NZ Fry Up: Will Spark build another data centre?; IT strategy and skills key to staying employed

New Zealand IT, tech, and telco news and views from our editor in Auckland.

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Will Spark build another data centre?

Every few years, an incumbent faces an existential threat to its business model. For Spark’s IT and Managed Services division (formerly known as Gen-i), in the early 2010s it was the government’s move to set up an infrastructure-as-a-service (IaaS) panel and leave them off it. The telco solved that problem by buying a company that did make it onto the panel, Revera (now merged with its CCL brand), in 2013, and it built a data centre in Takanini a year later to cement its position.

Now the threat is from the cloud hyperscalers—AWS, Google, and Microsoft Azure. Obviously, Spark can’t buy any of those, so it’s done the next best thing—made friends with them. At an investor presentation outlining the division’s three-year strategy, senior directors emphasised that Spark’s role in enterprise IT is “to be New Zealand’s leading agnostic cloud custodian, bring the best of private and public cloud together”.

IT and Managed Services accounts for a third of Spark’s revenue, and a third of its network investment. The division aspires to between 5% and 10% growth over the next three years, and whether it hits the top of the range mostly depends on public cloud, as Spark finance director Stefan Knight explains: “The biggest trend in the market will be the growth in public cloud. And that will obviously have an impact on pricing of our IaaS service. That’s where we will see the biggest change in trend potential,” he says.

Knight cites Gartner research that shows 80% of enterprises globally “will migrate entirely away from on-premises digital storage, moving to colocation or cloud”. If that holds true for New Zealand, the market here is in for a big shift—Knight says only about 25% to 30% of Kiwi organisations have made the move to cloud.

IDC research last year showed that Spark and Datacom have been holding their own until now. Together they account for 43% of the overall New Zealand IaaS market share, while from a public cloud perspective Amazon Web Services has 23%, followed by Microsoft at 19%, and Google at 1% market share.

IDC analyst Prabhitha Dcruz told Computerworld New Zealand last year: “IaaS is a highly competitive market, and global hyperscalers often account for close to 70% to 80% of the IaaS market share in most countries across [the Asia-Pacific region]. New Zealand, however, bucks the trend, reflecting that local IaaS providers are still in demand in New Zealand.”

So how can Spark hold its position? Especially now that Microsoft and CDC are entering the local market. Will it invest in another data centre to keep up?

Knight batted away questions on this topic from financial analysts at the investor presentation, referring to company’s current infrastructure review, whose results will be announced in August 2021. But he did say he thinks public cloud will grow faster than private cloud and that pricing will be key to maintaining customers. He was also quick to note that while competition might lower pricing, more volume can mean revenues aren’t as adversely affected.

“Over time, you will see increasing [data centre] capacity coming to the New Zealand market. I guess the question is ‘How much of it needs to be onshore versus offshore?’ and clearly there are bigger markets offshore. We see a large potential still for onshore, so I think there will be additional capacity come in. We’re at 75% to 80% committed-to-date [data centre capacity], so that’s some of the things we’ll need to look at going forward—what is the optimal mix for using our own data centre facilities versus partnering with others.”

Spark estimates the market size for cloud in New Zealand is revenue of about $730 million, of which it currently has about 31% revenue share.

IT strategy and skills key to staying employed

Understanding the investment strategies of the big providers—local and global—is critical for career-minded IT professionals. That’s according to Inland Revenue deputy director Greg James, who is on the home stretch of the organisation’s massive transformation project. In common with many government IT projects these days, he sought out off-the-shelf solutions from companies such as Oracle and Fast Enterprises when completely rebuilding the nation’s tax system.

“If I was crystal-ball gazing, I think that they’d be a move away from bespoke development as more and more commercial products are generated. So understanding market direction, understanding the strategy in the investments of some of the big players and some of the core technologies they use can really help people,” he says.

James was reflecting on how IT professionals can stay employable in an environment of rapid change. The Inland Revenue project is a case in point—it is the process of moving all its products off its Cobol mainframe called First and onto an entirely new system called Start. During that transition he says they’ve offered the Cobol developers the opportunity to retrain.

He says the most sought-after skills on the project have been “at the process, analyst level, and at the architectural level. People that can broker or facilitate or translate the business requirements from the business, from the expertise that sits in the business through to those more technical resources that sit in the back of the partner channel.”

Copyright © 2021 IDG Communications, Inc.

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