Microsoft Azure to contest supremacy in local cloud market

Owen Coppage, AGL. Photo: Peter Braig

Tech industry analysts and corporate technology executives are predicting significant new demand for cloud ­services after Microsoft officially turned on its Australian Azure data centres on Monday morning.

Analysts said the long-awaited announcement would vault Microsoft ahead of a raft of other cloud providers to contest supremacy in the local ­market with Amazon Web Services.

It announced plans to open data centres to host cloud services in Sydney and Melbourne last week, joining providers such as AWS, Rackspace, IBM and HP in chasing customers unwilling to have data managed offshore.

Gartner analyst Michael Warrilow said Google and VMWare were likely to announce Australian data centres for cloud services in coming months. ­Australian customers could use Azure before Monday, but worries on data sovereignty and latency (connection speed) to Singapore data centres had led some potential clients to hold fire.

' With AWS and Microsoft operating in Australia, local organisations benefit from the global competitiveness and scale these clouds behemoths offer,' Mr Warrilow said.

'Further, regulators will rest assured that not all eggs are going into one cloud basket. This will provide relief because uptake of infrastructure as a service is rapidly approaching one in two ­enterprises globally, with Australian organisations increasing their usage over the last year, after a slow start.'

In its launch announcement, ­Microsoft said several Australian ­customers already used Azure, including Commonwealth Bank of Australia, Carsales and energy company AGL.

AGL's chief information officer Owen Coppage told The Australian Financial Review, the company had been using Azure from its Singapore data centre to run its external facing digital platforms such as website and mobile apps.

The systems needed to be designed to avoid customer data being held ­offshore, and he said the addition of local data centres would enable AGL to be more ambitious as it gradually transitioned to a more widespread use of cloud infrastructure and applications.

'That was our first production run at using the platform and working out the nuances of how it works. It has given us the ability to scale with flexibility that is hard to replicate on premise,' he said.

'We have carefully selected and thought about the transition and now, when we move into new areas, we will typically say it has to be cloud first or subscription first, rather than investing in more hardware.'

IBRS analyst Joe Sweeney said Monday's announcement was very important for Microsoft in Australia. He said the cloud infrastructure market would rapidly consolidate to two main vendors: AWS and Azure, disappointing IBM, which has invested in local SoftLayer data centres as part of a $1.2 billion global bid to change its fortunes.

'IBM's capabilities lie in placing managed services around its cloud, and it will remain a distant competitor to the two giants,' Mr Sweeney said.

'Local cloud players will also face unsustainable competitive pressures from the top cloud players, and like IBM, rely upon providing managed services to remain viable in the long run. Even then, there will be increased competitive pressures from lower-cost, international specialists.'

Mr Sweeney said Microsoft had been losing customers to AWS, who would have preferred to stay, due to concerns about offshore data storage.

Microsoft's local cloud and ­enterprise head Toby Bowers said Microsoft was competing with ­providers such as AWS, but in some cases, like at CBA, Azure would be used in conjunction with rival services.

'We understand that the cloud market is crowded and we want to provide customers choice and flexibility. We think we can deliver the best cloud service in Australia, but obviously there are lots of scenarios in the enterprise where we fit into a broader strategy,' he said.