Amazon Web Services Makes Its Africa Push

AWS looks set to ramp up its cloud services strategy in Africa and it's not alone.

Guy Zibi, Managing Director, Xalam Analytics

September 3, 2015

4 Min Read
Amazon Web Services Makes Its Africa Push

Amazon Web Services' latest moves in Africa suggest that the company may be entering a more aggressive phase in its push for cloud services adoption on the continent. In August, AWS announced a plan to open an office in Johannesburg and hire over "250 highly skilled engineers, network specialists, account managers and other technologists." In addition, AWS has been engaging in what is akin to a seduction effort in the South African market, accelerating customer outreach efforts and hosting an AWSome Day session in Johannesburg.

Amazon Web Services Inc. is not new to Africa. The company has maintained a development center in Cape Town for the past ten years. A little-known fact is that Amazon's EC2 platform was first created and launched in Cape Town in 2006. Amazon set up an AWS support unit at the site in 2012.

For all the instrumental R&D role of Cape Town, however, Amazon's infrastructure presence on the continent (and in the broader Middle East and Africa region) has until now been limited, a factor that has constrained EC2 adoption even as cloud service penetration gradually picks up. AWS has no data center in the Middle East (not even an Edge Node). This is not particular to Amazon -- the Microsoft Azure and Google Compute Engine platforms similarly do not have the Middle East and Africa among their infrastructure "regions."

This means African clients are rerouted to Ireland, Middle Eastern Clients to Europe or Singapore. Latency rates are overly high (see Chart), generally limiting EC2 adoption to applications for which latency is not a critical consideration. Better EC2 quality of service is available, but at a high cost that has to integrate international MPLS connectivity to Ireland through network providers such as Level 3 or MTN. In turn, this limits service implementation to mid-size or high-tech firms while holding back broader adoption by the universe of start-ups that have been so critical to AWS growth in North America.

The recent AWS moves likely portend a more aggressive infrastructure push -- and are perhaps a harbinger for Amazon building up a data center in Africa. Challenges remain; power grid reliability has been shaky in the continent's largest markets, South Africa and Nigeria, challenging the purported viability of Tier 3 data centers. Connectivity obstacles linger, a critical hurdle to the AWS model. In Africa, the underlying network remains core to the cloud value proposition, with a disproportionate weight on service pricing, an antithesis to the AWS model designed around having a network that is so reliable that it is largely out of the (cloud service's) way.

And yet, the more aggressive approach has become necessary. South African cloud adoption has accelerated over the past few years; projections from the Xalam Analytics Africa Enterprise & Cloud Service detail a cloud service revenue market that will grow by a compound average of 20% to 30% annually over the next five years in South Africa, Nigeria, and Kenya, three of sub-saharan Africa's largest markets.

And while data center operating conditions are less than optimal, they are no longer a definitive obstacle to offering quality cloud services. As outlined in our upcoming Africa colocation report ("The Rise of the African Data Center" – September 2015), data center deployment has accelerated in South Africa over the past few years, with overall outsourced colocation space reaching nearly 40,000 square meters, twice 2010 levels. Nigeria and Kenya are seeing similar growth patterns.

Finally, competition has become more pointed. AWS, Google and Microsoft Azure may be hyperscale, but they are hardly alone. Dozens of cloud services and network providers have been pushing cloud services across Africa (SaaS and IaaS primarily) as they seek to capture a piece of a growing market; they are Africa-hardened and undeterred by purported infrastructural obstacle. Amazon's South African moves signal it's ready to try to catch up.

Figure 1: Amazon Global Region Locations - Check What's Missing Source: Amazon Web Services Source: Amazon Web Services

Figure 2: Latency by Location (to AWS closest region/Edge Node) Numbers are estimates and indicative only; variations are to be expected based on type of Connection; South Africa is a midpoint - 200 to 400ms depending on nature of access connection. Source: Xalam Analytics estimates; testing using Numbers are estimates and indicative only; variations are to be expected based on type of Connection; South Africa is a midpoint – 200 to 400ms depending on nature of access connection.
Source: Xalam Analytics estimates; testing using

— Guy Zibi, Chief Analyst, Xalam Analytics, the Africa and Middle East research unit of Heavy Reading

About the Author(s)

Guy Zibi

Managing Director, Xalam Analytics

Guy Zibi is Founder and Managing Director of Xalam Analytics, a research and analytics joint venture with Light Reading LLC focused on Africa/Middle East ICT and enterprise markets. Guy has more than a decade-long experience in researching and analyzing the business of technology in developed and developing economies around the world. He was previously Co-Founder and Managing Director with AfricaNext Investment Research, an Africa-focused telecom equity research firm, where he led financial analysis on African technology assets and managed projects around carrier due diligence, wholesale capacity markets and new carrier models. Guy is widely recognized as a foremost expert in TMT markets in growth economies. In prior years, Guy was Head of Pyramid Research's Global Consulting Practice and Director of EMEA Research. In those roles, Guy managed a team of consultants tasked with developing and executing the company's research into new technologies and innovative business models at a global level (Cloud, OTT, VoIP, enterprise, infrastructure bandwidth, mobile profitability in emerging markets). He also acted as the lead consultant for due diligence projects in Africa/Middle East on the buy and lending sides, spearheading financial and operational due diligence projects on the operations of fiber, mobile, fixed and Internet services providers in emerging markets.

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