Public cloud spend to blast past $5bn in Australia

Spending on public cloud services – both infrastructure and applications – is set to crack US$4 billion (A$5.58 billion) in Australia in 2016, but while many customers aspire to use more cloud, "aspiration" still outweighs actual consumption.

Gartner forecast that the Australian public cloud services market will grow 14.4 percent to US$4.18 billion in 2016, up from US$3.65 billion.

That's slower than worldwide growth, which Gartner predicts will be 17.2 percent to US$208.6 billion in 2016. On a global level, infrastructure-as-a-service is the fastest-growing category, expected to grow 42.8 percent in 2016, while software-as-a-service will grow 21.7 percent.

Australian public cloud growth compares favourably to traditional categories of technology. Gartner expects the Australian enterprise software market will grow 10.32 percent and reach A$10.6 billion in 2016.

It is broadly accepted that the biggest hyperscale cloud providers – especially Amazon Web Services and Microsoft Azure – are taking share away from physical hardware. While Gartner could not supply directly comparative figures for compute and storage, regional data indicates that on-premises infrastructure is going backwards.

The analyst body has predicted that the Asia Pacific server market will decline 8.6 percent US$1.79 billion in 2016, while the region's external controller-based storage market will fall 1.9 percent to US$3.68 billion.

AWS is by far the market leader in public cloud infrastructure, estimated to have many times the share of the IaaS market of its nearest competitors. The company is on track to break through the symbolic $US10 billion revenue threshold this fiscal year, having posted revenue of US$2.9 billion for the three months to 30 June 2016, a rise of 58 percent.

Cloud might be the more hyped sector, but the Australian IT services market is, in fact, growing faster, according to Gartner data. The IT services market in Australia is projected to grow 18 percent to total US$22 billion in 2016.

Pros and cons of cloud

IT modernisation is the top driver of public cloud adoption, followed by cost savings, innovation, agility and other benefits, according to Gartner. However, even with these advantages, the switch to public cloud is far from a foregone conclusion.

In fact, "the aspiration for using cloud services outpaces actual adoption", according to Sid Nag, research director at Gartner.

"There's no question there is great appetite within organisations to use cloud services, but there are still challenges for organisations as they make the move to the cloud. Even with the high rate of predicted growth, a large number of organisations still have no current plans to use cloud services," said Nag.

Perceived security risks remain a barrier to uptake, the analyst firm found. "Gartner's position on cloud security has been clear – public cloud services offered by the leading cloud providers are secure," said Ed Anderson, research vice president at Gartner.

"The real security challenge is using public cloud services in a secure manner. More education is needed to help organisations overcome the hype associated with security concerns. This should be a key area of focus for providers in working with their clients to unlock the benefits of public cloud services."

Despite the highly publicised benefits of hybrid cloud – which could include a multi-cloud mix of hyperscale providers, as well as a combination of public and private – this approach also faces impediments to wider adoption.

Customer concerns over hybrid models include integration challenges, application incompatibilities, a lack of management tools, a lack of common APIs and a lack of vendor support.

"Of course, in the case of hybrid cloud, these top concerns also highlight some of the top opportunities for providers," said Anderson. "We know that public cloud services will continue to grow. We also know that private cloud services – of various types – will become more widely used. Therefore, providers must focus on the top hybrid cloud challenges to be successful in meeting the growing demand for hybrid cloud solutions."