Amazon sets its sights on new data centre in SA

It is a matter of when rather than if Amazon Web Services opens one of its data centres in South Africa.

That is the message from Amazon’s chief technology officer, Werner Vogels, who said on Wednesday the group was working on understanding not only South African entrepreneurs but those across the continent.

“We have a lot of customers here already, especially when it comes to young business … but also larger companies, before opening up a region here,” Vogels told Business Times on the sidelines of the company’s summit in Cape Town.

AWS makes up 9% of the Seattle-based Amazon’s revenue of $135-billion. The company founded by billionaire Jeff Bezos is one of the world’s largest tech companies.

Amazon originally built AWS to host and organise its own site, More than 10 years ago the group decided to license the system they had built to other companies. Today it is one of the most profitable segments of Amazon.

Vogels said all regions were different but if he looked at India, for example, before they established a region – setting up a data centre and related infrastructure – in the country they had 70000 businesses using their services. Nine months after the launch this had increased 60% to 125000 customers.

Vogels said the expectations for growth in South Africa were in the same ballpark. He stressed that a region would not only be important for South Africa but also for other parts of the continent.

The new normal

He told 1200 developers from around Africa gathered at the summit that cloud computing was the “new normal”, whether they were a small business or a large enterprise.

It was where companies were starting now and because of that there were no restraints on development.

Companies from Netflix to Nasa make use of the service, and locally the product is being used by, among others, Absa, Pick n Pay, Zapper and NicheStreem.

Chris Shortt, general manager of information systems at Pick n Pay, said the cost of using AWS was key for the group.

He said they moved their online shopping platform into the cloud using a combination of AWS technology and another service nine months ago. They have also used AWS on the group’s new app.

Shortt said that about 10% of the company’s IT system was in the cloud and that they planned to move “quite a lot” of the group’s infrastructure and systems into the cloud. He said that at the moment, this was done on a case-by-case basis looking at the requirements, data sovereignty rules and cost.

“If they had a data centre or two in South Africa or Southern Africa and they were able to provide the services from South Africa with the same economics that they do other services globally, it would be hard to compete against them,” Shortt said.

He doubts that Pick n Pay will have its own data centres in five years.

Microsoft announced in May that it planned to open two cloud data centres in Johannesburg and Cape Town and would start selling their services from South Africa to the rest of the continent from next year.

Putting data centres closer to customers allows Microsoft to speed up the delivery of cloud services and comply with certain local laws, while getting the jump on AWS, its biggest rival.

Local niche players

Brushing off competition in South Africa because it is still early days, Vogels said: “I don’t think the winner is going to take the whole market. There will be a handful of global players. I also think there will be niche players that are going to be local.”

He added that companies which adopted a similar strategy to their competitors could do well, but “it is just not Amazon, it is just not how we operate”.

Vogels said that at the moment the main stumbling block for AWS, as for many other technology companies, was infrastructure on the continent, such as rolling out fibre. If more product is being delivered by companies in a digital form then there has to be assurance that people can access it.

Vogels said that speaking to South African customers he had found that entrepreneurs here wanted to spend a significant amount of time supporting and building their businesses, unlike in the US where it was about going as big as possible quickly, and selling.



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