The history of data centres can broadly be divided into three key eras – first, the era of on-prem, then the era where increasing numbers of on-prem data centres were colocated, and then an era when enterprise infrastructure was migrated into cloud. This history is not a series of straight transitions nor does it play out the same everywhere. The reality is more complex as these options now co-exist, each as different options and ‘hybrid’ combinations have evolved on the basis of meeting different IT requirements – one approach certainly does not fit all. The need to ensure that the choice of where to house your data matches your IT profile and business requirements is the key to decision making. Reliability/trust, cost, ease of access/consumption and security also impact that decision. However, the scope of decision-making depends upon a reasonable field of choice and, until recently, New Zealand had a more limited range of options due to a lack of investment into infrastructure and technology, and a relatively small population. This led to the practice of sending data to be housed overseas.
That era may be moving to a close as New Zealand increases digital activity and as major international players take greater interest in the opportunities the country offers. The launch of a Microsoft Cloud Region in New Zealand North will mark a significant milestone for digital infrastructure in the country. And for a nation whose Government has a stated ‘Cloud First’ policy, the arrival would seem to be expeditious. It makes it far easier to meet the requirements of the 2020 Privacy Act which essentially states that data stored overseas needs to conform to the same standards of protection and management as in New Zealand.
The new Region will offer the benefit of reduced latency for NZ-based applications and services and the benefits of scalability and flexibility will be important for the strong projected growth of digital activity in New Zealand.
However the question needs to be asked as to whether Microsoft’s initiative and the arrival of a global cloud provider will be enough to meet all local business needs? A simple analysis based on the history of digital infrastructure globally suggests the answer is ‘no’. Different forms of digital infrastructure offer different benefits and drawbacks to different customers. Key surveys over the past five years indicate that the process of buying and deploying cloud does not always lead to expected outcomes and that the key emerging trend is towards hybrid infrastructure replacing the original trend towards public cloud:
A study conducted by Unisys Corporation (UIS) in 2019 [1] across a number of markets internationally indicated that 58% of New Zealand organisations had failed to realise notable benefits from cloud computing, largely because they had not integrated their migration plan into their broader business transformation strategy, The equivalent proportion for Australia was 36%.
This research also indicated that 94% of New Zealand respondents had migrated to the cloud to some degree and that New Zealand led in adoption of multi-cloud (61% usage compared to 28% globally). Gartner predicted in 2023 NZ $3 billion (US $1.77 billion) in spending from New Zealand organisations on public cloud in that year, up 22.9% from 2022 [2].
A survey conducted in 2023 by W.Media among New Zealand’s data centre community indicated that in terms of forward investment, 47% were looking to invest in data centres, 41% in public cloud and 19% into private cloud. Usually a single company’s investment was spread over a number of different options.
The need for hybrid is driven by some of the problems experienced with cloud, particularly among first time users. These include higher-than-expected costs which can be linked in part to poor customer usage of cloud and/or to the selling of solutions that did not really match customer needs. Certainly, Microsoft’s New Zealand initiative will need to convince in terms of offering more immediate and local ‘hands-on’ technical support rather than just managing from a distance. A lack of proximity and immediacy in customer response would impact negatively, particularly among data-sensitive sectors such as finance, health and Government. The suspicion of cloud as ‘invisible’ infrastructure which is less trustworthy than the reassuring bricks and racks of the data centre still lingers although less among people involved directly with digital infrastructure than among those at the fringe (who may however play some role in decisions on infrastructure).
These reasons singly and in combination have caused a degree of repatriation out of cloud in most of the world’s major markets. A Citrix poll of 350 business and IT leaders in the US reported in February 2024 found 94% had moved some of their workloads back from the cloud to on-premises facilities over the previous 3 years. The top reasons for such “cloud repatriations,” according to respondents, include unexpected security issues (41%), high project expectations (29%), and failure to meet or set expectations (23%). [3]
One of the most logical solutions to these issues is to deploy a hybrid configuration such as public cloud (for example, Microsoft or AWS) in combination with private data centres. The simple fact is that not all workloads are suited for public cloud, especially those coming out of mission-critical and legacy systems. The latter may impact uptake of public cloud in New Zealand adversely as many companies still rely on older systems not easily migrated to the cloud.
A hybrid model means sensitive data can remain in private data centres while the company can also leverage public cloud scalability when required. Public cloud might not meet the stringent security or compliance needs required by some organisations. According to a 2023 analysis conducted by the Uptime Institute, 19% of outages occurred among public cloud providers. The same analysis indicated that only 11% of enterprise managers consider that public cloud services are resilient enough to run all their workloads while 18% don’t consider cloud resilient enough to run any. The majority of opinion – 59% – sits between these views [4].
There is therefore consensus that some consideration needs to be given to which workloads are suited to cloud and which are not. Some options to consider include:
- To offload less critical or seasonal workloads to the cloud while keeping control over essential systems housed elsewhere. This may help avoid unpredictable or rising costs as businesses scale
- To adapt and deploy infrastructure to meet the specific needs of different applications
- To avoid becoming too dependent on a single provider (for reasons of cost, choice and resilience)
- To run Disaster Recovery and Back Up solutions on distributed data and compute frameworks, and
- To integrate, wherever possible, new with existing infrastructure to develop the hybrid delivery model.
On this basis, ‘New Zealand Hybrid’ will form a strong solution to meeting hosting requirements. The advantage of localising the hybrid strategy is that it means quick response times and more customised solutions. The process would also indicate how local providers can work in tandem with global giants such as Microsoft in order to provide integrated solutions. The process encourages relevant innovation as local players will often invest in new technologies and services tailored to New Zealand businesses.
In conclusion, Microsoft’s new Cloud Region is a step forward for New Zealand’s digital infrastructure, but it cannot be viewed as the entire solution. A hybrid approach, combining global cloud providers with local data centres, will give businesses the flexibility, control, and security they need. This approach also supports key corporate and national requirements in terms of where and how New Zealand data is housed and processed.
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One of the implications of the growth in hybrid infrastructure systems is that increasingly colocation becomes the default option for enterprise. Their own facilities may not have the technical capability of operating as part of a hybrid system so this represents another step in the trend towards colocating into more powerful and flexible data centres. To reflect market requirements that are increasing and changing rapidly Plan B offers a full range of ICT and business continuing services including those focused on delivering connectivity and networking, business internet, cloud and cloud services, data centres, colocation and managed services. Full details can be found at: https://www.planb.co.nz/
Many of the strategies and ideas written about in this article originate from a draft of the keynote that Frazer Scott, Chief Executive Officer of Plan B will present at the New Zealand Cloud & Datacenter Convention 2024 at the Grand Millennium Hotel, Auckland on 31 October 2024. To register, please visit: https://clouddatacenter.events/events/new-zealand-cloud-datacenter-convention-2024/
[4] https://datacenter.uptimeinstitute.com/rs/711-RIA-145/images/AnnualOutageAnalysis2023.03092023.pdf
