Asia Pacific's public cloud market is globe's growth leader

28 May 2020 Consultancy.asia

A gap has opened up in the Asia Pacific (APAC) region in recent years between the intentions to transition to cloud technology and the requisite infrastructure. The Covid-19 crisis might galvanise businesses into closing this gap, according to the Boston Consulting Group (BCG).

BCG surveyed senior executives across six major APAC economies – Australia, India, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam – finding that spending on the public cloud in these regions is growing at a quicker rate than in the US and Western Europe.

Where most APAC businesses were spending approximately 3% of their IT budget on cloud in 2016, the figure had risen to 5% by 2018, and is expected to jump to 10% by 2023.

Intentions are clear among APAC businesses – cloud is the way to go. The region is among the digital hubs of the world, and businesses have been quick to identify the benefits of cloud technology as a facilitator of digital transformation.

APAC executives see innovation and risk reduction as major drivers of cloud adoptionAccording to BCG, innovation, growth and customer engagement are among the primary motivations behind cloud adoption in APAC. Meanwhile, cutting costs remains a key benefit of cloud technology. “For example, an Australian airline was able to save US$40 million in annual fuel costs by using cloud-based analytics to simulate tens of thousands of flight patterns and create more efficient routes,” explained BCG.

Barriers

Despite a quick rate of adoption, however, cloud penetration in the APAC market remains at just 20%. This is due to barriers in holistic cloud integration, mainly to do with organisational capabilities.

The first gap is at the strategy level, with many businesses failing to develop a cloud strategy that extends across a variety of business functions. BCG reports that the financial services and industrial goods sectors are front runners when it comes to adapting their monitoring, procurement and risk practices to the cloud, while most other sectors lag far behind.

Financial services ad industrial goods have the most mature cloud operating models

In the absence of comprehensive cloud strategy and modeling, proper integration becomes a major challenge. Then comes the lack of requisite skills in the market. The rapid rate of digitalisation in APAC markets has outpaced the development of digital skills that are crucial to extracting new tech's potential.

The response has been to use a combination of training in cloud-based skills as well as recruitment to fill the digital talent gap. BCG reports that this has been the case in the cloud sphere as well. Nevertheless, training, recruitment and the overall development of cloud infrastructure is a slow process, which has hindered cloud adoption across APAC in recent years.

The Covid-19 crisis and all its related circumstances are set to accelerate this adoption process. “The Covid-19 pandemic will make it more urgent for business leaders across APAC to increase their rate of cloud adoption. As companies shift workers to virtual environments and employ end-user computing, many are rushing to roll out essential collaboration tools,” wrote Luc Grimond and Alain Schnewly, Managing Directors at BCG and authors of the report.

In emerging economies, filling talent gaps requires a mix of internal and external training and support

“To reduce vulnerabilities, they will need to move from ad hoc applications to the more secure environment of the cloud. Likewise, restrictions around workplace access could make it difficult for companies to staff and manage their infrastructure and data centers effectively. These pressures, combined with the need to prepare for a post-Covid-19 return to growth, require businesses to close the foundational gaps that have hindered cloud use to date,” they added. 

The report suggests a set of steps that businesses can take to accelerate the cloud adoption process. The first is to align business objectives between business leadership and the IT practice, followed by a migration of functions to the cloud using value-based priorities. Other recommendations include the development of a talent strategy that creates an optimal combination of recruitment and training, as well as reevaluating cyber security mechanisms.