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Malaysia’s cloud adoption: slow and steady

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Cloud computing is evolving very rapidly. Yet in Malaysia, the adoption is still slow. This is a concern as embracing the cloud is considered a quick and easy way for small-medium enterprises (SMEs) to join the digital economy.

IDC forecasts that the cloud-related services market in Malaysia will have a compounded annual growth rate (CAGR) of 23.8% over the next five years. “The pace of change in Malaysia is a tad slow because of the inherent preference for traditional and on-premise IT architecture and services sourcing models,” said Sherrel Roche, senior market analyst, IDC Asia Pacific services research group.

“A majority of enterprises in Malaysia are lagging behind the cloud maturity curve,” she added, citing IDC’s latest Asia Pacific Cloud MaturityScape research. “They are still in the early stages of cloud adoption, with mostly ad hoc or opportunistic use of infrastructure and non-critical cloud services.

“This implies a marked preference for leveraging the cloud to drive down operating costs. Additionally, we are seeing increased deployment of cloud services in the government, telecommunication, and financial sectors,” she said.

“Organisations in Malaysia have multiple flavours of cloud delivery models,” she said. SMEs tend to adopt public cloud while large enterprises tend to go for private or hybrid clouds. “The demand for private or hybrid cloud is mainly due to concerns about security, sensitive data, and regulatory compliance. Enterprises will prioritise customer-facing applications, followed by data and analytics, office and e-commerce applications in a hybrid cloud environment.”

Cloud adoption growth varies by country and its Internet infrastructure. “The only way for customers to reach cloud solutions is via the Internet. There are very few Southeast Asian economies like Singapore or South Korea where the Internet penetration is deep enough to serve all the population. As governments update their infrastructure, the adoption will grow,” said James Forbes-May, vice president, APAC sales, Barracuda.

From left: James Forbes-May, vice president, APAC sales, Barracuda; Sherrel Roche, senior market analyst, IDC Asia Pacific; Dr Dzahar Mansor, national technology officer, Microsoft Malaysia; Raju Chellam, vice president, new technologies, Fusionex International

From left: James Forbes-May, vice president, APAC sales, Barracuda; Sherrel Roche, senior market analyst, IDC Asia Pacific; Dr Dzahar Mansor, national technology officer, Microsoft Malaysia; Raju Chellam, vice president, new technologies, Fusionex International

Microsoft’s Digital Transformation Study found 79% of business leaders in Malaysia acknowledging cloud computing as essential for digital transformation. “According to 81% of business leaders in Malaysia, cloud computing and the decreasing cost of devices have made it more affordable for companies of any size to transform digitally,” said Dr Dzahar Mansor, national technology officer, Microsoft Malaysia.

“Organisations are starting to realise the need and urgency to transform and stay relevant in the Fourth Industrial Revolution. There is much more awareness of the value of the cloud and how it works for their businesses. With an array of cloud solution providers, such as Microsoft, available to support them, their confidence and adoption rates have been rising,” he added.

Is Security Still a Thing?

Barracuda Networks’ Public Cloud Survey Malaysia 2017 found that a whopping 92% of respondents said their security concerns restricted their organisation’s migration to the public cloud.

Dr Dzahar acknowledged a continued perception among business leaders that the cloud is less secure. He said advances have been made in the cloud on security and privacy. “They need more exposure on how, with a constantly evolving threat environment, it is safer being in the cloud than relying on traditional forms of IT security,” he said.

Security is always a concern whether on cloud or on-premise, said Raju Chellam, vice president, new technologies, Fusionex International. “It pays to be paranoid about your data. The complexity is compounded because companies are now optimising workloads across multiple clouds.”

He cited an IDC report that said by next year, 60% of enterprise IT organisations will have committed to multi-cloud architectures. To manage this environment, they will seek management solutions from external providers, he added.

Businesses can improve their security by moving to the cloud, adopting modern platforms, and using comprehensive identity, security, and management solutions, said Dr Dzahar. “Digital transformation must be built on trust. People don’t use technology that they don’t trust.

“The truth is, the cloud is likely to be more secure than most customers can invest in their own operations today,” Dr Dzahar said. “Microsoft has made trust its number one priority, investing over US$1bn annually to ensure security, privacy, and compliance across various industries are being met.”

To ease the resistance of enterprises moving to the cloud, most public cloud providers today submit themselves for industry and even localised governmental certifications to establish additional trust and compliance, said Forbes-May. “Microsoft Trust Centre offers a rich resource of industrial and governmental compliance matrices. It helps to build confidence in the enterprises to move their workload to Azure. A recent study by Barracuda found over 58% of respondents in Malaysia said they trust public cloud more than they did five years ago,” he added.

The State of the Cloud

Cloud technology evolved rapidly in the last five years, said Barracuda’s Forbes-May. “Last year, Amazon Web Services (AWS) announced more than 1000 new features and capabilities.

“When people say cloud, they could mean many different things. We need to look at cloud technology from the point of view of what it offers,” he said.

  • Software as a Service (SaaS). “Solutions like SalesForce or Office 365 fall in this category and have a very high rate of adoption. Many vendors provide SaaS solutions but some are much more technologically advanced because of the size of the customer base they need to support and the scope of work that needs to be done,” Forbes-May said.
  • Platform as a Service (PaaS). “These solutions are provided by vendors like AWS, Microsoft Azure, Google, Alibaba, Heroku and many others. This is a great enabler for organisations to start building their own solutions without worrying about building their own data centres,” he explained.
  • Infrastructure as a Service (IaaS). “This is, by far, the most technology-intensive offering. With SaaS and PaaS, the networking and infrastructure are hidden from the user and controlled by the provider. In IaaS, the platform vendors need to expose multiple facets of their internal infrastructure so that customers can build their own super-flexible and highly scalable solutions,” he said.

Forbes-May noted that SaaS solutions like SalesForce and Office 365 are very popular because of many factors such as having no deployment or maintenance hassle; not requiring experts or staff to manage the solution; their 24×7 availability and ease of access from anywhere; and the solutions’ features.

On the other hand, newer services take longer to gain acceptance. “There are some which are meant for highly specific use cases, such as an AI engine for image detection and classification. They may not be of interest or much use to a large number of users,” he said.

According to Fusionex’s Raju, many SMEs are using public clouds for their entire business processes and transactions. “Initially most were using just IaaS. Now, they are increasingly using PaaS and SaaS but that is not the end of it. New cloud usage and pricing models are rapidly emerging, including niche areas such as Big Data Analytics (BDA), especially in Malaysia.”

IDC predicted by next year, new cloud pricing models will emerge for specific data analytics workloads. Growth for cloud analytics solutions will be three times more than on-premise analytics solutions. The IDC Asia Pacific Software Study 2016 revealed 42% of respondents from Malaysia were planning to deploy cloud-based analytics software in the next one to two years, while some have already deployed it.

Raju said AWS, Azure and Google Cloud will continue growing their share globally, but aggressive players from China, typically Alibaba, are chipping away at their share. Synergy Research Group’s Q2 data reported AWS, Azure, Google and IBM maintaining or growing their share of the worldwide IaaS market. AWS’s market share was 34%; Microsoft, 11%; Google, 5%; and IBM, 8% thanks primarily to its hosted private cloud services. “Among the next 10 top-ranked cloud providers, Alibaba and Oracle are achieving the highest growth rates,” the report said.

In September, Fusionex formed an alliance with Alibaba to provide end-to-end solutions across Southeast Asia. It will deploy its big data solutions on Alibaba Cloud’s infrastructure and become Alibaba Cloud’s go-to-market partner in ASEAN. “Our companies will help drive innovation in BDA, machine learning, Internet of Things (IoT) and artificial intelligence,” Raju said.

Public Cloud vendors such as Azure and AWS are crossing over to hybrid clouds and pushing into the enterprises aggressively, Barracuda’s Forbes-May noted. “AWS is drawing enterprises into its public cloud with hybrid offerings extended through IBM’s Softlayer and VMware.

“Microsoft Azure Stack offers the same public cloud offerings of Azure in physical servers sold by HPE, Dell-EMC and Lenovo. This gives hybrid cloud that exact look and feel of the public cloud. Moving forward, new solutions and services from the public cloud marketplace will further enrich public and hybrid clouds and boost cloud adoption by enterprises,” he said.

RightScale’s 2017 State of the Cloud Report reported that companies are reducing their investments in private cloud and more existing private clouds will be extended to the public cloud through a hybrid strategy.

It also found that companies are hedging its bets by investing multiple cloud platforms: 20% have a multi-cloud strategy while only 9% believe in using a single public cloud. Enterprises often kept disaster recovery sites on a different cloud platform. They also chose platforms based on their strengths. For example, it found AWS customers running BDA workloads on Google’s platform.

Cost optimisation was a top concern among enterprises after moving workloads to cloud, the report said. The other concerns were a lack of skills and expertise.

The most used public cloud services are managed databases offered by Amazon RDS, Azure SQL Database, and Google Cloud SQL. The next most used are push notification services. Machine Learning was used by only 11% of respondents, it said.

Public to Hybrid

As workloads increase, the operational expenses for cloud storage and computing will rise. However, Barracuda’s Forbes-May does not think SMEs will move their workload on-premise. “Costs consideration for compute, network and storage should be considered with the additional skilled engineering and support resources needed to keep the lights on for these systems to be kept on-premise.

“For most start-ups, it is hard to attract the right talent and hire the resource to develop and build their killer applications rapidly to establish a first-mover advantage. The start-up that leverages on the public cloud could be paying a little more for actual subscription or metered fees, but the economics work better in the cloud for them because they do not have to be distracted or suffer a loss of confidence if their applications suffer an outage when hosted on-premise.

“When they grow to critical mass and have more resources at their disposal, they can decide to bring the applications on-premise or leave them in the cloud,” he said.

Fusionex’s Raju said the cloud is still more viable as companies do not need to invest in hardware infrastructure. “On the cloud, they can increase or decrease the use of IaaS which is not possible on-premise,” he said.

“Through our observations, we found companies that have not yet gotten to the cloud will need to spend aplenty to build and operate their infrastructure just for month-end and year-end processing, usually done once a month or year. With cloud technology, they would only have to pay an additional fee for the computing power for a day or two during month-end and year-end processing,” said Microsoft’s Dr Dzahar. “Our existing cloud customers reported an average of 50% cost savings.”

Dr Dzahar added that Microsoft’s pricing mechanism is tailored to the customers’ workload requirements. “Microsoft Azure operates on a ‘pay as you go, scale as your business grows’ concept. It offers scale, speed, agility as well as strong backup and disaster recovery mechanisms,” he said.

Building an Ecosystem

As enterprise customers embrace cloud technology, they will realise they need help not only from technology vendors or providers, but also from local system integrators (SIs) and value-added resellers (VARs). “Enterprise buyers will evaluate SIs and VARs by their ability to scale, overall focus, and key partnerships with cloud technology vendors.

“SIs and VARs will continually be as important as they are today to make up a cloud vendor-partner ecosystem,” Forbes-May predicted. “They have the ability to bridge the gap between the end customer and cloud technology provider and help customers have a seamless, worry-free migration. Enterprise customers with a global presence may need an SI with a global presence to rely on their expertise to do large roll-out management and delivery.

“Additionally, after a customer has migrated to a cloud environment, buyers will need continuous support to operate and maintain the new operation while technology transfer to end users takes place,” he said.

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