness increased consolidation with the entry of new providers, but the services market is remarkably resilient across time and technology, and therefore, it is anticipated to evolve and grow as the cloud matures.

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