Published on the 28/02/2023 | Written by Heather Wright

Cloud use across Australia and New Zealand might be on the up – with some lucrative benefits for our respective economies, according to a new report –  but there are also some very different views when it comes to prioritising digital resilience in the year ahead.

The IDC Public Cloud Services Opportunities and Dividends to the Australian and New Zealand Economies white paper paints a picture of two countries moving at pace to cloud.

The report, commissioned by Microsoft says public cloud spend in Australia is set to increase 83 percent between 2022 and 2026 to hit $22.4 billion, with New Zealand spend nearly doubling from $2.6 billion in 2022 to $5.1 billion in 2026.

“Broad-based public cloud adoption generates ripple effects.”

And that growth comes with accompanying growth in new revenue for both IT providers and local businesses. IDC estimates that public cloud adoption generated $23.9 billion in new revenue for New Zealand businesses in 2022 – equivalent to six percent of New Zealand’s GDP – and the growth over the coming years will add a further NZ$21 billion to the economy and generate 134,000 new jobs as a result of new capabilities and growth.

In Australia, more than A$114 billion in cumulative new revenues across customer and supplier ecossytems are forecast by 2026, with nearly 600,000 new jobs created thanks to public cloud adoption and adjacent areas such as security, data mining and analytics.

That growth includes revenues from customer solutions that the vendor and partner ecosystems deliver as part of public cloud services deployments, including supporting hardware, networking, application software and other IT professional and managed services, as well as the revenues generated by customers from the use of the public cloud services.

They’re big numbers and ones Microsoft New Zealand national technology officer Russell Craig stands behind.

He told NewstalkZB that while he was sceptical about numbers, ‘this is a pretty robust estimate looking at the overall growth of spending on technology… with strong models in behind looking at the multiplier effect in terms of what the economic benefits that businesses can gain’.

The simple oft-touted explanation for the potential ‘cloud dividend’, and one IDC says has been proven over time, is that is that cloud computing reduces the IT resources businesses usually spend maintaining their own infrastructure, freeing them up for more digital innovation which in turn supports business innovation and drives new revenue streams and the exploration of other technologies, such as AI, IoT and data analytics, that can further fuel business growth.

“Both Australia and New Zealand are among the few countries in Asia Pacific where public cloud adoption has matured from discrete SaaS-based solutions for replacement of infrastructure, such as disaster recovery/backup services, to more advanced use case to drive digital transformation and innovation in their business environments,” the report says.

That broad-based public cloud adoption brings with it the advantage of generating ripple effects, including the creation of employment, opportunities and economic growth, IDC says.

“Increased adoption of cloud services will drive further spending in the adjacent areas of cloud security, and facilitate broader use of data mining analytics and integration of different sources of data to derive business insights, as customers will need to invest in products and services beyond the cloud hardware and software spend,” the report says.

“In addition, as cloud services suppliers meet demand for public cloud through investment in new local data centres, overall cloud spending will extend beyond just construction and maintenance of data centres to investments in the expanded partner ecosystem and new staffing demands.”

The report notes that while the pandemic saw declines in national GDPs, and some organisations cancelling or delaying large investments, cloud overall has grown with stretched IT budgets and a widespread focus on cost optimisation driving that growth.

A second report, also from IDC but this time for Lenovo and AMD, also points to digital infrastructure’s benefits to business. The CIO Technology Playbook 2023 says ANZ businesses are expecting digital to generate as much as 49 percent of business revenue from digitally connected products, services and customer experiences by 2027.

And the biggest adopters? The usual suspects of banking, financial services and insurance were the largest adopters across both Australia and New Zealand, followed by the government sector. Higher cloud maturity means some of the most complex and critical workloads for the financial sector are now on the public cloud, IDC says.

But while both countries might be embracing cloud, there’s a huge difference in opinions between the two countries when it comes to prioritising investments in digital resiliency for the 2023. While 100 percent of Australian businesses rated that as either a high priority (58 percent) or a priority, in New Zealand there was much less priority placed on upgrading IT infrastructure to a digital service delivery platform, with a meagre 27 percent rated it a high priority, with 40 percent saying digital resiliency investment was a priority, and 27 percent saying it either wasn’t a significant priority, or wasn’t a priority full stop.

The two countries are much more aligned when it comes to investing in, and sourcing from, local providers to increase business resiliency and mitigate future disruptions to supply chains and IP.

“As a result, the involvement in digital transformation projects of public cloud services’ ecosystem of interdependent and mutually beneficial solution providers will be an important source of future jobs and economic growth.”

That job front, of course, comes with its own challenges. While the report may forecast big growth in job numbers for both countries, finding people to fill those jobs is likely to prove problematic. The Lenovo/AMD report found 47 percent of Australian and New Zealand respondents listed human capital shortages as a topmost concern for 2023. Only high inflation ranked higher at 55 percent.

Around 20 percent of the new jobs will require specific technical or IT related digital skills at a time when companies are already struggling to fill roles requiring digital and data skills.

Not mentioned in the Microsoft-funded report is the repatriation of workloads back from public cloud to private cloud and/or traditional data centres in the last 12 months due to security concerns. That’s something the Lenovo/AMD report says a significant 63 percent of A/NZ organisations have done, saying across Asia Pacific businesses will continue to run more than 50 percent of mission critical workloads on traditional data centre infrastructure, systems and platforms, and private cloud infrastructure.

Multiple IDC surveys have revealed that a majority of any organisation’s workloads continue to remain on-premise, with a lack of skills for scaling up cloud adoption, technical debt, governance and compliance, security and vendor lock-in all cited as inhibitors.

For New Zealand, the addition of New Zealand-based cloud service regions, and a proliferation of local data centres currently planned, is already boosting public cloud for new workloads, Microsoft says.