Rising cloud service adoption opens fresh revenue stream for telcos

A fresh revenue opportunity is opening up for telecommunications companies in Nigeria as large and small corporates in various industry verticals seeking to cut down on Information Technology (IT) costs increasingly jump onboard the ‘cloud computing’ train, market observers say.

Cloud computing refers to the use of computing resources (hardware and software) delivered as a service over the internet.

Given the immense cost-saving and efficiency benefits brought about by cloud-based services, Nigerian firms are eager to pay for cloud technologies, which telcos can deliver to them efficiently.

A recent study released by World Wide Worx and Cisco shows that only 36 percent of Nigerian firms were using the cloud in 2013. A significant 44 percent of Nigerian firms, however, said they would indeed embrace the cloud in 2014, bringing the total to 80 percent.

“This is certainly a growth area for the telecoms industry. Virtually every telecoms operator is looking into data hosting centres,” said Emmanuel Onyeje, chief operating officer, Zinox Technologies.

Globacom, the second national carrier, which already runs one data facility in Lagos, recently announced a second centre, which will be one of Nigeria’s largest data centres on completion.

Also, MTN Nigeria has deployed a high-grade data centre with 500 square metres of collocation and hosting space in Lagos. By virtue of this infrastructure, the company is offering cloud-based services targeted at small and medium enterprises (SMEs) across various industry verticals in Nigeria.

The case is the same for Bharti Airtel, which opened its 1,858-square-metre Lagos data centre in 2012 to cater to its subscriber base.

MainOne, undersea cable operator, is also constructing a tier-3 data centre in Lagos, tipped to be the largest in West Africa. The data centre is expected to be completed in Q4 2014.

These projects, according to market observers, signify the growing presence of telecoms operators in the data centre industry and the lure of attractive returns from providing infrastructure.

In 2014, the overall cloud services market revenue will reach $209 billion, according to Markets&Markets, a research company. Market observers are of the opinion that telcos are angling for a piece of the pie, with a view to making up for falling revenues from their voice services segment.

“We will continue to explore opportunities inherent in cloud computing to help in stimulating the economic growth and development of this great country,” said Babatunde Osho, chief enterprise solutions officer, MTN Nigeria.

“The financial services sector such as all the major private banks and the Central Bank of Nigeria (CBN) are particularly interested in cloud computing as a means of reducing costs, by sharing services,” said Dele Akinsade, director of developer platform for West, East and Central Africa, Microsoft.

Available statistics, however, show that banks, for instance, spent an estimated $900 million on IT infrastructure last year in a strategic attempt to improve customer satisfaction and market dominance.

Industry watchers say telcos see the opportunity and are positioning their respective networks to offer a myriad of cloud-based services, though infrastructural, security and regulatory concerns still remain a big issue.

“The government can support the cloud computing industry by developing a robust national cyber security policy,” said Olusola Teniola, chief executive officer, IS Internet Solutions.

“Such regulation is a key building block for a cloud industry and would go a long way towards reassuring Nigerian businesses to host data onshore,” Teniola said.

In the midst of implementing International Financial Reporting Standards (IFRS) in 2011, the apex bank announced plans that required lenders to maintain independent servers within Nigeria to manage their data.

Nigerian-owned Inlaks Computers has designed a number of private clouds for clients like FirstBank, UBA, and the CBN. The apex bank has also clearly stated its desire to cut banks’ operating costs by pooling resources such as power and IT systems. Such moves are encouraging to grow domestic cloud-hosting capacity.

Nigeria has a cloud computing market potential of $1 billion, according to industry analysts, but broadband infrastructure bottlenecks form a critical drawback hindering the steady adoption of cloud services.

Ben Uzor