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How much public cloud do we want?

Peter Griffin, Editor. 12 August 2022, 2:22 pm

Google this week became the latest tech giant to announce New Zealand as a “cloud” region, following in the footsteps of AWS and Microsoft.

It won’t be building its own data centres as the other two are in the process of doing, but will locate its equipment in a local operator’s data centres, probably those of DCI, which last week showed off the Albany site it will construct two data centres on, spending $600 million to do so.

With all the public cloud capacity set to come online locally, Google has concluded, quite rightly, that sinking a huge sum into its own infrastructure here would not achieve the desired return on investment in a reasonable timeframe. Google is a distant third in the public cloud market and that doesn’t look like changing any time soon.

The New Zealand cloud market is set to hit $2.6 billion this year according to Gartner, up 26% from last year. There’s plenty more headroom for growth, but there’s also a lot of capacity coming online quickly. Will we end up with more cloud than we need?

Strong local scene

After all, we do already have established data centre and cloud providers operating here, including Datacom, Spark, Catalyst Cloud and the Datagrid venture planned for Southland could add significantly more capacity.

The arrival of the hyperscalers would appear to represent a big threat to them. But the reality is that most large enterprises and government departments plan to have a hybrid cloud strategy for the foreseeable future, sending some applications and workloads to AWS, Azure or Google Cloud, while putting others on local private cloud platforms or, in some cases, retaining their on-site infrastructure.

Security, flexibility and cost are the reasons for doing so. The public cloud is efficient for some applications but expensive for others. Even running artificial intelligence in the cloud, which is heavily pushed by the big three public cloud providers, can be expensive.

“Many businesses have built game-changing artificial intelligence/machine learning systems in the cloud, and when they get the cloud bills at the end of the month, they understand quickly that hosting AI/ML systems, including terabytes or petabytes of data, is pricey,” Information Week points out.

The sovereign cloud

Local player Catalyst Cloud came out strongly this week to criticise Google’s claim that its New Zealand cloud region “will give Kiwi businesses the choice to keep their data onshore and retain data sovereignty”. Catalyst obviously has a vested interest here, it wants a growing share of the New Zealand cloud market, including in the public sector.

But chief executive Doug Dixon is right. If our data is hosted by an American cloud provider, it is subject to the CLOUD Act (or Clarifying Lawful Overseas Use of Data Act) which came into effect in 2018.

It means that the US Government could request access to data Google, AWS and Microsoft hold outside of US territory, including data sitting on a server in Auckland. The prospect of that becoming a regular occurrence here is probably low. But we live in uncertain times. Things can change and the US has the legislation in place to make the public cloud providers comply.

Google and the other cloud giants have been bending over backwards in the European Union to give organisations control over their data residency and access to counter concerns about the CLOUD Act. But the Europeans are also working on GAIA-X, a strategy to have European-owned and operated data infrastructure to reduce their reliance on the US public cloud vendors and their CLOUD Act exposure The project, however, seems to have run into trouble.

Google is talking up encryption, which it currently applies to its Workspace platform, its rival to Microsoft Office 365, as a way for organisations to “continue benefiting from the powerful innovations of Google Cloud while retaining complete confidentiality and control over their data”. Encrypt it all and no one can see it anyway, they argue. That’s a good strategy, CLOUD Act or not.

The rush to the public cloud

Such measures appear to be enough to satisfy our big companies and our Government. They are already in or are heading to the public cloud in some capacity, which will fuel the local business for AWS, Microsoft and Google over the next decade.

But the sovereignty issue runs deeper. Do we want the majority of our online infrastructure to be provided by a small handful of US companies or do we want our own companies, subject only to New Zealand law, holding our most sensitive corporate and public sector data, employing our own cloud engineers and coming up with new cloud-based innovations?

We are on our way to getting the former. We can’t sacrifice the latter. Our big companies and our Government need to recognise the national interest aspect of this and procure cloud services accordingly.


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