building the african cloud - xalam analytics · and the key market players • q&a −...

Building the African CloudTuesday November 2nd 2017

Produced in Association With

Speakers

Guy ZibiManaging Director,

Xalam Analytics

Iain MorrisNews Editor, Light Reading,

for Connecting Africa

Agenda

• Introduction• The cloud and the data center in Africa − the Connecting Africa

view• The race to the cloud and the transformation of the African data

center market − the Xalam Analytics perspective including the colocation opportunity, the rise of distributed computing, the connectivity and data protection challenges, regional disparities and the key market players

• Q&A − questions from the audience

The Connecting Africa view

• African markets still largely served by data centers outside Africa, but there is growing demand as businesses look for greater agility, flexibility and security

• Cloud services look set to become big business in Africa as facilities expand and network investments create opportunities

• Major players are expanding into the market, including Microsoft, Level 3 and Liquid Telecom

• Yet serious challenges remain, including access to capital, the cost and reliability of power and governance issues

How important are cloud services to African enterprises in 2017?

• About half of the respondents to a recent Connecting Africa survey said cloud services would carry some importance in Africa this year

• Another 32% said they would become important next year or at a later date

0% 10% 20% 30% 40%

Not yet - maybe in 2018 oreven later

Of limited importance only in2017

Important to large enterprisesonly

Very important to all types ofenterprise in 2017

The cloud at AfricaCom 2017

• Discussion about the cloud and data center opportunities will figure in several keynotes and panel sessions at the upcoming AfricaCom event in Cape Town between 7 and 9 November

• You can find more details online athttp://tmt.knect365.com/africacom/

BUILDING THE AFRICAN CLOUDTHE RACE TO THE CLOUD & THE TRANSFORMATION OF THE AFRICAN DATA CENTER MARKET

A XALAM DIGITAL ANATICS PRESENTATION – NOVEMBER 2, 2017

8

The Foundations of the African Digital Economy

© Xalam Analytics LLC - 2017

Foundational Pillars of the African Digital Infrastructure

CONNECTIVITY

DATA REGULATIONS

LOCAL HOSTING- DATACENTERS

DEMAND STRUCTURE

CLOUD SERVICES

IOT

Source: Xalam Digital Analytics Research

Data centers are critical foundations of the African digital infrastructure

Vital to the development of cloud services and IoT

Highly physical, somewhat invisible – but their (digital) impact is everywhere;

The underlying foundations for the fourth industrial revolution.

CONTENT

1. The Upside of the African Cloud and

Data Center Markets

10© Xalam Analytics LLC - 2017

Africa Colocation Space vs. Sample Major Colocation Markets

Africa Amsterdam Frankfurt London

Thou

sand

s Squ

are

Met

ers

Sources: Africa: Xalam Digital Analytics; Amsterdam: Dutch Data Center Association; Frankfurt and London estimated based on CBRE European Market Review (2016)

African Colo Space: Half the Size of Amsterdam & Frankfurt, ~3x

smaller than London

The African MTDC* Market Hypothesis: A Compelling Upside

Below “Natural State” Levels - Africa Share of Global Population, GDP, Broadband and Colo Space

16%

12%

4%5%

1%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Share of Population Share of MobileConnections

Share of GDP Share of MBBConnections

Share of MTDC Space

Available datacenter colocation space has to go grow 2x-4x to get closer to “natural” levels, given the size of the digital

economy

Sources: Estimates as of Q2 2017; Africa data by Xalam Digital Analytics; GDP and population data from the World Bank (2016); Global Mobile Broadband Connections from Ericsson Mobility Report (2017); Global colocation numbers are Xalam estimates

*MTDC = Multi Tenant Data Center

A matter of perspective: Growth curve potential, or mountain of obstacles?

One Key Factor: Large Volumes of African Content Hosted Overseas


*MTDC = Multi Tenant Data Center

MTDC Colocation Demand vs. Supply Growth Over the Past Five Years – 2012-16 Colocation vs. B2B /Wholesale - Revenue Growth Over the Past 2 Years (2014-16)

Realizing the African Cloud and Data Center Potential – The Time is Now

*Not the case everywhere; ”Demand” defined as data center revenue-generating space Source: Xalam Digital Analytics estimates.

0%

20%

40%

60%

80%

100%

120%

JNB Metro CPT Metro Lagos Metro Kenya Tunisia

Demand Supply

Data Center colocation demand is growing 1.5x to 2x faster than

supply*

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

South Africa Kenya Tunisia Morocco Nigeria

B2B & Wholesale MTDC Colocation Mobile

Data Center colocation revenues are outpacing top line B2B and mobile

services revenues*A symbol of the ongoing transition in the structure of African ICT

revenues towards

connectivity and

applications.

*From a smaller base; B2B including communications and connectivity onlySource: Xalam Digital Analytics Estimates


The African Data Center Race is On

Construction of Teraco Bredell Data Center, South Africa; Photo Credit: Penetron Group

2. African MTDC Growth: Why Now?


Why Now? Data Traffic, Cloud Workload Economics and the Rise of Distributed Computing

Distribution of African Markets by Number of Broadband Connections – 2016 vs. 2020

*Based on sample of 30 African markets; MBB including 3G and 4G connections only; FBB including wireline and FWA connections higher than 1MbpsSource: Xalam Digital Analytics Research

Strong, sustained growth in data traffic consumption – BB connection base will double between 2016-2021;

Evolution of data traffic towards video streaming and more latency-sensitive applications;

The (slow) rise of cloud adoption and the emergence of IoT.

Evolution of cloud architectures: processing nodes have to be closer to the source/destination of the content;

Highly relevant for Africa: can’t harness the full benefits of the cloud and IoT with an architecture that is predominantly reliant on Europe/Asia-based servers;

Economic size, supporting infrastructure not optimal for large, hyperscale DCs; edge nodes will do finely.

Africa Highly Suitable for Distributed Computing

Strong Underlying Internet Growth

6

11

8

5

4

10

5

11

0

2

4

6

8

10

12

<1m 1m-5m 5-10m >10m

Num

ber o

f Cou

ntrie

s

2016 2020

More Connections, More Traffic – The Number of Countries with >10m Connections will Double by 2020


Why Now? The Digital Natives are Here

> 300 active startup hubs*, and > 7,500 startups** – less than 1% of Africa’s formal enterprise base, but an outsized impact on cloud adoption patterns;

Leveraging mobility, connectivity and cloud technologies to solve real-world problems;

Active across sectors – from agriculture to health, energy and fintech

Pioneer users of cloud and colocation services – They test the feasibility of public cloud services in the African context

Pushing traditional players to accelerate their transformation.

*GSMA*XDA estimate, based on sample data from Startup Genome and Disrupt Africa


Why Now? The Last Frontier for Global Public Cloud Players

Africa traditionally missing from “global” public cloud and MTDC maps;

The Microsoft move was a game-changer – it means that maybe the public cloud economics are starting to add up;

In Africa, perhaps more than anywhere else, third party DC colocation will be a critical part of the public cloud economic model

African colo players are up to the task – at global standard

The MSFT move compels public cloud competitors to look harder into African DCs

It also compels global colocation providers to look harder into an African presence.

Datacenter Regions and Availability Zones for Key Public Cloud Players

*Including announced regions and availability zones as of September 2017; Africa DCs expected for 2018; geo-locations are proximate.Source: The Companies, Xalam Digital Analytics research

2. Finding the Upside: Not Equal Under the

Sun

18

Not all Markets will Fulfil their Cloud Potential


These Foundational Elements Will Make the Difference Between Countries

CONNECTIVITY

DATA REGULATIONSLOCAL HOSTING- DATACENTERS

DEMAND STRUCTURE

Source: Xalam Digital Analytics Research


Connectivity: An Existential Obstacle to Cloud and DC services in Africa

AN ACCESS CHALLENGE

Cloud Threshold of Credibility: >2-5Mbps at user level, Gigabit connectivity within, and to the data center;

This is about the Abundance and Affordability of the bandwidth

AN ECOSYSTEM CHALLENGE

Cloud/Data Center is an Ecosystem Business;

It’s Metcalfe’s Law at Work; And Connectivity is the Physical

Glue It Holds Together the Ecosystem,

Allows it to Get Stronger

WHOLESALE -INTERNATIONAL

The most positive progress over the past five years; Sustained decline in capacity prices International capacity supply - doubling every other year since 2011 Lit capacity will double from 2016 levels – by 2020 Still a challenge, no longer a bottleneck

Substantial improvements in the availability of capacity But most markets have highly concentrated structures; Price points from the affordable to the ridiculous; Still a significant bottleneck – Major differences between markets.

Material increase in the pace of retail BB adoption; But ~90% of connections <5mbps; Haven’t passed threshold of credibility to truly foster cloud service

adoption; Still a bottleneck for cloud services – but strongly positive

evolution, likely to persist over medium term

WHOLESALE –METRO +

INTERURBAN FIBRE

STATUSCONNECTIVITY SEGMENTS

RETAIL – LAST MILE

CONNECTIONS

20

Demand Structure: Towards More Verticalization


Waves of Cloud/Colocation Service Adoption

ENTERPRISE & SMEs

AGRO-BUSINESS

RETAIL

INDUSTRY/MANUF

OIL & GAS

TOURISM/HOSP

PROF. SERVICES, ETC

Different use cases Different demand curves – and

pace of adoption More fragmented demand -

Higher need for verticalization Requires a dynamic digital market

Traditional Demand Curve

Digital Native Demand Curve

FINANCIAL SERVICES

GOVERNMENT / PUBLIC SECTOR

CONNECTIVITY PROVIDERS

CLOUD SP/SI

DIGITAL MEDIA, OTT, CDNs

TECH STARTUPS

FIRST WAVE SECOND WAVE

Source: Based on cloud native adoption curve concept by Stephen Orban, AWS; adapted by Xalam Digital Analytics

21

An Unevenly Distributed MTDC Market


Africa MTDC Colocation White Space – Metro Market View - 2017 E The Internet Hubs are Forming – but What About West Africa?

Bubble size and square size represent relative colo space sizeSource: Xalam Digital Analytics Research

No market has emerged as a true hub for West Africa’s Internet market

Nigeria is the natural pretender

But watch for Angola, Ghana

3. Where Does the African Telco Fit in this

Picture?

23

Telcos and the MTDC Space: No Universal Path


In a number of countries, traditional telcos are getting out of the MTDC space..

We expect [that] co-location services will continue to be a service our customers will look to us for, but we do not necessarily believe we have to own the data center assets to be effective in the delivery of those services.

Glen Post, CEO, CenturyLink Alternative ISP7%

Integrated Telco14%

Carrier Neutral Colo26%

IT/Cloud Provider

54%

Share of MTDC Colocation Space by Type of Provider – 2017 E

(Some) African markets may be different..

Alternative ISP6%

Integrated Telco59%

Carrier Neutral Colo2%

IT/Cloud Provider18%

FiberCo DC3%

Government13%

South Africa Emerging African Colo Markets*

*Sub-Saharan Africa, excluding South Africa, Kenya and Ghana; Estimates include data centers in construction and expected to launch in 2017Source: Xalam Digital Analytics Estimates

Focus on Connectivity – Nobody does it Better

Targeted Vertical Prioritization – Impossible to be Everything to Everybody in a Cloud & IoT Era

Partnerships will be Vital

In some (less developed) African Markets, Telcos will Have to Dominate the Value Chain

The Telco Role in a Cloud and MTDC Space – Some Pathways

Xalam Digital Analytics.The answer is in the data.

Xalam Analytics, LLCPart of the Light Reading Research NetworkUS Office: 1 Mifflin Place, Harvard Sq. Suite 400Cambridge, MA 02138London

[email protected]

@xalamanalyticswww.xalamanalytics.com

building the african cloud - xalam analytics · and the key market players • q&a −...

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