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Welcome to the fourth edition of Datacom’s Annual Cloud Report (in conjunction with TRA), where we deep-dive into cloud markets across Australia and New Zealand. Based on findings from our survey of 650 senior IT decision-makers, one thing is clear – last year saw some of the fastest shifts in the market we have seen for many years.
As we emerge from pandemic lockdowns and restrictions, organisations on both sides of the Tasman are turning their attention to business risk management and surrounding innovation. In this report, you’ll see this closely ties to several factors:
You’ll also find this report unpacks key moments of innovation in the history of our markets (especially the New Zealand market). The exciting announcement and arrival of the hyper-scale public clouds is opening up a period of growth and innovation to help customers thrive. The public cloud market has been growing year on year and will be unleashed further with easier local access.
The Australian market continues to show strong IT maturity and the shift to the execution of a hybrid-cloud reality. It’s a model that many have been wrestling with, and in this report, we can see the uptick in application experience driving organisations to think more strategically about which clouds are the best homes for their applications.
These insights into critical shifts in priorities and decisions help Datacom disrupt the way we do business, drive rapid change and, ultimately, focus on delivering value and support where our customers need it most.
Director - Datacom Cloud
In 2020, Australian organisations switched their primary focus from managing cost to managing risk. Over the last 12 months, there has been a rapid increase in cyber threats, as well as managing the risk of COVID for staff, customers and operations. Many businesses have matured in their cybersecurity policies and practices but continue to struggle to get ahead of the threat and educate employees and stakeholders. Significant changes in working practices (hybrid working, remote access) led to customers reviewing and re-thinking their security processes and practices including privacy, encryption and critical infrastructure. Read more about this in our Cloud Protect eBook.
Growth also remains a key focus for companies in Australia alongside an increased prioritisation of innovation. This focus is highly connected with investment in growth centred on new digital products and services to drive revenue and customer value. The adoption of design-thinking approaches with agile methodologies is also helping to improve speed to market, as is integration via API layers.
For New Zealand, it’s all about supporting customers with the right talent and skills. With limited access to an overseas workforce, there have been continued efforts to acquire and retain staff amid the challenges of lockdowns and disrupted operating environments. This is likely to be a challenge for organisations over the next 12 months as the war for good talent plays out. Companies that can retain or recruit people with in-demand skills will win the day, either within their own IT departments or through key partners. Strong focus on staff development, creating a positive culture and being more flexible will be essential.
Risk management has also become increasingly important and is now one of New Zealand’s top three priorities, replacing “survival” which was identified as a top priority in our last survey.
Innovation continues to grow in importance in terms of funding allocation and the language of innovation is being used more regularly in the way businesses are self-describing their use of technology. Organisations want to succeed, but innovation must be grounded in insight, customer demand and tangible benefits. The move to a more agile methodology allows companies to innovate incrementally and generate value more quickly.
Among our survey respondents, 42% of Australian businesses described themselves as innovators, compared to 33% in 2021.
New Zealand’s figures were lower than Australia’s, but results were up year on year, notably in the early adopter category: 36% vs. 27%.
What gets categorised as “innovation” can vary across organisations but there is a clear trend towards investing more in agile and scalable platforms, better processes across the organisation and people and partners to help pursue digital innovation.
Some companies are also undertaking mergers and acquisitions or going via the venture capital/start-up route to achieve similar results and mitigate the risk of disruption. Innovation is being viewed as both a long-term objective for growth and a short-term necessity for competition.
Our responses across Australia and New Zealand revealed a cluster of key IT management priorities centred around:
The IT management priorities remain relatively unchanged from the results of our last survey, indicating continued funding for multi-year initiatives for many larger organisations.
One notable shift is the industry-wide rise in the importance of cybersecurity, now the #1 IT management priority for both Australian and New Zealand organisations.
Across both markets, there’s also a concentrated focus on operational excellence tied to “modernisation”, with automation at all levels a critical piece of these efforts. This is also linked to a focus on people – automating processes to re-focus people on customers and incremental value drivers.
Cloud is no longer an “or” strategy, it’s an “and” strategy.
The move to the public cloud is shaking the historical IT shackles and ensuring some difficult conversations are being had around how and when to make this move. The growing familiarity with and knowledge of cloud environments, along with a greater awareness of the opportunity to operate mixed environments, is giving organisations more options when making decisions about workload locations.
There is also growing knowledge that a multi-cloud strategy is not just an option – but rather, essential. The various attributes and variations in applications have ensured that organisations need to embrace a hybrid cloudscape to truly leverage the full capability of the cloud.
76% of Australian organisations and 74% of New Zealand organisations believe that they maintain a very high level of maturity in managing cloud and infrastructure environments. This was a 10-point rise over 2020 indicating organisations have greater experience with managing modern, cloud-based infrastructure. There’s also a growing understanding of where and why certain applications should be housed and managed.
Workload location drivers have seen a noticeable shift, moving away from COVID-driven concerns about security and employee experience in 2020, to a focus on business continuity, application performance, growth and innovation. These focus areas are acting as the key strategic drivers for cloud strategy in 2022. Greater appreciation and understanding of modern application practices such as containers are also driving cloud decision-making across Australia and New Zealand.
Throughout 2021, we saw first-hand the desire to move IT to the cloud, to take advantage of what the public cloud can deliver in terms of scalability and features. This has seen an increase in organisations prioritising a move to the public cloud.
However, it’s not all about the public cloud. More and more organisations are pragmatically embracing a workload-by-workload approach, ensuring the right workload for the right cloud.
With more organisations adopting the “and” cloud approach, a hybrid cloud strategy is winning – and providers that can deliver to this customer goal will win too.
When asked about the current and planned location of workloads, survey respondents revealed increasing acceptance of the multi-cloud environment with little forecasted movement over the next two years. This reflects the acceptance of managing mixed environments and a shift away from making pure IT-based decisions towards creating a foundation for new business initiatives, with the location of workloads being determined on a project-by-project basis. This demonstrates the growing maturity of organisations and the realisation that a multi-cloud strategy provides a much better outcome.
Our observations are that New Zealand figures reflect fewer public cloud offerings in the market, and it’s anticipated that uptake will align more with Australian figures as hyper-scalers arrive in the country. The arrival of hyper-scalers in New Zealand will generate another wave of innovation and value for customers as they take advantage of a local hyper-scaler product offering.
Providing further context for this approach, it’s clear that a need to balance both innovation and business continuity (BCP) was a key driver. It’s this paradigm that fuels the rise of the multi-cloud – a need to move fast, but with some guardrails. Global uncertainty is also driving certain decision-making with an increase in data sovereignty requirements growing in importance.
Building on 2020 results, the largest percentage of respondents feel that multiple tools are an appropriate way to manage their environment – and that approach has continued. It’s not about single panes of glass or mega tools, but more about creating easy access and authentication to multiple tools in a way that allows developers and IT teams to manage their environments with high degrees of efficiency.
What is included in “tools” to manage an environment will continue to be unique to each organisation, especially in larger enterprises and government sectors. There’s a desire to allow easier curation of multiple tools, with providers building in mechanisms to help IT teams manage user access, authentication – and, ultimately, risk.
Having access to the best of the best while retaining a nimble approach to resourcing is a constant battle. People and skills are fundamental pillars of every IT engagement and organisations are looking closely at how to balance resourcing costs with delivering value.
Survey data shows a softening of the anticipated additional budget being allocated to all resource types.
Across Australia and New Zealand, there is a strong focus on bolstering in-house capabilities, complemented by external resources. This reflects the need to ensure strong foundations for organic growth while being able to extend based on project demand.
From previous and current survey data, this blend of internal and external resource will continue to fluctuate over time. In terms of the resources being sought in the market, there are two broad trends – organisations are either looking for someone to “do the boring stuff” more cost-effectively or someone who can offer specialised skills to drive “innovation at pace”.
There has been a significant departure from 2020, with business analysts, project management and digital transformation (including CX) rising to the top.
This is not unexpected, given the way organisations are choosing to work with suppliers and partners. With a heavier focus on customer experience, organisations are also looking to create differentiation through an unforgettable digital experience (DX), rather than the tech.
With the move to agile many organisations have adopted new methodologies to deliver initiatives including scrum, KanBan. The new project manager now has a hybrid role to play, that of project manager (defined tasks) and scrum master (interactive, unknown). This has put more pressure on these roles and made the hybrid project manager more valuable within an organisation.
Although security skills continue to be in high demand, the security skills category is no longer ranked as the #1 challenge. Capacity in the market has increased and it’s easier than in previous years to find security skills or managed services in the partner landscape.
Budget constraints continue to be nominated as the top challenge – highlighting the perpetual nature of the issue. Innovation and customer-driven projects still need to return value. This focus on greater ROI and time to revenue is also contributing to a change in the way projects and initiatives are managed. The rise of agile methodologies is driving the ability to release incremental value to customers quickly, a skill that organisations are coming to expect from project managers too.
Other factors posing challenges include the after-effects of the global pandemic driving increased fuel, electricity and other power-related costs. This challenge is also set against a backdrop of organisations looking to reduce their carbon footprint and create more sustainable business models.
While your organisation may not have an immediate action plan for these strategies or tactics, they should be on your radar:
Solutions and services related to hybrid IT will evolve into vertical industry specialisations as the generic cloud is commodified further and ANZ enterprises look for partners that can help with their specific industry requirements.
Cybersecurity will continue to suck up skills, budget and sanity. The focus for 2022 will be on zero trust, with recovery and continuity of defensive measures. High-profile breaches of the supply chain (third-party service provider) will continue.
Innovation will start to decouple from the public cloud. Organisations will increasingly realise that developing an innovative app or service doesn’t have to be limited to public cloud offerings. The drivers for this realisation include more “as-a-service” offerings – that can be consumed on-premises – being implemented, and edge computing solutions morphing from an IT discussion into a tangible reality.
Government interventions across the world, including in ANZ markets, will drive sharpened national sentiment or “nationalism” related to platform choices. Sovereign clouds and data strategies will need to be considered. This will generate additional burdens on enterprises and potentially hinder their ability to optimally interact with overseas organisations or teams.
Hyper-scale public cloud computing providers will increasingly help drive edge computing and data centre co-location adoption – not just shifting workloads to their platforms. This will be driven by ‘smart X’ projects involving sensors, devices, hardware, data and services that require ‘edge to cloud’ architecture.
Digital transformation and future IT visions articulated by Australian and New Zealand executives and decision-makers will move from the platform up the stack. They’ll be defined by data, services, digital products and outcomes.
The most profitable and high-growth organisations in 2022 will be characterised by operational excellence when it comes to cloud and IT infrastructure. Automation, pro-active analysis and action, as well as integration across services and providers, will determine success.
The “great resignation” reverberating around the world will result in skilled ANZ IT workers revising their outlook and considering a change. Recruitment and retention will be a constant focus – providing appropriate remuneration and skills development (on-demand) will be determining factors.
The buzz will be about quantum computing, AIOps, low-earth orbit connectivity, data trusts, digital business and, to a lesser extent, sustainability. Vendors will push marketplaces by trying to win over ISVs and SaaS players, but the experience will remain messy and unattractive to buyers in the short term.
Legitimate enterprise 5G use cases will ramp up and place increased pressure on IT infrastructure performance. Innovators will start to increasingly share their stories.
The market will continue to see two types of cloud and infrastructure users emerge: enterprises that use containers and serverless offerings with some software development capability, and SMBs that rely on SaaS offerings for speed and scale. What is defined as “mature” within cloud and infrastructure models will shift from operating platforms and security to deriving value from data and services.
Our customers are solving some of the most exciting challenges in their industries and communities. Through people-led conversations that are focused on tangible outcomes, develop the right cloud strategy to meet your unique goals, priorities, and the changing needs of your customers.
TRA undertook an online survey of IT and business decision makers in Australia and New Zealand in late 2021. The quantitative survey included 500 organisations in Australia and 150 in New Zealand. The main demographics of respondents are shown below. For any additional questions about the methodology please contact TRA.
TRA is a fast-growing IT analyst, research, and consulting firm with an experienced and diverse team in Sydney | Melbourne | Singapore | Kuala Lumpur | Hong Kong | Tokyo. We advise executive technology buyers and suppliers across Asia Pacific. We are rigorous, fact-based, open, and transparent. And we offer research, consulting, engagement, and advisory services. We also conduct our own independent research on the issues, trends, and strategies that are important to executives and other leaders that want to leverage the power of modern technology. TRA also publishes the open and online journal, TQ.