More cloud is moving to Australia, with Amazon Web Services and Rackspace the latest two cloud computing operators to open data centres here.
The reason is simple – customers are demanding it, partly for better technical performance and partly to comply with Australian regulations on data storage.
Although Australian cloud computing providers have run cloud data centres locally since the concept’s infancy, until recently the big global players operated here through overseas outsourcing arrangements.
However, Gartner analyst Rolf Jester says there is a definite trend for cloud operators to move their operations here.
“The assumption that cloud has independence from geographic location runs squarely in the face of buyer demand and requirements – location does matter to people,” Jester says. “It’s partly the need to control things but some organisations have legal obligations to protect some data and keeping it in the confines of a particular geographic jurisdiction can help.”
Jester adds that Australia is “not a bad location” even for an Asia Pacific regional data centre. “It’s maybe not the centre of Asia or the lowest cost country but it has readily available infrastructure and skilled staff,” he says.
The biggest cloud infrastructure-as-a-service operator globally is Amazon Web Services, which earlier this month announced it was opening Sydney as its ninth global region.
The senior vice-president for United States-based Amazon Web Services, Andy Jassy, says the company has 10,000 customers in Australia and New Zealand but he expects this to grow significantly.
“The fact that we had over 10,000 customers without any physical infrastructure here and they were using us for every imaginable use case was the first sign for us that there was real demand here,” Jassy says.
“Australia has one of the largest technology spends in the world and Australian companies have proven comfortable with outsourcing their technology needs. We felt it was a compelling market for us and we really believe Australia has a chance to be one of our biggest regions.”
Jassy says both existing customers and potential new customers were telling AWS sales staff they wanted to move more of their workloads to the cloud but needed the facility to be in Australia, mainly to reduce the amount of delays on the network.
The AWS Sydney region consists of two data centres in separate locations but Jassy says the company is ready to scale this up quickly to meet growing demand.
Meanwhile, US competitor Rackspace is also set to open a cloud computing facility in Sydney, as the anchor tenant at the new Digital Realty data centre in Erskine Park.
Rackspace country manager Mark Randall says there are thousands of Australian customers already using the company’s cloud data centres overseas and some of them would migrate to the local facility when it opens in December. He adds that others would remain global customers, especially businesses with an international workforce or customer base.
Rackspace’s decision is driven by customer demand. “Some of it is psychological,” Randall says. “There’s also the regulatory regime for certain industries like finance. And the third reason is performance – certain applications really benefit from hosting as close as possible to the customers.”
For example, Randall says hosted virtual desktop environments, where machines become a thin client for applications such as Microsoft SharePoint collaboration software, are particularly sensitive to network latency. AWS’ Jassy points to media delivery – such as video streaming or online games – as another example.
Randall says the national broadband network – assuming it gets deployed according to current plans – would drive growth of cloud computing and IT more generally. However, he says cloud computing will continue its rapid growth “with or without the NBN”.
Not only Australian businesses choose to base cloud computing locally but also international companies with a big local presence. For example, Fuji Film has based the entire cloud operations for its Australian business here, systems integrator and IT consultancy Ethan Group chief executive Paul Kawtal says.
Data is subject to the laws of the jurisdiction in which it is stored, so keeping sensitive information within the country can make life simpler from a legal point of view. For example, updates to the Privacy Act mean that Australian companies are liable for breaches of Australian privacy law if they send data offshore. The legal risk doesn’t apply if the data is outsourced within the country because the local cloud provider would be held responsible instead.
In certain industries, such as banking, the law has even more to say about the location of data. Cloud software company Rubik Financial’s CEO, Brent Jackson, says his company uses Australian data centres only because his customers in the financial sector demand it.
Rubik runs its secure production environment from a Macquarie Telecom data centre and bases its staging and testing development environment with Dimension Data-owned BlueFire.
“Banks and credit unions and building societies are all regulated by APRA [Australian Prudential Regulation Authority] and they have a lot to say around collecting data and taking that data offshore,” Jackson says. “The feedback is that it’s easier for them to conform to guidelines by hosting their data in Australia with an Australian company.”
Jackson says his clients prefer the data centre to be owned by an Australian company as well because US operators such as Rackspace and Amazon Web Services could be bound by the Patriot Act to hand over data to the American government or US courts, even for data centres based outside the United States.
For his part, AWS’ Jassy acknowledges that his company is bound by US laws but argues that it is a “red herring”.
“The reality is that the Patriot Act is actually less severe than the data access laws in many of the countries we operate in,” Jassy says. “If you look at how data access laws have impacted our customers and cloud customers over the past 6½ years, it’s had no meaningful impact on our customers or our business.”
While many financial institutions do use overseas cloud computing providers such as Salesforce and DocuSign, Rubik’s Jackson says Australian competitors have an edge in this sector because there are fewer regulatory hurdles to get a local outsourcing arrangement approved.
IT outsourcing provider Ajilon Solutions Centre general manager Paul Craig says government clients are another market sector demanding Australian cloud solutions.
“When you combine federal and state governments, you’ve got one of the largest buyers of outsourced IT and they’re not ever going to send their data offshore,” Craig says. “As governments migrate into a cloud environment, which will happen over time, it will create a critical mass of demand to make the Australian cloud data centres viable.”
Craig says businesses don’t see the decision on where to store data as “one size fits all” – it is a matter of providing layers of protection and access for different types of data. Some companies have a lot of staff or customers accessing the systems from overseas, so the data would need to be replicated in other countries to maintain performance, he says.
The biggest Australian-owned cloud provider is Telstra, which has been focusing intently on cloud strategy and grew its cloud business 42 per cent last year alone. Telstra has 15,000 Australian cloud customers and is planning to expand to Asia.
Telstra’s director of cloud solutions, Michael Riad, says location is a big factor for his customers and that gives Telstra an advantage because of its national presence.