Frost & Sullivan: Australia's IaaS market to reach $380 mil by 2017

SYDNEY, AUSTRALIA: Infrastructure as a Service (IaaS) is growing rapidly as organizations gain more confidence in the reliability and security of the cloud delivery model and realize the benefits of outsourcing their IT infrastructure such as storage, servers and networking components to specialist vendors who provide access to these resources over the cloud on an as-needed basis.

IaaS can be used to host a variety of systems including corporate applications, websites and virtual data centres. The benefits IaaS offers include significantly reduced capital expenditure (CapEx), quicker and easier scalability of IT resources, location independence and lower risks of system failure associated with on-premise resources.

Frost & Sullivan's latest report, Australian Infrastructure as a Service Market (IaaS) 2013, outlines the main drivers stimulating IaaS adoption as reduction of IT capital expenditure (CapEX), the greater agility and scalability IaaS offers in changing infrastructure requirements, higher levels of awareness of the benefits of IaaS, an increasing need for mobility amongst corporate employees requiring access to corporate resources from any internet-enabled location and public cloud infrastructure improvements such as the National Broadband Network (NBN).

As the benefits and reliability of the cloud delivery model for infrastructure are better understood, concerns about sovereignty and security of data held in the cloud, the reliability and security of access to infrastructure delivered over the cloud and general management conservatism over migrating business functions to the cloud are eroding. Frost & Sullivan estimates that IaaS vendors in Australia earned revenues of just under $65 million in 2012.

Phil Harpur, senior research manager, Australia and New Zealand ICT practice, Frost & Sullivan, said: "Although the IaaS market is considerably smaller and much more nascent in comparison to the SaaS market, Frost & Sullivan forecasts that IaaS expenditure will grow at an compound annual growth rate (CAGR) of almost 43 percent to reach $380 million by 2017, as an increasing number of clients switch to the IaaS provisioning model, and many more vendors enter the local market."

IaaS vendors in Australia are categorized into four main groups.

Pure play IaaS cloud providers, which include Amazon Web Services (AWS), Google and Rackspace typically offer public IaaS service as core service, although an increasing number are offering private, virtual private and hybrid offerings as well.

Carrier cloud players on the other hand are essentially telcos offering cloud based solutions. They leverage their strong network capabilities. Examples include Macquarie Telecom, Optus, and Telstra.

The third group, traditional managed service providers, provides cloud-based services, and usually private cloud offerings, although an increasing number are also offering hybrid and public cloud deployments. Services range from cloud brokering and best of breed solutions to actual hosting and deployment. This is a rapidly growing segment. Examples include Brennan IT, Fujitsu, Harbour MSP, HP and IBM.

The final group of resellers and channels partners re-sell or white-label some of the first three categories providers' offerings.

As growth of cloud computing threatens traditional revenue streams from on-premise system integration and maintenance services, many of the large integrators and channel partners are now developing cloud services.

Mayank Kapoor, industry analyst, data center and cloud computing, APAC ICT practice, Frost & Sullivan, said: "Managed service providers and system integrators are adapting to the emergence of IaaS and have the advantage of being able to offer end-to-end IT services and support, and customizing private cloud solutions in the Australia market. Examples of managed service providers and system integrators that are building or expanding their cloud services portfolio include Brennan IT, Dimension Data, HP, Fujitsu and IBM."