This article first appeared in Digital Edge, The Edge Malaysia Weekly on August 22, 2022 - August 28, 2022

Here’s a corny corporate story: On a late Friday evening when the office was deserted, an engineer saw the company’s CEO standing next to the new office shredder. The engineer walked up. “Can I help, sir?”

“Sure, young man,” the CEO said. “My secretary has left for the day. This is an important document, and I don’t know how this gizmo works.”

The engineer turned on the shredder, took the paper from the CEO, inserted it in the slot and pressed “start”.

“Excellent!” the CEO exclaimed as the paper disappeared inside the machine. “I just need one photocopy.”

If that quip made you wink, these points should make you think: To help save the environment, why keep paper documents? Why not encrypt your documents and save them with a secure password to ensure privacy? And finally, for BC/DR (business continuity/disaster recovery), why not keep a copy in the cloud?

The first two points may be clear to most CEOs, but the third point may raise some alarms. We will address the warnings a little later. But for now, companies — both public and private — are bullish about workloads on cloud.

Worldwide end-user spending on public cloud services may reach US$494.7 billion (RM2.2 trillion) in 2022, up 20.4% from US$410.9 billion in 2021, and will jump to nearly US$600 billion in 2023, according to Gartner Inc.

Sid Nag, Gartner’s research vice-president, says the cloud is the powerhouse that drives digital organisations. “CIOs (chief information officers) are beyond the era of the irrational exuberance of procuring cloud services,” he says. “They want public cloud providers to drive specific, desired business and tech outcomes in their digital transformation (DX) journeys.”

The largest segment is SaaS (software as a service), which will cross US$176.6 billion in end-user spending this year. “IT leaders who view the cloud as an enabler rather than an end state will be most successful in their DX journeys,” Nag says. “Organisations that combine cloud with other emerging technologies will fare better.”

The Edge

Technically, many companies choose “containers”, which are software packages that can run apps on any operating system (OS). The software packages are abstracted from the OS so they can be run across any platform or cloud.

Edge and cloud computing take advantage of such containerised apps. Edge containers are located at the edge of a network, closer to the data source; cloud containers are in the data centres. Organisations that have already implemented containerised cloud solutions can quickly deploy them on the edge.

According to International Data Corp (IDC), up to 75% of companies plan to boost investments in edge computing over the next two years by an average of 37%. Why? Better app performance, expanding workloads, and new use cases that leverage artificial intelligence (AI) and machine learning (ML) demand greater compute capacity at the edge. The amount of data stored at the edge is rapidly expanding and needs to be stored longer.

Dave McCarthy, IDC’s research vice-president for cloud and edge infrastructure services, says enterprises want the benefits of a cloud with the freedom to deploy anywhere. “This creates tremendous opportunities for tech suppliers to reduce complexity and maintain consistency,” he says.

Jennifer Cooke, IDC’s research director for edge strategies, says IT is driving and supporting critical digital-first efforts in end-user organisations. “Companies will continue to support different compute, storage, and network architectures at the edge,” she notes. “Being able to deploy in multiple environments is also a key selection criterion, underscoring an organisation’s plan to extend compute resources into many different environments, including in the cloud, core data centres (DCs) and in the field.”

All clouds are housed in DCs. And the Asean region will be the world’s fastest-growing DC market in the future, exceeding the growth in North America and the rest of Asia-Pacific. According to an investment report published by the Asean secretariat early this year, the DC market in the region will reach US$3.5 billion by 2024 — from US$1.9 billion in 2019 — growing at a compound annual growth rate (CAGR) of 13%. In 2020, Asean had 300 DCs, 70% of them concentrated in Malaysia, Singapore and Indonesia.

What’s driving demand for cloud and DCs? Internet of things (IoT), especially in Malaysia, Indonesia, Singapore, Thailand, Vietnam and the Philippines. “This stems from their strong focus on smart cities development, manufacturing, and the rapidly growing digital economy,” the report states.

“Many multinational enterprises (MNEs) have set up centres of excellence and R&D facilities to develop and customise technology solutions for local and MNE clients.”

Another reason? Some technopreneurs are transforming into unicorns. “Among the region’s unicorns, start-ups with valuations of US$1 billion or more, Carsome, a Malaysia-based used car marketplace, and Carro, a Singapore online car sales platform, use AWS,” Nikkei Asia reported in August 2021.

“Bukalapak, one of Indonesia’s largest e-commerce platforms and a Tokopedia competitor, uses Microsoft Azure. Alibaba is one of Tokopedia’s largest shareholders, and Microsoft has stakes in Grab and Bukalapak.”

Microsoft reportedly plans to invest US$1 billion over the next five years in Malaysia. “The announcement on what would be the US tech giant’s biggest investment in Malaysia comes after the government gave conditional approvals for Microsoft, Google, Amazon and Telekom Malaysia to build and manage hyperscale DCs and provide cloud services,” Nikkei Asia reported in April 2021. “Investments from these cloud service providers will total RM12 billion to RM15 billion over five years.”

Malaysia’s public cloud market was worth US$643.4 million in 2020, according to a research firm, Twimbit. “Public cloud accounted for 3.63% of the total IT spend in Malaysia, making it the second-biggest cloud market in Asean, behind Singapore,” Twimbit reported. “SaaS was the biggest chunk with US$402.6 million, while IaaS (infrastructure as a service) saw the fastest growth at 17.21% and may cross US$260 million in 2023.”

What about small and medium enterprises (SMEs)? The cloud can help Malaysia in two vital areas — services and manufacturing. The services sector employs 62% of Malaysia’s workforce, while manufacturing employs 17%. Manufacturing is a significant component of Malaysia’s economy and contributes about 23% to its GDP. Up to 98% of companies in the manufacturing sector are SMEs. Services employ more people since services need a substantial human component, while manufacturing requires a significant capital outlay.

Are SMEs in Malaysia moving to the cloud? “Misconceptions have led to a rather slow adoption,” Twimbit reported in December 2020. “For example, many assume high costs associated with the transition to cloud and difficulty attaining the cost benefits of adopting cloud in the short run. Studies have shown that only 32% of SMEs are ready to adopt new technologies.”

The flip side: Cloud outages, which can drive a deep wedge between operators and customers, leading to cascading angst down the value chain. The proportion of outages costing over US$100,000 has soared — from 39% in 2019 to 60% in 2021, according to the Uptime Institute’s 2022 Outage Analysis report.

“Digital infrastructure operators are still struggling to meet the high standards that customers expect and service level agreements (SLAs) demand — despite improving technologies and the industry’s strong investment in resiliency and downtime prevention,” says Andy Lawrence, executive director of Uptime Institute Intelligence.

“In time, both the technology and operational practices will improve, but at present, outages remain a top concern for customers, investors and regulators. Operators will be best able to meet the challenge with rigorous staff training and operational procedures to mitigate the human error behind many of these failures.”

Uptime’s annual outage analysis collates data from surveys, data supplied by Uptime Institute members and partners, and its database of publicly reported outages. The two key concerns: power supply and human error.

Power-related issues accounted for 43% of outages that were classified as significant (causing downtime and financial loss). The single biggest cause of power incidents was UPS (uninterruptible power supply) failures. And an overwhelming majority of human error-related outages involved ignored or inadequate procedures.

“Nearly 40% of end-user organisations have suffered a major outage caused by human error over the past three years,” Uptime reported. “Of these incidents, 85% stem from staff failing to follow procedures or from flaws in the processes and procedures themselves.”

One solution for end-user organisations would be to partner with a certified cloud MSP (managed service provider) and distribute their BC/DR risk across hybrid and multi-clouds. Haji Munshi, who has worked in senior management roles at Dell, Cisco Systems and Google Cloud, and is currently group CEO of Cloud Kinetics (CK), says companies are rapidly moving to the cloud for their IT needs, with estimates showing that cloud adoption has been doubling roughly every 28 months.

“Most companies are straddling or plan to keep their workloads on multiple cloud environments, either on Amazon Web Services, Microsoft Azure, Google Cloud or their own data centres,” Haji Munshi says. “It would be best for end-user organisations to partner with MSPs to help them achieve optimal business outcomes from strategic IT investments. As hybrid cloud operating models become the de facto standard for IT organisations, access to proven expertise and shortage of skilled teams have become more significant impediments.”

The bottom line: Optimal business outcomes are vital, especially now that Asean is a business hub. Foreign direct investment (FDI) inflows into the region reached its highest level yet in 2019 at US$182 billion. The pandemic derailed the FDI train with investments declining to US$137 billion in 2020. Despite that, Asean’s share of global FDI rose from 11.9% in 2019 to 13.7% in 2020.

Digital economy and infrastructure-related industries helped cushion the fall in other sectors in the wake of Covid-19, the Asean Investment Report notes. Investment within the region remained resilient, increasing 5% to US$23 billion in 2020, pushing up the intra-Asean share of FDI in the region from 12% to 17%.

Since we started with a corporate mishap, let’s end with another. It shocked me when I saw my buddy after three years. “Your hair’s gone grey, you’ve lost weight and you look tired, bro,” I said. “What’s wrong? Is your role as the CISO (chief information security officer) going well?” My friend sighed. “You know what the two biggest fears of a CISO are? Everyone who works in the company — and everyone who doesn’t.”

Raju Chellam is vice-president of new technologies at Fusionex International, Asia’s leading big data analytics company

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