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With tech giants Microsoft and AWS opening local data centres soon, are we about to witness a substantial cloud transition among regional businesses?

As tech stocks continue to suffer losses, Apple has been one of the hardest hit, losing nearly $200 billion compounded by lower than expected demand for its iPhone X range, potentially due to an extremely high pricing structure and smartphone market saturation.

By contrast, Microsoft has seen its value steadily climb since CEO Satya Nadella took over the reins in February 2014, having tripled by September 2018, with a 27% annual growth rate.

Microsoft’s Ascendancy

And unlike Apple, who’s iPhone sales which still make up nearly 60 percent of Apple’s entire revenue, or Google who’s revenue comes almost exclusively (86%) from ads, Microsoft’s business is diverse. Windows, Xbox, and Surface combined makes up just 36 percent of Microsoft’s entire revenue, a fact which has no doubt shielded them from much of the current pain surrounding the FAANG stocks.

Nowhere was Microsoft’s ascendancy better illustrated than in the fact that it briefly passed Apple in market cap value to assume the title of world’s most valuable company, before the Cupertino giant retook the position.

After having lost its way somewhat in the late 2000s, many industry analysts believe that Microsoft now has a healthy and vibrant business, as its investments over recent years in cloud services and Office 365 pay off.

Local Data Centres

As if on cue, Microsoft recently announced that it would be opening local data centres in Cape Town and Johannesburg which, combined with other local cloud services, will create an estimated 165 000 new jobs in SA through to 2022.

According to Microsoft’s Cloud Development Lead, Asif Valley, the company’s investment in the local data centres aims to address business and regulatory requirements across many markets, whilst the project will also drive massive growth in the ICT sector via creating thousands of new job opportunities.

With many African companies relying on cloud services delivered from outside the continent, Microsoft’s data centres will be used to augment the delivery of cloud services, including Microsoft Azure, Office 365 and Dynamics 365.

A Push Towards Cloud Services

The local South African market has seen a notable push towards cloud services in 2018. Non-early adopters have been waiting to see whether the cloud hype has been justified, as well as waiting for the costs to drop to a point where implementation is cost effective.

The biggest advantages of cloud are fairly commonly known – agility and flexibility. However, knowing that datacentres are hosted offshore, some companies have concerns around security, legal compliance and regulation issues.

With a worldwide network connecting over 100 data centres on every major continent across the globe, Microsoft’s local data centres will now address some of these common objections. In such cases, cloud providers bring massive data centres which offer better security and tech innovation than a company trying to build its own on-premises environment.

The Multiple Advantages of Local Data Centres

These data centres support adherence to data regulations like GDPR and PoPI, while meeting corporate security requirements. Data sovereignty issues are addressed, whilst latency is improved. The pay per usage model and lack of upfront capital expenditure required for an on-premises environment only makes the use case more compelling.

Cloud platforms also enable more effective data analysis. This not only creates more effective market segmentation, it lays the foundation for 4th Industrial Revolution technologies such as the internet of things (IoT) and artificial technology (AI).

It all adds up to considerable excitement on the local tech scene regarding the imminent arrival of Microsoft’s Azure data centres.

With AWS also opening an infrastructure region in South Africa in the first half of 2020, it seems that the next year or two could be pivotal in South Africa’s transition to the cloud.