The Rise of the Asian Cloud
Disruptive innovation and its mandate on infrastructure
As the Cloud revolution enters a new era of adoption, innovation and growth, it is evident that Asia remains Silicon Valley’s strongest rival in digital transformation. The spotlight continues to shine on the hyper-growth economies of Asia, where growth will not only be continual, but innovation-led, with China and India at the forefront. The benefits for CIOs of multinational companies will be a more diverse variety of new Cloud providers to potentially partner with.
Asia: Fueling Disruptive Innovation
According to a recent Capgemini Consulting, Fahrenheit 212, report, “Despite its continued growth, Silicon Valley no longer claims sole ownership of innovation.”
A recently released 2017 Global Technology Innovation report by KPMG shows the US only marginally leading China in making a global impact on technology breakthroughs, and India in third place for the second year in a row, with “technology disruptions fueling the digital transformation scene in India”.
The KPMG survey shows that “China is transforming from an investment-intensive, export-led model of growth to one driven by consumption and innovation. Through the use of disruptive technologies such as Cloud computing, the Internet of Things, smart industrial robotics, Data & Analytics, and enhanced automation, Chinese companies are capturing new business opportunities.”
“India has achieved early success in the digital revolution since becoming a global powerhouse for software development and information services,” also according to the KPMG survey. “More and more start-ups are targeting the domestic Indian market, as businesses shift from serving global markets with outsourcing.”
The Cloud Revolution, Shifting Gears
While today’s global Cloud is still dominated by the Big Four—AWS, Microsoft Azure, IBM Softlayer and Google Cloud Platform—Asia, China in particular, poses a different challenge for CIOs of global enterprises with significant presence in the region. New entrants to the Cloud market from Asia are not only growing exponentially, but coming into play with a scale and penetration rate that allows them to disrupt the market in unique ways.
The region’s largest three Cloud players—Alibaba, Baidu and Tencent have been making a massive impact, especially in China, for a number of years now, with large ecosystems, strong financial foundation, strategic business models and innovative services which are surpassing their Western counterparts. Yet much of this growth and innovation has gone somewhat unnoticed by many enterprises based outside the region.
“China’s leading digital players now rival their Western counterparts in terms of overall scale, value and innovation capability. And while the impact outside of the domestic market has been limited, we expect this to change. Internet players will increasingly become more established and visible on the global landscape through direct expansion into Emerging Market eCommerce, social and mobile services; cross-border M&A of high-tech firms; exporting disruptive business models; and attracting international digital talents,” according to PWC in “The Rise of China’s Silicon Dragon” Report (May 2016).
For example, since its launch in 2015, Alibaba Cloud (Aliyun) has seen triple-digit growth which now puts parent company, Alibaba Group, into position as the 4th largest hosting company in the world and the largest in China. The company’s innovation, strategic partnerships and exponential growth is making it a strong force to contend with on a global scale.
While Alibaba, Baidu and Tencent have undisputed advantage in the growing China market, Western Cloud and digital innovation players, including the Big Four continue to face barriers to entry as foreign investment in Internet Data Centers (IDCs) and Internet Service Providers (ISPs) is strictly prohibited, except in limited situations where foreign-invested companies established Sino-foreign joint ventures and acquired relevant professional certification.
In the meantime, India is yet to see a local player at the scale of the three large Chinese digital players, yet its domestic market opportunities are huge. 451 Research analysts predict that China and India will emerge as cloud powerhouses in the Asia-Pacific, generating revenue of over $1.69 billion and $877 million, respectively, with a CAGR of 26% and 25% through 2020. Combined, the two countries account for over 30% of the Asia-Pacific market.
“We believe the cloud-computing markets in China and India show huge growth potential. Industry-wide business transformation has unlocked market opportunities and created an ecosystem of cloud suppliers in China and India. Anecdotal reports and survey data indicate that local businesses are sizing up service provider capability based on a set of attributes,” said Agatha Poon, Research Director of APAC services for 451 Research.
The ‘tipping point’ of Cloud adoption
With enterprise Cloud adoption reaching a tipping point and foundation IaaS, PaaS and Storage becoming increasingly commoditized, service providers on the infrastructure side are therefore scrambling to ensure readiness and alignment to meet more sophisticated requirements of today’s CIOs.
Until now, the sheer complexity of migrating a core application to the Cloud, coupled with the lack of speed and “fixed” nature of the underlying network, has restricted the ability of most IT departments to take full advantage of on-demand Cloud infrastructure services. Therefore, despite the ongoing commoditization of IaaS and PaaS, once an application has been deployed into a Cloud platform it tends to stay there.
But as Cloud adoption by multinational enterprises enters a new stage of growth, with more companies moving critical core applications from on-premise data centers and colocation facilities into the Cloud, Bill Barney, CEO, Reliance Communications and Global Cloud Xchange notes, “Today’s high concentration of data centers in the US and Europe are far from most users in the emerging growth markets of Asia. Regulatory compliance, user experience, reliability and cost factors will mandate significant movement of data closer to users.”
And as with China, strict regulatory and licensing regimes in other Asian markets limit the scope of operations from foreign-owned providers, almost certainly compelling the CIO to think beyond the Big Four to further capitalize on new opportunities in the global marketplace.
So, as with global networking where it is now widely acknowledged that no single provider can offer the best service in every location, a “multi-vendor” global Cloud strategy is almost inevitable for today’s enterprises.
This further begs the question of how to best manage a “multi-Cloud” environment and control the inevitable “Cloud sprawl”. The answer to this lies in Cloud orchestration. With Cloud Service Providers (CSPs) increasingly making integration with their platforms possible through APIs, we will soon see powerful portal-based Cloud orchestration available enabling users to operate Cloud environments in a range of CSP platforms; turning servers up, managing service lifecycles and even integrating multi-CSP environments, all through a single portal.
Infrastructure Mandates for the Next Decade
But where will this leave IT departments of companies with widespread Cloud services and even wider-spread locations? They will need an infrastructure partner to ensure seamless alignment and secure integration to maximize leverage and value of global business expansion.
“Whoever masters the combination of Cloud orchestration, fiber ubiquity and low-cost global access to competing computing resources will be the technology infrastructure company of the next decade,” said Barney.
Until today, fixed connectivity terminating in multiple expensive physical appliances with fixed configuration have acted as a choke hold on the corporate network. But no longer; Software-Defined Networking (SDN) and Software-Defined Wide Area Networks (SD-WAN) are allowing the network to catch up with data center technology, making connectivity as elastic as the Cloud.
“The enterprise network increasingly needs to be software-enabled and agile to be truly Cloud-optimised. The software-defined network will need to be able to dynamically support a variety of sophisticated functions, accessing an unlimited number of connections, connecting to an ever-changing library of Cloud-hosted applications, with efficiency and elasticity,” said Wilfred Kwan, Chief Operating Officer, Reliance Communications and Global Cloud Xchange. “In other words, far-reaching 100G+ fiber networks, SDN and SD-WAN, coupled with point-and-click portal based orchestration services which simplifies the Cloud migration process, will be a necessary mandate.”
Sure bets for the next decade
There’s little doubt that the IT landscape and infrastructure needs of the multinational enterprise will soon barely resemble the scenario from only a handful of years ago of the on-premise data center, and capacity-constrained fixed WAN. And as new providers enter the market offering services and coverage in key markets which simply cannot be matched by established players, many “basic” Cloud services and infrastructure will become increasingly commoditized. IT departments worldwide will be presented with a variety of services and geographical coverage that may on first impression be daunting and confusing; almost unachievable, but which once mastered, will present almost unimaginable levels of flexibility at low cost.
By leveraging next generation 100G+ Software-Defined Networks and Software-Defined WANs, and overlaying smart orchestration of a global “multi-Cloud” environment, the migration of applications into and out of Clouds will be simplified beyond recognition; even in today’s “challenging” markets in Asia where the meteoric rise of Cloud players like Alibaba and Tencent is driving massive Cloud growth and service innovation at rates barely appreciated in the West.
For the CIO of a multinational enterprise, this means he can finally take full advantage of the Cloud; moving data and compute power on a continual basis according to where the lowest price point for a given service quality can be achieved. It’s not inconceivable to think that not long from now, CIOs will be able to instruct their teams to carry out “day trading” in Cloud services; firstly for easily-portable services such as archived storage and in the fullness of time, seeing whole application environments switched between Cloud Service Providers at the click of a mouse delivering ultimate freedom and service elasticity.
Taking all preparational measures into consideration, global CIOs embarking on the Cloud journey will see exponentially growing business opportunities in the Asian markets, predominantly China and India. With these opportunities, we will see the continued rise of the Asian Cloud affording new choices and benefits to businesses worldwide.