Innovation Nation
Innovation Nation

This is the sixth edition in an eight-week series, made possible by MYOB, looking at how technology is changing the way New Zealand businesses operate.

Cloud computing has come a long way from the "running your code and storing your data on someone else's server" sentiment from seasoned systems administrators who didn't trust others to do their work for them.

Now that the concept has matured, shifting IT into the cloud offers compelling advantages, for small to medium size businesses, startups and existing ones alike.

Instead of dealing with complex licensing for standalone software packages and buying or leasing computers for them, you rent applications and pay a subscription charge (Software as a Service or SaaS).

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Infrastructure can be rented in the same way, allowing organisations to access as much computing power and storage space as they need almost instantly; or, the computing capability can be scaled down to save on costs when it's no longer needed.

LIVE Q&A: What is cloud computing?

Kallol Dutta, general manager of delivery and automation at Spark, says this flexibility can pay huge dividends to companies that know how to utilise it.

"The advantage of cloud computing is that you have various commercial models of managing costs; you can pay as a service, you can pay as you go, or pay as you scale," Dutta says.

"Instead of getting locked into big constructs which are inflexible, cloud gives you that flexibility and that flexibility enables us to be more cost competitive because you optimally use what you need," Dutta said.

Artist's impression of the cloud.
Artist's impression of the cloud.

Fast, reliable and affordable internet connections and ubiquitous public cloud providers have created a seismic shift in how IT services are consumed. Used properly, cloud services enable organisations to box well above their weight.

"Cloud computing allows small business to access IT services that historically would have been the domain of larger organisations," Says Nathalie Morris, chief executive of Auckland-based analytics company Qrious.

"You no longer need to have all the in-house expertise to be able to access software, infrastructure and platforms, because you can simply rent them," Morris says.

Local cloud provider Catalyst's managing director Bruno Lago agrees.

"Small to medium-sized organisations in New Zealand are adopting cloud computing primarily for business agility and innovation," Lago says.

"When organisations run applications in a cloud-native way they can scale their applications according to business demand, a principle we call elasticity. Rapid elasticity enables organisations to more closely align the demand from their customers with the resources they consume," Lago explains.

"It is like having a big party at home and turning on an extra fridge for the day to keep the drinks cool. You only pay for the additional electricity consumed during that day," Lago says.

Lago also points to clouds giving organisations freedom to innovate and experiment rapidly to test ideas, and the ability to turn capital expenditure into operating expenditure for businesses as major advantages.

As IDC IT services market analyst Chayse Gorton puts it: "Organisations are moving beyond questioning whether they should migrate to the cloud."

"They are instead analysing the impact of not migrating to the cloud and how they can use cloud to create competitive differentiation by shifting digital talent from traditional in-house IT to innovation initiatives," Gorton says.

Data bank
Data bank

IDC estimates the New Zealand IT services market will reach almost $4 billion in four years time, up from just under $3.5 billion last year.

Organisations using the cloud to create competitive advantages for themselves and in conjunction with innovation accelerators such as the internet of things and artificial intelligence are driving the growth in the local IT market.

Most of the cloud operators you'll come across are American multinationals, such as Amazon Web Services, Google Cloud Platform, Microsoft Azure and IBM Cloud.

Chinese and European companies are trying to get a foothold in the booming market too.
Huawei is making a big cloud push, ditto online retail giant Alibaba; France's OVH recently announced that it would open facilities in Australia, to be closer to regional customers.
Does it matter where the cloud you use is located?

Lago says: "where and with whom you store your data absolutely matters."

For starters, clouds closer to users lower the costs of large data transfers and improve application response, and there can be legal implications for information stored in other jurisdictions than our own too.

"The laws governing your data are defined by its physical location and the service provider that hosts it.

Some countries have legislation that allows them to obtain and collect data from individuals and organisations, even if the data is not on their shores. Examples include the USA Patriot Act, the Foreign Intelligence Surveillance Act and the Stored Communications Act," Lago says.

With that in mind, and growing environmental awareness, New Zealand, with its renewable energy sources (data centres consume lots of power for the servers they house and their cooling) ought to be able to attract more cloud providers, local and overseas ones.

New Zealand now has multiple subsea cables that compete with each other to provide large amounts of data transfer capacity, and we are closer to the US West Coast than Australia.

One thing that hasn't changed since the early days of IT is that technical knowledge is still required for a successful move to the cloud. What's more, due to its flexibility and connected nature, the cloud demands a different approach and new skills compared to traditional IT, so as to avoid cost blowouts and avoid security mistakes.

Searching NZ recruitment sites for cloud based positions show hundreds of unfilled positions currently.

The number of situations vacant advertised is a sign that cloud-skilled techies will continue to be in demand and act as a brake on NZ companies wanting to access IT services "on someone else's computers", ironically enough.

At midday on Wednesday, the Herald will run a live panel in which experts will discuss how this technology is changing small business in New Zealand. Tune in to participate in the live chat.