Growing in cloud

Growing importance in cloud services across the region is helping to highlight considerable market potential for solution providers in Middle East.

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Growing in cloud
By  Piers Ford Published  May 8, 2015

Growing interest in cloud services across the region is helping to highlight considerable market potential for solution providers who want to get involved in delivering flexible offerings that also address some searching customer questions.

The security and reliability of cloud services remain key concerns for organisations poised to adopt them but held back by doubts about the benefits of running core business systems outside the corporate IT infrastructure. And the sheer range of business models made possible by cloud services means potential providers are having to provide new levels of consultancy to strengthen their sales case.

These complications aside, there is clearly a major opportunity to profit from a burgeoning market. According to Frost & Sullivan, the cloud services market in the GCC is estimated to reach $668 million by 2020, growing at a CAGR of 32.8%. Haritha Ramachandran, industry manager, Information and Communication Technologies Practice, said the market is still in a nascent phase.

“Security concerns are driving local companies to choose the private cloud model over the public cloud,” said Ramachandran. “Cloud adoption rates have been on the higher side in countries like UAE and Qatar. Many businesses have already been through the first stage of cloud adoption, namely, virtualisation, which brings benefits such as virtualised infrastructure and applications, diminished down time, and operational expenses automation.

“Currently, local telcos are the main cloud service providers and early adopters of technology; telcos will use their existing infrastructure comprising data centres with MPLS to layer their operation and offer additional services via the cloud. Cloud services are mainly used for web services (eg mail on MS office 365 and web hosting) with SaaS as the most popular type of cloud service regionally. The education sector with research in technology and science is one of the top cloud computing users in the GCC (eg international universities in Qatar education city).”

The challenge for solution providers looking to break in to cloud services is as much to do with their own current business models as it is about customer demands. Altaf Alimohamed, managing director at hosted IT services company Media Solutions, said the necessary shift from the quick returns of hardware/software sales to the longer game of ongoing service provision raises the key issue of profitability. Providers must commit to continuous upgrades and service extension, and offer pay-as-you-go options and high performance guarantees – which require investment without the promise of high margins in return.

“A scaled cloud operation should offer a more cost-effective solution for businesses, and if these criteria are met, this results in a much lower invoice amount than an on-premises solution,” said Alimohamed.

“Therefore, the net margins are slimmer - a big departure from the current business models, and one that brings both positives and negatives to each party – the solution provider and the client.

“Media Solutions has been offering cloud services in the MENA region since 2007. Indeed, we were perhaps the ‘first-to-market’ and certainly one of the very early adopters, at the birth of the IT shift.

In the early days, we soon discovered that it was not viable for us build a cost-effective infrastructure locally, but we were convinced that cloud was the way to go, and placed a strategic focus on mastering cloud solutions.

“We partnered with services provider Cobweb, which had already invested Capex in building out its service, immediately associating Media Solutions with leading partners in order to provide a high quality, local cloud-based IT service to the UAE and greater region.”

Handling the transition to these new business models is probably the greatest challenge facing aspiring cloud services players. The mix of public, private and hybrid solutions offers infinite possibility for service portfolios, and getting it right will depend on a number of variable factors.

“It comes down to the solution provider’s skills as well as the existing customer/market base,” said Nehul Goradia, VP – channel and alliances at distributor Optimus. If their customers are large enterprises, then enabling a hybrid or private solution may make more sense, but if their customers are SMBs, then enabling a public cloud with defined SaaS offerings maybe more profitable.”

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