I recently sat on a panel to discuss the adoption of cloud computing in Nigeria and Africa and seeing the overwhelming optimism about cloud services among the panel and the audience, I couldn’t help but do a trip down memory lane to a time when cloud computing was considered a joke in Nigerian and African business circles. I remember working through the night preparing a detailed pitch on cloud services to a Nigerian company many years ago and delivering what I thought, at the time, was a compelling pitch to the management of the company the next day, only for the CEO to ask me, with a serious face, “…data in the cloud, what happens when it rains?”. Although it was probably slight, I knew at the time that the deal would not be done. It is therefore gratifying to observe the accelerated adoption of cloud services in Nigeria and Africa, driven by small and medium-sized enterprises (SMEs) seeking more effective ways to transform their businesses and increase efficiency and operational processes. . A study by EY published in 2021, showed that out of 89 companies surveyed in Africa, 75% confirmed that they use cloud services.
What are driving the accelerated adoption of cloud services in Nigeria and Sub-Saharan Africa (SSA)? Although COVID-19 has ultimately catalyzed the rapid growth the SSA cloud services space is currently experiencing, other important factors are highlighted below:
A significant contributor to the growth of cloud computing in Africa is the rapid improvement in broadband availability, speed and resilience across Africa. Data provided by Xalam Analytics to the African Data Center Association (ADCA) shows that bandwidth capacity more than doubled between 2017 and 2020. In Nigeria, broadband penetration increased by an unprecedented 92% between 2017 and 2021 only. As broadband infrastructure has improved across Africa, cloud services have become more accessible and reliable, leading to increased adoption by individuals and businesses.
Another key driver of cloud services growth is the cost management imperative for most businesses on the continent. Many African economies have struggled before and after COVID, which means SMEs are being forced to reduce/eliminate avoidable costs, including expensive software, hardware and labor expenses. Strategic shifts in on-premises business operations towards colocation and managed services and the adoption of software as a service (SaaS) have positioned businesses on the continent for growth and profitability by helping to reduce costs and increase efficiency. With cloud services, savings in avoided software and hardware purchase costs can be channeled by African SMEs into funding growth initiatives.
Time-to-market is a critical competitive differentiator for SMBs, as the ability to reduce time from idea to product/service can be the difference between success and failure for an SME. The inherent benefits conferred by cloud services, such as the ability to work collaboratively anywhere and anytime, dynamic scalability, and access to the latest and most efficient software, have dramatically shortened the time marketing for SMEs. With cloud services, processes that, for example, used to take 3-6 months to complete are now completed in 3-14 days.
Despite the success of cloud services in SSA, considerable challenges continue to threaten the growth of cloud computing on the continent. A major deficit in supporting infrastructure across the continent has resulted in over 80% of the continent’s data being stored outside of Africa, despite the growing number of data centers being built on the continent. Broadband availability, cost and quality remain sub-optimal, limiting the ability of SMEs across the continent to utilize cloud services. Unclear regulations and laws regarding data management also pose a risk to cloud services, as many governments on the continent insist that their citizens’ data be stored locally and in some cases insist on the use of physical servers for data storage.
Nonetheless, the outlook for cloud services in Nigeria and the African continent is indeed bright. The substantial investments in cloud computing services in the region are an indicator of the expected growth in the cloud computing space over the next few years. In Nigeria alone, there has been over $1 billion in investment in cloud services between 2019 and 2022. These include direct investment in building data centers and cloud services. inq. continues to invest heavily in its cloud-based service offerings, including its Edge AI and IoT, Fabric, SDN/NFV for Edge Cloud and Edge Baremetal solutions. UK fund Actis recently acquired a majority stake in Nigerian data center provider Rack Center in a $250m deal with Rack Center, later announcing a $100m expansion plan by 2022. Zimbabwe-owned Africa Data Centers recently raised more than $300 million from institutional investors such as the International Finance Corporation (IFC) and the UK CDC. In addition to these acquisitions, the entry of hyperscalers (AWS, Azure, Huawei Cloud) into the SSA market indicates the confidence of the global ICT community in the future growth of the cloud services space in Africa.
At inq, we believe that despite the challenges highlighted above, the African cloud services market is an exciting place right now. As a leading solutions provider on the continent, we will continue to fuel the exponential growth of cloud services across Africa in the future.
Author: Stephen Okoye, CTO, inq. digital nigeria
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