Only one company in South Africa can lay claim to owning more than a quarter of the total data centre market in the country – and that company is Business Connexion. New research recently released by Frost & Sullivan indicates that with 27% market share, the organisation which is staking its claim as the country’s leading provider of cloud-based services is well ahead of its competitors.
That much is clear from the report, ‘An overview of the South African Data Centre Market’, released this November.
Johan van Huyssteen GM: Cloud Infrastructure Services at Business Connexion, explains the significance of data centre capacity: “The data centre is the fundamental building block for the hosting and delivery of cloud services. These facilities underpin the ‘x-as-a-service’ model, where ‘x’ is any kind of service – from software to infrastructure – and are an indicator of the ability of a service provider to scale to meet market demand.”
In its report, Frost & Sullivan (FS) puts annual data centre revenues at R2.3 billion in 2010 while it expects a Compound Annual Growth Rate of 9.6% through to 2016, when revenues are anticipated to R4.0 billion. It notes that the top four data centre providers have a combined market share of 68% with the remaining 32% contested by more than ten companies. The nearest competitors to Business Connexion are IBM with 16% and Dimension Data with 15%.
Notably, van Huyssteen draws attention to key observations contained within the report. “FS points out that there is a high degree of rivalry in this market; the cost of setup and therefore the barrier to entry is high; and leased-versus-owned data centres impact industry cost structures. These are vital observations which confirm the validity of the long-term strategy taken by Business Connexion in investing in its own data centre capacity which kicked off in 2006 – and which today, gives us a clear lead in this market.”
With FS pointing to location, service level agreements, value-add and compliance as key differentiators in a competitive market, van Huyssteen adds that the nationwide reach offered by Business Connexion is complemented by its capacity outside of South Africa. “That’s important for many of our clients which are expanding into neighbouring territories,” he says – adding that the combination of its broad range of competencies creates substantial value in the services the company delivers for clients.
Increasing uptake of data centre services will be the main driver for the growth anticipated by FS; it says contributing trends include accelerated outsourcing of data centre requirements, which will allow companies to maximize returns on their IT spend in precarious economic conditions; increased IT spending as an integral part of growth strategies; and a drive towards SME adoption of data centre-based services. “That’s an affirmation of our belief in the cloud model for IT service delivery,” van Huyssteen says.
Indeed, FS notes that more companies are outsourcing the management of their servers and other non-critical IT functions because of the increasing costs of electricity, land, IT expertise and equipment. It also says virtualisation solutions including virtual machines, desktops, software-as-a-service and cloud storage will be important products in the future as they offer savings on IT infrastructure and are accessible to the SME market. “With our data centre capacity as the foundation, Business Connexion is already delivering these services to market right now. It is a nascent market, but the principles and benefits are proven. And as demand escalates, Business Connexion will use the advantage we’ve build over the last five years to stay at the forefront,” van Huyssteen concludes.