Cloud growth outweighs Covid effect in APAC

One sector which has been booming during the Covid-19 pandemic is cloud computing: and this is at least as true in Asia as it is elsewhere.

It's no surprise, of course, as cloud solutions are one of the easiest ways to scale digital services rapidly. Companies worldwide are seeking to make more use of remote working and conferencing; they're looking to cut costs, often using improved processes and greater automation. And more and more often, all these things are built and delivered in the cloud.

Thus far, certainly in Asia, it seems that the dash to the cloud has more than counterbalanced the general contraction in business overall as the global recession bites. Asia/Pac cloud spending is projected to sustain modest growth across 2020, according to International Data Corp's new report Cloud and COVID-19: Asia/Pacific (the report excludes Japan).

The report analyses data on end-user intentions against the impact of Covid-19 across IT and cloud spending. The IDC analysts assess that APAC spending in public cloud will reach US$34.51bn across 2020 - that's up from US$25.98bn in 2019. Spending in the region on infrastructure-as-a-service IaaS and platform-as-a-service PaaS private cloud, as well as front-ended software-as-a-service SaaS, is also expected to increase this year.

"As organizations transition to the Next Normal, increased demand for public cloud services has solidified and is likely to be maintained. Countries are emerging from the immediate reactive state and are building plans for recovery - with some countries moving faster than others. Moderate growth can be expected across all countries, except for New Zealand which will generally remain unchanged," says William Lee, Research Director for Cloud Services at IDC Asia/Pacific.

According to IDC, some of the increase on infrastructure-as-a-service IaaS spending will result from disruption of hardware supply chains and is likely to take the form of solutions delivered using short-term virtual private cloud (VPC) with hyperscalers. The increase in software-as-a-service (SaaS) spending will be driven by remote work solutions and conferencing/collaboration services.

The report also highlights security as one of the top areas for new spending, and again this makes sense. Increased use of remote access tends to mean security risk, and sensible organisations will be seeking to make sure that their move to cloud and remote operations doesn't result in needless vulnerabilities and breaches.

"The pandemic has brought opportunities for some organizations to take advantage of changed operating conditions," adds Lee.


Clouds arrive over Jakarta

One sign that the cloudy way of doing business is spreading across Asia/Pac is the arrival of Google Cloud in Indonesia. Announced two years ago, this move has now been completed and the web giant has officially launched its new cloud region in Jakarta, bringing a range of its cloud offerings to Indonesia with local latency and jurisdiction for the first time.

This level of infrastructure is known by Google as a Google Cloud Platform (GCP), and it debuts with three separated cloud zones: this is intended to provide redundancy and so to prevent loss of data or service disruptions. The Jakarta GCP will also provide considerably reduced latency access for customers in Indonesia as they will no longer be making use of machinery physically located overseas.

"A lack of local cloud infrastructure has been a traditional barrier to cloud adoption in Indonesia, but we're changing that with the launch of our Jakarta cloud region," said Rick Harshman, managing director of Asia Pacific and Japan at Google Cloud.

For cloud providers, local infrastructure in foreign markets means the ability to provide in-country disaster recovery and local storage of sensitive data. This is frequently a critical requirement for enterprises making serious use of cloud-hosted applications, especially if required by local regulations, which is not uncommon. Google will be opening its first Indonesian data centre in 2020, arriving ahead of larger American rivals like Amazon's AWS and Microsoft Azure, as well as major Asian cloud players such as Alibaba and Tencent.

"Customers for public cloud need regions in their legal jurisdiction, connected to local sources of data, and close enough to their customers to make apps snappy," explained Miles Ward, CTO of Google partner SADA Systems, commenting on the Jakarta launch.


Do feed the unicorns

Apart from conventional cloud services such as compute, databases, storage and security, Google Cloud will bring with it some more exotic offerings. Local customers may also choose to exploit Google's artificial intelligence (AI), machine learning (ML), and application development cloud toolsets.

Some of these services have already tempted local enterprises. Indonesia is home to some of Asia/Pac's most high-profile data driven unicorns, such as ride-hail service and would be Chinese style "super app" Go-jek. Less glamorous but undeniably heavyweight corporations such as telco XL Axiata and global titan Accenture are also signed up.

It's not just the new Silicon Valley players that are seeking to build cloud business in Asia/Pac: more traditional players in the IT sector are on the march also, and they too are finding the region to be a good place to grow. IBM has just managed to beat the estimates for 2020 Q2 profit, and Big Blue says that its cloud computing business is largely responsible for that, with Asia/Pac one of its best performing regions globally. The firm is now looking to scale down some of its traditional businesses and get further into the cloud, which is a comparatively high-margin activity.

"The trend we see in the market is clear. Clients want to modernise apps, move more workloads to the cloud and automate IT tasks," IBM's new chief Arvind Krishna said on a post-earnings call with analysts. Krishna was, of course, formerly in charge of Big Blue's cloud operations. IBM's cloud revenue rose 30 per cent to US$6.3bn in Q2.

Asia Pacific showed a pickup in client spending during June even as US and Latin America customers pulled back, IBM CFO James Kavanaugh told analysts.

"From a client perspective, our business is more concentrated in large enterprises, which in total have been relatively more stable throughout the pandemic," Kavanaugh said.


All businesses are facing a cloudy future

This may of course be a temporary phenomenon caused by the delay in the pandemic reaching Western regions of the world and the earlier emergence of the East from its worst effects (or anyway the worst effects of the early wave or waves). The fact that some Asian nations have managed highly effective responses to the pandemic may also be having a positive impact.

However the background seems unlikely to change significantly almost regardless of the way the pandemic continues to play out. Businesses everywhere will continue to shift operations into the cloud whether they do so using IaaS, PaaS or SaaS. Asia/Pac will remain home to some of the world's biggest and fastest growing economies, in many cases served by relatively undeveloped infrastructure and ready to do business with whoever can deploy the new solutions.

It would seem that cloud in the Asia/Pacific region will be a good business bet for some time to come.