[South Africa] 2024 to see tighter IT budgets, more local cloud uptake, says Routed
04-12-2023 13:17:00 | by: Nixon Kanali | hits: 1382 | Tags:

Predicting the future can be tricky, and some may say even more so in the world of IT.  Though not for Routed who confidently shares that it’s likely we’ll see a 2024 with tighter budgets, increased local and sovereign cloud uptake, and more AI hype than action, according to Andrew Cruise, Managing Director at Routed, a local VMware Cloud Verified provider and VMware Principal Partner.

The pace of change in the technology sector has always been brisk, as demonstrated by the rapid development and massive innovation that occurred in 2023. As we prepare for 2024, it's clear that developments in IT will continue to reshape the business world. 

2024 will see continued tightening of IT budgets.  “While this is not specifically a South African thing, or even unique to IT, there does appear to be a general negativity in the market. One area where this may be playing a role is in the uptake of cloud, as the tightening of the belts is to the detriment of the hyperscale cloud providers, who are now beginning to appear expensive,” he says.

“At the same time, however, the enterprise’s outlook on the cloud is maturing, as are the actual cloud offerings out there, so while hyperscalers may be impacted, it also becomes clearer that when it comes to cloud, there's a hat for every head, so to speak.” Cruise notes that while the tightening of budgets has impacted IT spending, the issues organisations have with hyperscalers do not spill over to the rest of the cloud. In fact, he says, there is a lot of positivity around the cloud, and particularly around local cloud operators. This, he adds, is because there are plenty of good stories coming out of the local arena. 

“One of these is the sovereign cloud story, which is especially relevant to VMware cloud providers. This sovereign VMware cloud appeals to the public sector, which is why we are increasingly seeing partners coming to us with public sector tenders that list ‘VMware Cloud verified’ as a requirement.”

“So, all told, there has been a positive trend towards local cloud, sovereign cloud, and overall cloud maturity in the last year, with VMware cloud providers, in particular, gaining more attention.”

Of course, beyond the cloud, we have seen the rise of artificial intelligence (AI). Cruise draws parallels between the current AI trend and the late 1990s/early 2000s internet boom, highlighting the challenge of translating technological advancements into profitable business models.

”When it comes to a radical new technology like this, it's easy to be caught up in the hype, simply because your competitors are doing it. However, it is my feeling that currently, AI is mostly hype. I believe it will be very important at some later stage, but certainly not in the next year or two, as everybody else seems to think,” he continues.

“For one thing, with AI, we can see that the market is very badly affected by the lack of technical ability, relevant technology skills, and overall competence. For this reason especially, we are cautious about over-investing too soon.”

Another challenge that will still be there in 2024, he adds, is the obvious exchange rate problems, which tend to come in waves. This is because sentiment changes, causing rates to fluctuate. Sadly, these fluctuations tend to lead to the exchange rate falling further - something that significantly affects South Africa, because all its hardware and software comes from overseas, and is denominated in dollars.

“There is a general inflation caused by the fluctuating exchange rate that ultimately affects all IT, although in the case of the cloud, it probably delivers benefits. After all, local cloud is usually priced in local currency, and local cloud providers will try and smooth over the currency fluctuations for their customers. Purchases from the hyperscalers, on the other hand, will likely be dollar-denominated.”

“While the more developed nations have already experienced the growth that comes with the cloud, I think there are still enormous opportunities in Africa. However, I don’t believe 2024 will be the year where Africa becomes the next big frontier. Ultimately, markets are based on the availability of money, and that is one thing Africa still lacks. Where the opportunities really lie in Africa in the near future is in the provision of fibre optic cable infrastructure, to deliver reliable, cheap, and fast Internet. This is, after all, the foundation on which the cloud is built,” says Cruise.