In this Insight, Neuralytix analyzes Cloud Expo Asia, held in conjunction with Data Centre World, at the Marina Bay Sands in Singapore between October 12-13, 2016. Given its prominence and size as a regional trade show, Neuralytix believes this conference is a reasonable barometer of sentiment across the Asia region.
Neuralytix identified several key interest areas at the conference: software-defined infrastructures (in particular, software-defined storage and software-defined datacenters); building, leveraging and migrating to cloud datacenters; and hybrid cloud computing.
Neuralytix presented on the topics of software-defined storage, software-defined datacenter, and the opportunity for the VAR and SI channel with the cloud.
Hybrid Cloud Computing
Perhaps the most prominent set of exhibitors by far, at Cloud Expo Asia, were Infrastructure as a Service (IaaS) cloud providers. Each of the exhibitors espousing their relative superiority over another through various differentiations, including network bandwidth, security, uptime, years in business, etc.
In particular, many promoted their ability to reach the Chinese audience with minimal latency, fenced in by the Great Firewall.
Compared to North America, the message was the same – use the Cloud to reduce time-to-deployment, minimize or eliminate capital expenditure, and improve total cost of ownership. As expected, given the primarily Singaporean audience, the message was received with some skepticism and a healthy dose of caution, given the Asian propensity towards being in control of its own resources. However, Neuralytix believes the message that the Cloud is secure and a viable option was heard loud and clear; and that it is not a question of if the Asian IT community will adopt Cloud computing and IaaS, but rather a question of when and how much.
That said, the same audience also found favor in the ever lowering cost of investing in IT equipment, especially with (hyper-)converged infrastructures – given its relatively low cost of entry and scalability. Whereas, in Neuralytix’s opinion, North America (and to a lesser, but similar extent, Europe) over rotated towards the Cloud as a messianic alternative to capital investments in IT, Neuralytix expects the APAC region to march towards hybrid computing more readily than wholesale moves into the Cloud.
Software-Defined Infrastructure
Adoption of new infrastructure in Asia typically follows North America between 12 to 24 months. Currently, Asia is looking at opportunities that software-defined infrastructures, both in storage, and at the datacenter level can help.
Despite a typically self-reliant culture, Asian customers are quick to accept and are adopting in an accelerated manner, hyper-converged infrastructures (HCI). Neuralytix believes that companies in Asia have recognized, perhaps quicker than those in the Western world, that HCI (and standard converged infrastructure) can drive down infrastructure capital investment, as well as restraining operating expenses, while enabling a scale as you go approach.
Customers exhibited the expected concerns regarding protecting existing investment, and the overall impact on the datacenter with respect to introducing and migrating to a software-defined infrastructure. However, customers seem satisfied by the evolutionary approach to software-defined infrastructure.
In interviews with a number of vendors, the success of HCI has exceeded all expectations in terms of the pent up demand, units shipped, and the revenues. Vendors reported that success was not limited to certain countries, but that expectations have been exceed across the board.
HCI seemed to appeal to all sectors, all sizes of enterprises, and all countries. China, in particular, it seems has wholeheartedly embraced HCI as a way of catching up to the West by way of minimizing time-to-deployment of large scale projects, as the Chinese focus away from being managers and administrators of IT equipment, moving up the stack to more value creating, information and insight producing activities and applications.
By 2020, Neuralytix expects China to be in the top three countries in terms of HCI node count – a staggering turnaround as it moves from deployments that often involved direct attached storage to individual servers running disparate applications.
VAR and SI channels
During the conference, Neuralytix addressed Asian VAR and SI channel partners. They, like all other VARs around the world are experiencing pressures on revenues and profits. Many of them were perplexed about how to integrate the Cloud into their portfolio.
Issues that were identified including the loss of integration margin due to convergence, account control when reselling cloud services, and where to find new sources of sustainable revenue.
Neuralytix presented on this topic, and gave similar advice to the Asian VAR and SI channel community, as it does to the North American and European channel community – the channel must engage higher in the IT stack, reselling cloud services often results in loss of account control, and the best source of sustainable, high margin revenue is by establishing themselves as managed service providers.
The channel must move further up the IT stack, providing more than customization and deployment services. It needs to be able to help advise, consult and implement sector or country specific enterprise applications. Just as installation of Microsoft Exchange, SQL Server or Oracle was once a highly specialized activity for the channel, the new opportunities lie in the ability to advise customers on the best use and implementation of concepts such as the Internet of Things (IoT) or Big Data or industry specific applications.
As more and more users move away from self-hosted Exchange and other email applications, the channel is also recognizing that they are losing significant revenue and margin dollars through the resell of applications such as Office 365. The channel is only able to recognize the commission offered by Microsoft for being the partner of record. The channel is no longer able to recognize the entire deal. Exchange is not a unique application, the resale of any cloud based application comes with the same restrictions.
That is why Neuralytix advises the Asian channel community to leverage the trust that their customers already have in them, and establish themselves as a managed service provider. The channel could provide services such as disaster recovery as a service (DRaaS), backup as a service (BUaaS) or even desktop as a service (DTaaS). The benefit of providing such services can be tremendous – cloud service provision is “sticky”. Once the channel starts getting customers onto their service, customers are reticent to change cloud providers due to the cost, time and effort involved. Additionally, the channel has the ability to make better margins on the on-premise equipment it sells by burying the cost of the service into the deal. Being a managed service provider typically requires only one customer to sign on to pay for the upfront infrastructure and capital costs, with marginal costs involved subsequent additional customers – again creating new opportunities for higher, sustainable margin dollars.
Conclusion
Neuralytix believes that the Asian/Pacific market is as buoyant as ever. With countries such as Australia/New Zealand (ANZ) almost at par with North America in terms of technology adoption, the region is accelerating the pace at which it keeps up with technology innovation.
With so many sovereign nations in the region, regulatory and governmental demands are forcing local enterprises to leverage technology to meet compliance goals. In doing so, local enterprises are turning to the Cloud for help, at the same time, looking to drive down the total cost of ownership of technology infrastructure overall.
To meet global competitive demands, local enterprises are also trying to find ways in which it can better leverage the data it stores through the use of Big Data, at the same time, figuring out how to integrate inputs from IoT devices.
To achieve this, software defined infrastructure is allowing local enterprises to evolve their environments at a pace at which the enterprise is comfortable; and the Cloud is filling gaps when they arise.