Spending On African Cloud Services Expected To Triple In Next 5 Years

Written by Tom Jackson

African investment in cloud services is increasing as the continent continues to leapfrog its way to technological development, with spending in the sector set to triple in the next five years.

Big companies are entering the space. Amazon Web Services announced recently it will open data centers in South Africa in 2020, and major players including Microsoft, Liquid Telecom and Vodacom are getting into African cloud in a big way.

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Public cloud services are among Africa’s fastest growing tech segments, and spending is expected to almost triple between now and 2023, according to a recent report from the International Data Corporation (IDC) that focused on South Africa.

Spending on the sector during 2017 amounted to around $308.4 million, according to the IDC report.

“Our recent announcement that we are bringing the new Amazon Web Services region to South Africa is thanks to customer demand,” said Geoff Brown, sub-Saharan Africa regional manager at AWS.

“Bringing an AWS Region to South Africa means organizations will be able to provide even lower latency to end users across sub-Saharan Africa.”

The business ambition is clear in the words of Dean Erasmus, Azure business lead at Microsoft.

“Our mission is to empower every person and every organization on the planet to achieve more. Africa is a market that shows amazing innovation when it comes to adoption of technology,” he told Moguldom.

cloud services
Microsoft is one of the international tech companies bringing cloud services to Africa. Image – AP Photo – Elaine Thompson

Guy Zibi is founder of research firm Xalam Analytics. Though he says data can get a bit sketchy in different markets, all the evidence shows that Amazon Web Services and Microsoft are on the money with their view that demand is on the rise.

“Now, ‘cloud’ is a fairly broad and fluid concept, and the dynamics do vary depending on the various forms of cloud services, and depending on the demand segment,” Zibi said.

Adoption of software as a service (SaaS), Zibi said, has been faster than other spaces such as infrastructure as a service and platform as a service.

“In terms of markets, SaaS adoption is fairly pervasive, especially for basic office workloads like email and Skype,” Zibi said. “Beyond those, the availability and quality of affordable connectivity is typically the key factor of difference. The main cloud markets are the usual suspects – South Africa and Kenya stand out, but we’re also seeing increased adoption in markets like Nigeria and Senegal.”

But what types of companies are adopting cloud services in Africa? Demand is especially apparent from smaller businesses, said Winston Ritson, head of cloud services at Liquid Telecom.

“Indeed, the majority of sub-25 businesses are digital from day one and totally cloud native,” he said in an email, referring to businesses with 25 or less staff members.

Demand for cloud services growing across Africa

Aside from South Africa, demand is highest in Kenya, Uganda, Zimbabwe and Tanzania.

“This is down to the wide availability of fast broadband over good fibre networks, as well as a growing informal sector of sub-25 businesses,” Ritson said.

“Africa is a new frontier market. It has a young population and so resistance to cloud is less than in more developed markets.”

There are still barriers to uptake — challenges around connectivity, skills, cybersecurity and ethics.

Companies like Microsoft have to be very clear that they are committed to securing the data and protecting the privacy of their customers.

“With the development of these new technologies come the responsibility to use them ethically. Many organisations remain wary about the efficacy of cloud security,” Erasmus said via email. “As the world becomes more digital, so does the potential for cyber crime.”

Amazon’s Brown agrees that questions about data security are common, and Amazon Web Services needs to ensure that security and data protection are always top priority.

“Another question we sometimes hear potential customers raise is about getting ‘locked-in’ to using a single vendor. It’s understandable that a customer would ask this question. Thankfully, we build our services on a variety of open standards which gives selection and choice to our customers,” Brown said.

Cloud uptake still faces barriers in terms of payments and connectivity, said Liquid Telecom’s Ritson.

“Many companies don’t have company cards or are unbanked, so traditional payment mechanisms are problematic,” Ritson said. “Many businesses still need to understand the benefits of using cloud services. In addition, access to broadband is limited in some areas.”

Barriers aside, everything points to increasing growth in cloud services in Africa. AWS and Microsoft are getting established on the continent early and are in it for the long haul.

“Organisations are gearing up for a future powered by the intelligent cloud and AI,” Erasmus said. “As these technologies become increasingly central to business strategy and transformation, Microsoft is committed to delivering cutting-edge innovations, programs and expertise that help our customers navigate these technological and business shifts.”

Tom Jackson is co-founder of Disrupt Africa, a news and research company focused on the African tech startup ecosystem.