Abu Dhabi, UAEThursday 22 August 2019

Cloud promises sunny outlook for region's enterprises

Public cloud market in Mena is projected to reach $1.9bn by 2020, up from $956m in 2016

By 2022, nearly 70 per cent of all regional enterprises are expected to have multi-cloud environments. Courtesy: Equinix 
By 2022, nearly 70 per cent of all regional enterprises are expected to have multi-cloud environments. Courtesy: Equinix 

Cloud computing is a tech buzzword in the Middle East and North Africa (Mena), with a growing number of enterprises - ranging from start-ups to government entities to family-owned conglomerates - embracing it to plan their strategies in 2019 and beyond.

For example, Bahrain’s Information & eGovernment Authority (iGA) has managed to cut down its technology operational costs by up to 60 per cent using cloud, while Jordan-based start-up Mawdoo3 - a comprehensive online Arabic content publisher - has successfully moved its Artificial Intelligence (AI) projects on to the cloud.

Cloud computing is the practice of using a network of remote servers hosted on the internet to store, manage and process data, rather than a local server or a personal computer network.

Seeing the lucrative opportunities in Mena market, global tech giants such as Oracle, Amazon Web Services (AWS) and Microsoft have or have announced they will set up their own data centres in the region this year.

“In the Mena region, we don’t have challenges on ‘why’ cloud' - it’s only about ‘when’,” Arun Khehar, senior vice president - business applications, Eastern Central Europe, Middle East and Africa at Oracle, tells The National.

For regional enterprises, moving their operations to a cloud hosted by a professional company, such as Oracle or Microsoft, is proving cheaper than creating their own infrastructure of servers, hardware and security networks – bringing down the overall cost of ownership.

Oracle, whose regional clients include First Abu Dhabi Bank and DP World, aims to capitalise on the emerging regional market with plans to double its global cloud application revenues in the coming months.

The potential in the regional cloud industry is immense with the UAE as one of the fastest-growing markets for Oracle, says Mr Khehar, adding, “Currently, we are working to shift our current on-premises business - which is globally worth $6.5 billion (Dh23.87bn) - to the cloud.”

In 2018 fiscal, Oracle’s global revenue from cloud applications business was more than $11bn.

Using Oracle services, Dubai-headquartered retail, hospitality and healthcare conglomerate Landmark Group started moving its operations - beginning with its human resources database - to the cloud few quarters back. DP World and Apparel Group are already running their operations using Oracle cloud.

By migrating to the AWS cloud, the Bahraini Information & eGovernment Authority, has reduced the government procurement process for new technology from months to less than two weeks.

A recent Microsoft survey of 1,300 Middle East-based decision makers revealed that regional organisations are accelerating their cloud engagement. Seventy five per cent of those who have yet to migrate their IT environments to the cloud plan to do so in 2019.

This market acceleration is also being driven by security concerns. Nearly 63 per cent respondents in a recent Microsoft survey reported losses in either productivity or data due to a cyber incident in 2018, and 46 per cent of victims were affected more than once.

“These findings tell us that the region’s need for a trusted, secure and intelligent cloud has never been greater. Many regional organisations have already placed their trust in the cloud,” Necip Ozyucel, cloud and enterprise group lead at Microsoft Gulf, tells The National.

Surging demand for cloud services has led Microsoft to bring its own data centres to the Middle East. Its UAE data centres, one each in Dubai and Abu Dhabi, are expected to go live this year.

“These facilities will deliver intelligent solutions to customers across the region empowering them to avail enterprise-grade reliability and performance,” says Mr Ozyucel.

Emirates Airline, Emaar Properties, Dubai Airports, Majid Al Futtaim, Daman Insurance and Gulf Air are some of the organisations that have chosen Microsoft as their digital transformation partner in the cloud.

Microsoft’s Azure cloud has a 16 per cent share of the global cloud infrastructure market, making Microsoft the second-biggest provider of cloud services after AWS, according to April 2018 estimates of research firm Canalys.

Like Microsoft, California-headquartered Oracle has also announced it will set up its own data centre in the UAE in 2019 to enhance its capacity.

“Sixty per cent of our regional clients have already moved to cloud. Now our goal is to shift the remaining 40 per cent … the upcoming data centre will enhance our capacity manifold,” says Mr Khehar.

The public cloud services market in the Mena region is projected to grow to $1.9bn by 2020, up from $956m in 2016, according to Hamburg-headquartered business intelligence portal Statista.

AWS will open at least three centres in Bahrain to serve customers across the Middle East and Africa.

“We are already seeing dramatic change as businesses and governments across the region have started to migrate to cloud, using the existing AWS infrastructure around the world,” says Vinod Krishnan, head of the commercial business for Middle East and Africa at AWS.

Regional organisations such as Al Tayyar Travel Group, flydubai, and Union Insurance are leveraging the AWS cloud, says Mr Krishnan, adding that it is enabling them to focus on the development of their products, services and helping them to innovate faster.

Another area where AWS sees increasing growth and a lot of potential is within governments.

“Governments in the Middle East are embracing innovation and developing new ways for engaging, as well as looking at rolling out smart city initiatives that require a robust cloud back end,” says Mr Krishnan.

By migrating to the AWS cloud, the Bahraini Information & eGovernment Authority, has reduced the government procurement process for new technology from months to less than two weeks, and reduced information and communications technology infrastructure operational costs by around 60 to 90 per cent, he adds.

Start-ups are also taking advantage of cloud to implement technologies like AI that would have previously been cost prohibitive. Mawdoo3, which provides the largest Arabic-language content platform in the world, is running its AI initiatives on AWS to develop Arabic voice-to-text services.

Also for large enterprises and family owned businesses in the region, cloud technology is a key enabler for their digital transformation

“Adoption of the AWS cloud allowed Al Tayer Group, one of the largest luxury retailers in the Middle East, to launch digital and e-commerce initiatives at large scale and low cost,” says Mr Krishnan.

While some industry experts maintain that the cloud market is still in its early stages in the region, with the recent investments and announcements by global cloud service providers, the industry is approaching a tipping point.

“Over the last year, demand for cloud services has been very strong but the lack of in-region deployed cloud platform has been a barrier to [wider] adoption ... we need more data centres physically present here to cater to local companies,” says Jeroen Schlosser, managing director of American firm Equinix Mena, which operates a global network of data centres.

He says this year “will be the first year when both governments and enterprises have choice in building hybrid cloud structures. Its growth is driven by the strong focus on transforming the oil economy into a more diversified one".

Hybrid cloud is an environment that uses a mix of on-premises, private cloud and third-party, public cloud services.

Equinix opened its data centre in Dubai in early 2013. Last year, it inked a joint venture with Omani telco Omantel to develop a data centre in Muscat, where carriers, content and cloud providers can house their critical data and avail services such as data backup, recovery, processing, management and distribution.

By 2022, nearly 70 per cent of all regional enterprises will have multi-cloud environments, according to Massachusetts-based researcher International Data Corporation (IDC), which also predicts an increase in investments by public cloud service providers in the Middle East, Turkey and Africa region. Spending will grow at a compound annual growth rate of 29.8 per cent - reaching $4.1bn by 2022 - up from $1.1bn in 2017.

“The assurance of lower IT costs and scalability has drawn technology decision makers to move their business-critical data and applications to the cloud,” says Yasser Zeineldin, chief executive of UAE’s home-grown IT company eHosting DataFort, which hosts two data centres in Dubai.

Besides allowing easy extension of business capabilities, cloud provides enterprises with a competitive edge, says Mr Zeineldin, adding that the popularity of the "pay-as-you-go model" is another driver towards cloud adoption in the UAE.

Using this model, there is no capital expenditure and the client company will incur expenditures for only selective services that it makes use of at the data centre such as for storage or backup or processing of data in the cloud.

Updated: January 28, 2019 03:31 PM

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