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 audience, I could not help but take a trip down memory lane to a time when cloud computing was considered a matter for banter in Nigerian and African business circles. I remember working all night to prepare a detailed cloud service pitch to a Nigerian company many years ago and delivering what I thought, at the time, to be a persuasive 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?”.
While this was probably light-hearted, I knew at that point that the deal would not be closed. It is, therefore, gratifying to observe the accelerated adoption of cloud services in Nigeria and Africa, driven by Small and Medium Businesses (SMBs) looking for more efficient ways to transform their businesses and increase operational efficiencies and processes. An EY study released in 2021, showed that of 89 companies surveyed in Africa, 75% confirmed that they use cloud services.
What are the drivers of the accelerated adoption of cloud services in Nigeria and Sub-Saharan Africa (SSA)? While COVID-19 ultimately catalysed the rapid growth currently being experienced in the SSA cloud services space, other important factors are highlighted below:
An important 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 Centres Association (ADCA), shows that bandwidth capacity more than doubled between 2017 and 2020. In Nigeria, broadband penetration grew by an unprecedented 92% between 2017 and 2021 alone. 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 struggled prior to and post-COVID, meaning that SMBs are being forced to reduce/eliminate avoidable costs, including expensive software, hardware and manpower expenditure. Strategic shifts in business operations from on-premises to 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 cost and increase efficiency. With cloud services, savings from the avoided cost of purchasing software and hardware can be channelled by African SMBs to funding growth initiatives.
Time to market is a critical competitive differentiator for SMBs as the ability to reduce turnaround time from idea to product/service can be the difference between success and failure for an SMB. The inherent advantages 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 substantially shortened SMBs’ time to market. With cloud services, processes that would, for example, previously be completed over 3-6 months are now being achieved in 3-14 days.
Notwithstanding 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 increasing number of data centres being built on the continent. Broadband availability, cost and quality remain suboptimal thus limiting the ability of SMBs across the continent to use cloud services. Unclear regulations and laws around data management also pose a risk to cloud services as many governments on the continent are insisting that their citizens’ data be stored locally and, in some cases, insisting on the use of physical servers for data storage.
Nevertheless, the prospects for cloud services in Nigeria and on the African continent are, indeed, pleasing. The substantial investments in cloud services within the region, are a pointer to the growth expected within the cloud computing space over the next few years. In Nigeria alone, there were over $1billion in cloud services investments between 2019 and 2022. These include direct investments in building data centres and cloud services. inq. continues to invest massively in its cloud-based service offerings including its Edge AI and IoT, Fabric, SDN/NFV for Edge Cloud and Edge Baremetal solutions. British fund, Actis, recently acquired a controlling stake in Nigerian data center provider, Rack Centre, in a $250million deal with Rack Center subsequently announcing a $100m expansion plan by 2022. Zimbabwean-owned Africa Data Centres recently raised more than $300m from institutional investors such as the International Finance Corporation (IFC) and the United Kingdom’s CDC. In addition to these acquisitions, the entry of the hyperscalers (AWS, Azure, Huawei Cloud) into the SSA market indicate the faith 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 at the moment. As the continent’s leading-Edge solutions provider, we will continue to power the exponential growth of cloud services across Africa well into the future.
By Stephen Okoye, Chief Technology Officer, inq. Nigeria