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Frost & Sullivan: Infrastructure as a Service Adoption Leaps Ahead As More Data Centres and More Participants Entice Companies to Experiment With Cloud Computing

Market forecast to grow by 49.8% and reach $466.5 million by 2017

Sydney, 16 November 2011 – Australia experienced a huge spurt in the number of companies adopting the public cloud Infrastructure as a Service (IaaS) delivery model within the last 12 months, with almost half  (49%) of all cloud computing users trying IaaS.  A growing number of local market participants plus an increase in the number of local data centres are driving awareness of the benefits of infrastructure from the cloud, resulting in 38.3% growth for the IaaS technology segment in 2010 and revenues of $27.5 million.  
The IaaS market is expected to remain strong, growing at a compound annual growth rate of 49.8% over the next seven years to reach a total value of $466.5 million by 2017.  The findings were released today in Frost & Sullivan's latest cloud computing report, AStrategic Analysis of the Australian Infrastructure as a Service Market 2011.

The study defines IaaS as a provisioning model in which an organisation outsources the hardware used to support business operations. The service provider owns the equipment and is responsible for housing, running and maintaining it with the client typically paying on a per-use basis.
The two components of IaaS are compute-as-a-service, which is sold as a combination of server computing, memory and storage; and storage-as-a-service which is primarily sold as stand-alone storage space in the cloud.
IaaS' ease of use, particularly through web-enabled self-provisioning and the instantaneous provision of infrastructure are the major drivers encouraging adoption by Australian organisations. Other positive factors include infrastructure scalability, the ability to turn IT infrastructure into an operating expense, the elimination of up front capital expense, a reduced requirement for internal resources, low barriers to entry and lack of long-term commitments.
The main restraints holding back market growth continue to be related to privacy and security, with organisations trying to understand the impact of regulatory compliance on data sovereignty issues. The report also identifies the inability to precisely track the location of data in the cloud as a high concern for business.  High latency, reliability of service levels and data handling in the areas of migration, recovery and archiving are other areas of concern. Frost & Sullivan suggests that public cloud IaaS providers will need to deliver similar or equivalent service to that which organisations are familiar with in order to encourage greater adoption.
The most popular component of IaaS, accounting for 91% of the Australian market, is compute as a service, which is sold as a combination of server computing, memory and storage. Given the low cost of trying out the service, many enterprises have taken the opportunity to experience the benefits and being satisfied, have begun migrating sections of their infrastructure to the cloud. High organisational interest and significant cost savings are expected to drive demand for compute as a service through to 2017.

The second component of IaaS – Storage-as-a-Service –  is not witnessing the same level of interest due to the need for huge bandwidth to transfer the large amounts of data that organisations deal with today. Those companies that are turning to storage-as-a-service typically do so to augment their storage infrastructure due to increasing data storage requirements, or as a low-cost option to support their disaster recovery/business continuity strategies.
Arun Chandrasekaran, APAC Research Director – ICT Practice, Frost & Sullivan, said, “Australian companies will continue to turn to IaaS in the short and medium term, driven by cost pressures, scarce in-house resources and an increasing need for business agility.  The last few years have served as an important catalyst for adoption of infrastructure-as-a-service due to the stringent focus on cost saving. Australia is already the largest market in Asia Pacific for public cloud IaaS and we expect a huge increase in the number of domestic suppliers in the years ahead.  Adding further impetus to the market, several global service providers have indicated that they will be setting up local data centres to capitalise on the burgeoning market growth.”
The biggest adopters of IaaS are IT and telecommunications service providers who are turning to the services to meet fluctuating IT requirements and from a desire to achieve cost efficiencies. There is also strong demand from software companies that have developed Software as a Service (SaaS) solutions. Other vertical markets active in IaaS include government, the education sector, internet-based businesses such as gaming, social networks and web portals, hospitality, retail and professional services.
Other major findings of the analysis include:
  • 43% of organisations are now using some form of cloud computing;
  • 41% believe that cloud computing is a number one priority for them in the current year;
  • Almost one third of IT decision-makers say that senior management is increasingly exerting pressure on IT to look at a cloud alternative in order to reduce costs and increase business agility;
  • 41% of organisations believe that the risks associated with cloud computing – such as security, privacy and reliability - far outweigh the benefits.

Frost & Sullivan's Strategic Analysis of the Australian Infrastructure as a Service Market 2011 examines current and anticipated future demand, major drivers and restraints affecting the Australian IaaS market. The report forms part of the Frost & Sullivan’s Cloud Computing Research Program 2011. All research services included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants. Interviews with the press are available.

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