Enterprises across Australia and New Zealand have been enthusiastic adopters of the cloud.
A 2023 IDC whitepaper sponsored by Microsoft said Australia and New Zealand are among the few countries in the Asia Pacific region where public cloud adoption has moved beyond discrete software-as-a-service-based solutions for the replacement of infrastructure, like disaster recovery, to advanced use cases driving digital transformation and innovation.
But this is not coming without strain. Forrester’s State of Cloud in Australia and New Zealand 2023 report found continued growth in cloud utilization across organizations is driving Australian and New Zealand IT leaders to focus on efficiency and cost. IT leaders should expect further challenges as demands grow for new use cases like artificial intelligence in the future.
Explosion in cloud demand putting pressure on cloud strategies
Senior Australian enterprise cloud decision-makers have reported their organizations spending an average of nearly US $14 million (AU $21.85 million) on public cloud in the past 12 months. Forrester said this scale, combined with the pressure of a technology sector and an economic slowdown, has revived interest in ballooning cloud waste and efficiency.
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“As companies look to address economic uncertainty, optimization is top of mind,” the Forrester report said. “We’ve reached new levels of spend that have far surpassed expectations.”
Some IT leaders are renegotiating cloud contracts with higher amounts of committed spend or larger committed growth rates in exchange for discounts. Many are also using cloud cost management and optimization solutions to reduce waste, while work with database and network architects could further optimize performance, security and cost concerns, Forrester said.
Organizations are even expanding the adoption of financial operations practices. Rather than just using new tools, Forrester suggests that IT teams are making an effort to build in collaboration, hold users accountable for spending decisions and provide more transparency on spending initiatives.
“This initiative is gaining traction among tech executives, not just cloud leaders,” said Forrester. “While the tech downturn isn’t hitting local firms as much as onshore multinationals, Australian firms still want the most out of FinOps — even as layoffs by big tech firms cool the labor market.”
The strain on cloud strategies is expected to continue, Forrester said.
“In the coming years, many enterprises will start to explore new cloud use cases, whether that involves the edge or AI-enabled services,” said Forrester. “Each fresh opportunity will put a new strain on current strategies.”
Australia and New Zealand proving they are cloud-forward
IDC’s report predicted Australian spending on public cloud would increase by 83% between 2022 and 2026, from AU $12.2 billion (US $7.81 billion) in 2022 to AU $22.4 billion (US $14.34 billion). Gartner, meanwhile, predicted Australian organizations would shell out AU $19.9 billion (US $12.74 billion) on public cloud just this year and expected NZ $3 billion (US $1.77 billion) in spending from New Zealand organizations, up 22.9% year-on-year.
The spending predictions reflect the new scale of Australia and New Zealand’s cloud growth.
Ever since the arrival of the major public clouds, Forrester’s research shows local enterprises have been increasingly migrating their existing workloads rather than just using the cloud for new apps. On average, Australian enterprise cloud decision-makers in organizations migrating to a cloud computing infrastructure as part of public cloud adoption anticipate having migrated 46% of their workloads within two years, which would be an increase from 36% today.
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Retailer Woolworths, for example, completed its migration of 20 SAP applications, 75 terabytes of data, 135 database servers and 435 application servers to Azure in 2022, which included one of the biggest SAP environments in the region. Meanwhile, ANZ Bank is in the midst of an enterprise-wide migration to AWS and Google Cloud Platform.
ANZ Bank is far from alone in its pursuit of a multi-cloud strategy. Forrester’s Infrastructure Cloud Survey, conducted in 2022, found a huge slice (95%) of Australian enterprise cloud decision-makers at organizations using the public cloud who say they use multiple public cloud vendors, demonstrating that multicloud is the predominant strategy for most organizations.
The shift is not limited to the private sector. Though slower to move, Australian public sector agencies have also been encouraged to embrace cloud-first or cloud inclusive approaches over a number of years, including in the Federal Government’s 2017 Secure Cloud Strategy, which was updated again in 2021. Reasons given include increasing speed, enabling continuous improvement, providing easier access to public services and reducing maintenance costs.
While Australia may not have become the second-largest cloud hub in the world as Forrester forecast in 2014, the future looks bright.
“The cultural and business factors that drove that prediction, including the country’s fast-follower mentality, a vibrant startup scene, tech-forward citizens and cultural ties to U.K. and U.S. business communities, continue to drive investment,” Forrester said.
Data center expansions will support public cloud growth
Australia and New Zealand’s cloud uptake will be accelerated by new hyperscaler data center investments across Australasia. AWS has committed a further AU $13.2 billion (US $8.44 billion) to Australia’s East Coast regions from 2023 to 2027, as well as NZ $7.5 billion (US $4.43 billion) to establish a data center in Auckland, consisting of three availability zones. Both Microsoft and Google have also announced plans for New Zealand regions.
The arrival of hyperscaler data centers in New Zealand, in addition to the existing presence of New Zealand’s Catalyst Cloud, is expected to propel strong growth in the market.
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“Growth in cloud adoption continues globally, but it is in 2024 that we’ll see it explode in New Zealand,” said Gartner Research Vice President Michael Warrilow earlier this year. “The arrival of the hyperscale cloud vendors into the local market will drive this accelerated growth.”
For Forrester, changing data center footprints is only another reason organizations will be optimizing their strategies.
“ANZ firms need to strategically evolve their cloud strategies based on their own business context, including prior investments, new pressures and development skills and requirements, revisiting their existing plans to ensure optimization across cost, data, resilience and networking architectures,” the research firm said.