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New Zealand organisations steadily embracing cloud computing

Frost & Sullivan: New Zealand organisations steadily embracing cloud
computing for IT solutions

Awareness of multiple cloud benefits beyond reducing IT costs include
agility, flexibility and collaboration with stakeholders

Auckland, 5 December, 2013 – Organisations in New Zealand are becoming
increasingly aware of the numerous benefits cloud computing offers and are
progressively adopting cloud solutions to reduce IT costs, improve business
agility, increase flexibility and enhance collaboration with stakeholders
through community cloud environments.

Frost & Sullivan’s new research, State of Cloud Computing New Zealand 2013
reports that of organisations in New Zealand currently using cloud
computing services, 47% spend more than 10% of their total IT budget and
32% spend more than 20% of their total IT budget on cloud solutions or

Phil Harpur, Senior Research Manager, Australia & New Zealand ICT Practice,
Frost & Sullivan says, “There is a marked increase from 2012’s figures,
indicating a growing shift to the cloud. Though larger organisations
generally spend more on cloud computing services, smaller and medium sized
enterprises investing significant amounts of their IT budget have also

63% of organisations in New Zealand currently using cloud solutions plan to
increase their cloud-based solutions budget over the next year, an increase
from 57% in 2012. 33% of organisations indicated flat spending on cloud
services, a decrease from 40% who indicated no change in spending
previously. “All these reflect a market very much in a growth phase,”
states Harpur.

E-mail and storage & office productivity solutions are most accessed via
the cloud. “88% of New Zealand organisations access e-mail via the cloud -
33% via public cloud, 38% via private cloud and 17% via a hybrid model. In
a private cloud environment organisations favour server computing
solutions, e-mail security, office productivity solutions and storage,
while in a hybrid cloud environment CRM is the most widely deployed
application,” Harpur elaborated.

Andre Clarke, Country Manager, New Zealand, Frost & Sullivan says, “Overall
IT cost reduction, reduced risk of IT disruption from external factors such
as natural disasters, greater overall business agility and flexibility,
enhanced IT infrastructure efficiency and faster deployment time are all
factors driving adoption of cloud computing.”

Organisational understanding of cloud computing is maturing, and interest
is observed across all sectors in the New Zealand market, with no one
vertical dominating demand. Software-as-a-Service (SaaS) still accounts for
the largest portion of cloud revenues, although the adoption of
Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) has
been very strong over the past two to three years.

SaaS offers several benefits over on-premise software such as lower upfront
costs, standardisation and ease of upgrade, ubiquitous access and seamless
integration with in-house infrastructure. Other driving factors for SaaS
adoption include the Ultra-Fast Broadband (UFB) rollout, falling broadband
prices, rising data cap limits on broadband plans and increasing enterprise
mobility. However, data sovereignty remains a prominent issue in New
Zealand, particularly in the public sector where the government cloud
strategy mandates that all data remains in New Zealand, thus limiting the
number of potential suppliers.

SaaS application adoption rates are positively correlated with the size of
the organisation which are more likely to use software applications
accessed via the cloud, especially for Office Productivity Applications,
CRM, HRM and ERP. “Multinational SaaS vendors,, SAP,
Microsoft, and Google have had good growth in the New Zealand market and a
new area of “cloud first” applications is growing as demand is emerging for
custom built SaaS offerings,” mentions Clarke.

NZ founded SaaS providers continue to emerge, offering innovative,
competitive services to both local and international clients. Xero is the
technology success story of the year and currently the flag bearer for the
NZ SaaS industry, leading the way and proving that NZ can create valuable,
global software brands.

With Infrastructure as a Service (IaaS), the use of compute instances is
much higher than storage due to low barriers to entry, attractive pricing
and well publicised implementation case studies. “IaaS has seen a huge
spurt in adoption in the last 12 to 24 months due to an increasing number
of local market participants such as Datacom, ICONZ, Gen-i/Revera, Maxnet
and Web Drive” added Clarke.

Over the next 12 months, at least 25% of organisations not currently
accessing office productivity applications (e.g. Google Docs) via the cloud
are likely to do so. CRM, Desktop and Analytics and Business Intelligence
are the SaaS applications most likely to be migrated while HRM, e-mail
security and ERP are less likely to be migrated to the cloud.

Challenges in adopting cloud-based services include data / security threats
and risks as well as integrating existing systems and legacy applications
with cloud data. Private cloud deployments are more widespread than both
public and hybrid cloud deployments for all types of software and
applications, with the exception of conferencing. Companies that implement
private clouds can face challenges when they try to gain extra scale in the
future. Network Security is the most important ICT component when building
a private cloud followed by application security and access control and IT
service management tools third. “Also, the sales processes of cloud service
providers are more complex, very different and far more solution oriented
than traditional menu driven transactions. To overcome this challenge, many
providers are investing in training and up-skilling their sales
professionals,” Harpur explained.

Security is the most important criteria when selecting a cloud vendor,
followed by reputation, trust, service and reliable support, price and ROI
success. Vendors must also have sufficient SLAs, offer sufficient product
scalability and offer a range of value added services” Harpur added.

59% of organisations currently outsource their data centre hosting, largely
due to cost and security factors, and 78% expect their data centre
requirements to increase over the next 12-18 months. Cloud computing growth
is driving demand for data centre capacity and providers are expanding
local presence as well as building new capacity in multiple locations
nationwide. New data centre space is in response to the strong growth in
data usage, demand for local data centres and increasing propensity of
toward outsourcing data centre operations. Frost & Sullivan believes that
the growth rate of data centre outsourcing and the need for greater data
centre space will continue to stimulate demand, providing significant
growth opportunities for most service providers.

Frost & Sullivan's State of Cloud Computing New Zealand 2013 report forms
part of the Frost & Sullivan New Zealand Enterprise Communications program.
All research services included in this subscription provide detailed market
opportunities and industry trends evaluated following extensive interviews
with market participants.

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