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Where is Africa in the cloud? (1)

Foreign investors are keen on the African cloud computing market, which currently has a penetration rate of about 15 percent, but is set to grow significantly. An increasing number of undersea cables connecting the continent to the internet is enabling this growth.

African companies are increasingly giving up their own servers for the cloud, especially with foreign service providers, which initially did not have data centres domiciled on the continent, weighing on the speed of data transmission. That is beginning to change, as international cloud service providers now compete with local ones for custom. Big Tech certainly senses an opportunity. IBM, Microsoft, Amazon, and Oracle, which operate data centres on the continent, are building additional capacity.

Even as more data centres are being built on the continent, some African firms and governments still prefer to host their data themselves or with data centres abroad when the size requirements, and political considerations in the case of governments, make it imperative for them to host their data externally. 70 percent of Nigerian government agencies prefer to host their data with hosts abroad, for instance. But that is changing. That it is cheaper is one reason why, as maintaining in-house servers require the procurement of scarce expertise, high energy costs and regular software and hardware upgrades. New submarine internet cables that enable faster internet and heavier transmission of data is another factor.

In fact, the trend is not limited to large African firms like banks and industrials, but small and medium-sized enterprises (SMEs) as well, for which the advantages of lower cost and asset burden trump general concerns about the security and privacy of data. In this regard, data centres with carrier neutrality have a competitive advantage.

In assessing the state of the African cloud computing market, I find that while it is indeed growing, with potential for even greater expansion, it will be constrained by still intractable infrastructural deficiencies on the continent and how as the cloud underpins the rising centralisation trend by global tech via software as a service (SaaS), African subscribers will remain firmly tethered to hardware domiciled abroad regardless.

In assessing the state of the African cloud computing market, I find that while it is indeed growing, with potential for even greater expansion, it will be constrained by still intractable infrastructural deficiencies…

Data centres, cloud computing/cloud services

Put simply, cloud computing is the outsourcing of the information technology (IT) requirements of digital services to third-party providers, thus allowing firms and governments to concentrate on their core business. These IT requirements range from software applications, hardware infrastructure, to the internet platforms through which digital services are delivered to end-users.

Still, ‘the Cloud’ has evolved into “a metaphor for the services provided over the internet.” Thus, cloud computing refers to how varied hardware and software resources are pooled and managed to deliver services over the internet. These cloud services are mainly of three types viz. Software-as-a-Service (SaaS), Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS).

Read also: Expert urges more cloud solution adoption to boost consumer experience

Data centres are the infrastructural backbone of cloud services, even as they are offered as a service themselves, a so-called Data centre-as-a-Service (DaaS), which is really just a type of IaaS (Dillon, Wu, & Chang, 2010). Still, the distinction has to be made between data centres and cloud computing, which has evolved to a gamut of IT services, with third-party data centres only just a part but key component of the cloud’s ecosystem.

Big tech dominates the global cloud computing market

Big tech dominates global cloud computing nowadays, after edging out telecommunication firms, who were the original pioneers, as their infrastructure provided them a positioning advantage. The global cloud infrastructure service revenue was about US$180bn in 2021, according to Statista, with Amazon Web Services, Google Cloud and Microsoft Azure, so-called hyperscalers, the top 3 leading firms.

The cloud commits subscribers to not only hardware but software as well. SaaS will hardly be optimal for customers without either IaaS or PaaS or both. Unsurprisingly, there are concerns about the growing dependence by firms on the cloud, being as it is dominated by just a few big tech firms. In the banking industry, for instance, the oligopolistic global cloud computing market is the perfect recipe for the ultimate archetypal centralisation, a source of concentration risk in an industry where risk management is designed to avoid precisely such an agglomeration of resources towards a single or few points of failure.

Unsurprisingly, the Bank of International Settlements highlighted how the increasingly oligopolistic nature of the global cloud computing industry will have “systematic implications for the financial system” in a July 2022 report.

An edited version was first published by the NTU-SBF Centre for African Studies at Nanyang Business School, Singapore. References, figures and tables are in the

original article. See link viz. https://www.ntu.edu.sg/cas/news-events/news/details/where-is-africa-in-the-cloud

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