25 October 2019
Econ 4.0: Is the future cloudy?
Here are two geeky — and corny — questions. One, how old
is the computer? Answer: As old as Adam and Eve. It was an Apple with
limited memory, just one byte. Adam bit on it — and everything crashed.
Two, who invented cloud computing? Answer: It was Moses. He was the
first with a tablet that could connect to the cloud.
If you think those are silly jokes, yes they are. But
what is not laughable — other than the cloudy haze — is that global
spend on public cloud services is set to cross US$214 billion by 2022,
up from US$182 billion in 2018, according to Gartner Inc. That is a
compound annual growth rate (CAGR) of 17.5% between now and then.
“Cloud services are definitely shaking up the industry.
What we see now is only the beginning. We project the market size and
growth of the cloud services industry at nearly three times that of
overall IT services by 2022,” says Sid Nag, a research vice-president at
Before we proceed, let’s pin down some definitions.
Simply put, “cloud computing” refers to any application that can be used
anywhere, anytime and on any device as long as the device is connected
to the internet. There are three kinds: Infrastructure as a service
(IaaS), which mimics hardware; Platform as a service (PaaS), which
refers to the operating system or environment; and Software as a service
(SaaS), which are applications on the cloud.
There are three types of cloud: Public cloud (examples
include Gmail, Hotmail, Twitter, YouTube, Facebook), where resources are
shared between users; private cloud (such as those used by banks,
hospitals, insurance companies and government agencies), where the
resources are only available to authorised users; and hybrid cloud,
where some critical applications (such as finance and employee details)
are on a private cloud and non-critical applications (such as marketing
collateral and e-commerce merchandise) are on a public cloud.
The fastest-growing segment, as can be expected, is
IaaS. That is because putting company workloads on a public cloud frees
up (in many cases, eliminates) the need for servers, storage and
networking gear to be kept and maintained in-house or in data centres.
IaaS is set to grow 28% this year to reach US$39 billion globally, up
from US$30.5 billion in 2018. The second-highest growth rate of 22% will
come from PaaS.
More than a third of all organisations view cloud
computing as a top three priority for investing. By the end of the year,
more than 30% of new software investments will shift from cloud-first
“Most organisations need cloud-related services to get
on board public clouds and to transform their operations. Currently,
about 20% of cloud budgets are spent on cloud-related services such as
cloud consulting, implementation, migration and managed services. We
expect this to increase to 28% by 2022,” says Gartner’s Nag.
What about Asia-Pacific? This region (excluding Japan)
will spend US$26 billion this year on cloud-related services, up a big
47% from 2018. By 2023, this spend is set to cross US$76 billion.
“Improving business agility and speed are the main focus
areas. Security concerns and IT governance are major inhibitors.
However, sentiments about security on public cloud have changed over
recent years, with improving IT security now considered one of the top
drivers for public cloud adoption,” says Ashutosh Bisht, a senior
research manager for Asia-Pacific at International Data Corp (IDC).
China is obviously the biggest market and accounts for a whopping 50% of
Asia’s overall spend. The country is on track to plonk US$12.9 billion
(RM53.8 billion) on public cloud services this year. In second place,
and far behind, are companies in Australia and India, which will invest
US$4 billion and about US$3 billion respectively on cloud-related
The top three sectors? Professional services, banking,
and discrete manufacturing. These will account for 33% of all public
cloud services spend, mostly on IaaS as a replacement for buying data
centre hardware. However, construction and professional services (for
example, accounting, legal and software development) will see the
fastest growth in public cloud spend between 2018 and 2023, says IDC.
Malaysia’s gross spend on information and communications
technology (ICT) products and services is forecast to cross US$17
billion by 2020, from about US$15 billion in 2017, according to
Gartner’s estimates. That is a CAGR of 4%. The fastest-growing segment
would be software, at 9% a year to reach US$1.67 billion next year.
Last year, the Asia Cloud Computing Association (ACCA)
ranked Malaysia No 8 out of 14 Asia-Pacific countries in its cloud
readiness index (CRI). The CRI ranks the region’s economies across 10
parameters, including data centre risk, international connectivity,
broadband quality, cybersecurity, privacy, intellectual property
protection, freedom of information, business sophistication and
“Malaysia retained its 2016 ranking of 8th place. It
performed exceptionally well in the cybersecurity parameter and made
moderate progress in government regulatory environment. However, the
country has declined or stagnated in most other parameters. It lost five
spots in business sophistication, suggesting that it could be doing
more to facilitate business operations. It also experienced lower scores
in the aggregated cloud infrastructure and government segments, two
fundamental drivers of cloud readiness,” says ACCA’s report.
ACCA’s 2019 board includes members from Amazon Web
Services, Google, Microsoft, Verizon, Equinix, Globe Telecom, Digital
Realty, Ericsson, TrustSphere and Salesforce.com. Singapore led the
region in cloud readiness, followed by Hong Kong, New Zealand, Japan,
Taiwan, Australia, South Korea, Malaysia, the Philippines, Thailand,
Indonesia, India, China and Vietnam.
“The CRI measures the extent to which economies are
prepared to adopt and roll out cloud technologies. It ranks where
economies are in relation to each other, rather than comparing absolute
scores. It is a composite index made up of 10 parameters grouped into
four readiness segments — cloud infrastructure, cloud security, cloud
regulation and cloud governance,” says the report.
One key sector that could tilt the scales? Small and
medium enterprises (SMEs), which are the backbone of Malaysia’s economy.
There are about a million SMEs in the country, according to SME Corp
Malaysia, the central coordinating agency under the Ministry of
International Trade and Industry. Cloud adoption has huge potential to
grow if SMEs jump on board to adopt cloud computing. That is one reason
the market for cloud-related services may grow at 24% a year for the
next five years.
“The pace of change in Malaysia is a bit slow because of
the inherent preference for traditional and on-premise IT architecture
and services sourcing models. The majority of enterprises are lagging
behind the cloud maturity curve. They are still in the early stages of
cloud adoption, with mostly ad hoc or opportunistic use of
infrastructure and non-critical cloud services,” says Sherrel Roche,
senior market analyst at IDC Asia-Pacific.
An overwhelming 77% of SMEs in Malaysia are
“micro-enterprises”, or those with fewer than five employees and annual
sales below RM300,000. A further 21% are small enterprises with fewer
than 75 employees and annual revenue of less than RM15 million. The
final 2% are mid-sized enterprises with a headcount of 75 to 200 and
annual sales of RM15 million to RM50 million.
Meanwhile, in the BSA (Business Software Alliance) 2018
Global Cloud Computing Scorecard, Malaysia dropped one place to No 14
out of 24 leading IT economies. It was No 13 in 2016.
BSA reports that Malaysia has modern e-signature and e-commerce laws in
place. These measures provide a good level of protection for cloud
computing. It also has data protection regulations that are generally
compatible with globally recognised frameworks.
BSA ranks countries by five criteria, including
cybersecurity, compliance with international standards, IT readiness and
broadband deployment. Malaysia’s aggregate score for 2018 was 59.3. The
top six were Germany (84), Japan (82.1), the US (82), the UK (81.8),
Australia (80.6) and Singapore (80.2). South Korea was No 12 (72.2);
Thailand, No 19 (48.4); India, No 20 (48.4); China, No 22 (43.7);
Indonesia, No 23 (40.7) and Vietnam, No 24 (36.4).
Worldwide, it is the SMEs that are jumping on the public
cloud bandwagon because unlike large enterprises, which have or need
data centres, they cannot afford to invest in servers, storage and
networking gear. Those fixed assets are a huge capital expenditure. On
the cloud, SMEs can operate on an operating expenditure model, paying
for computing and services as and when required, also known as
Also, backup and recovery can be automated, software
updates can be done automatically, employees can access the cloud
anywhere at any time from any device connected to the internet and teams
in remote locations can collaborate seamlessly. In other words, cloud
levels the playing field for SMEs.
Across the Causeway, the Infocomm and Media Development
Authority of Singapore announced in June its GoCloud initiative to help
ICT SMEs in the city state to transform their software offerings into
being cloud-ready. Three approved companies — Amazon Web Services, IBM
Singapore and NTUC LearningHub — will provide these SMEs with technical
consultancy services to build up their digital capabilities in cloud
What can governments do to shrink the digital divide?
ACCA recommends that governments work to develop initiatives that boost
connectivity fundamentals. These could be government cloud (G-Cloud)
schemes that improve international and domestic connectivity as well as
natural digitisation plans that drive short-term technological
innovation in emerging fields such as 5G, the Internet of Things,
artificial intelligence, and address longer-term development goals.
Some countries are already doing that. The CRI 2018
index includes six non-Asian economies (Brazil, Germany, South Africa,
the UAE, the UK and the US) to provide an additional layer of
international comparison. “The results show that the top Asia-Pacific
performers (Singapore and Hong Kong) come out as global leaders, ahead
of much larger economies such as Germany, the UK and the US,” says ACCA.
The bottom line: Is the future cloudy? Yes, for two
reasons. One, because cloud computing offers a standardised platform for
hosting applications that can be accessed individually and globally.
Two, because it is no longer “why” you should consider moving to the
cloud, but “how” and “when” should you do it. The future should be
cloudy, but not hazy.