Will the NBN drive cloud uptake?

Certain parties - corporate and political - like to tell us that the NBN is going to enable a raft of broadband services for Australians. So what does the NBN have in store for cloud services? Andrew Collins puts the question to those in the know.

It’s 10 pm and all of your 50 employees have gone home for the day. Time to kickstart your ADSL2+ router and upload the 20 Gb of data your graphic designers have created in the last 14 hours to that new cloud-based backup service you subscribed to last week.

What’s that? It’ll take almost two days to upload it all? But tomorrow is just hours away.

Fast forward a couple of years. The situation is the same, but now you’ve got a fibre-based NBN connection with a maximum upstream of 50 Mbps. That same upload will take less than an hour. Backup window met. Disaster avoided. Boss happy.

Yes, the scenario is a little contrived, and it’s rather specific, but it illustrates a story that we’re hearing more often these days: that with the extra bandwidth that the NBN is expected to provide, cloud services will begin to look more attractive, and consumers and businesses all over the country will be more inclined to leap aboard the cloud.

Nice idea. How does it hold up to scrutiny?

All aboard - or at least some

Cloud infrastructure provider EMC believes the NBN will boost cloud service uptake.

Clive Gold, Marketing CTO at EMC, reckons that recent disasters around the globe have caused many businesses to take another look at cloud-based disaster recovery (DR) and business continuity (BC) options. The idea is that by putting your data, services, applications and so on in the web, you still have access to them if some disaster does befall your physical offices or data centres.

But while organisations are interested in these services, Gold says, Australia doesn’t have the high-speed ubiquitous networks that these cloud solutions rely on.

“That’s where the NBN in my opinion is going to change this whole environment. We’re going to see this whole move to the various cloud services just take off like we haven’t seen any part of IT take off before,” Gold says.

Going beyond DR and BC, EMC actually sees the NBN allowing businesses to move their primary storage into the cloud, as well.

“What we talk about is ‘virtual storage’. It’s the idea of having your data accessible in two places at once. So I’d have my data in Sydney and Melbourne. Now you might say ‘that’s what DR is’, but it isn’t - because today that’s a primary and a secondary copy,” Gold says.

“What I’m talking about is ‘primary/primary’ - so I can actually access, change and do everything on both of those copies. So that totally changes what we’re talking about. But that is reliant on a high-speed network between the two [sites],” Gold says.

Orange Business Services, which offers various public and private cloud services, thinks smaller and larger organisations will react differently to the NBN. Justin Pate, business development executive, IT Services, Orange Business ANZ, explains.

“From a consumer point of view around NBN - because let’s face it, that’s effectively where it’s being targeted, politically at the moment anyway - there will be an increase in the adoption rate of cloud services,” Pate says. “But it will be in that public cloud arena.”

And, he says, this increase in public cloud adoption could also extend to those SMBs that rely on consumer-grade internet access like ADSL2+.

But the same doesn’t necessarily ring true for larger organisations.

“It’s still a ‘watch this space’ from a larger organisation’s point of view. Most of them have long-term 3-5+ year agreements in place with carriers today around MPLS and IP VPN-style technologies,” he says.

With these high-speed links already in place, any bandwidth jumps the NBN affords to those using consumer offerings is irrelevant to these larger organisations. And according to Pate, since they already have high-bandwidth links in place, they are already looking at what cloud services can offer.

A question of timing

IBRS analyst Guy Cranswick has a rather different perspective. In a word, he says the impact of the NBN on cloud uptake is “unknowable” - because we know so little about the realities of the NBN.

“One of the most reliable and thoughtful and economic analyses came from Access Economics about the benefits of NBN. They said there’s just too little data to see, at this stage,” Cranswick says.

“So when you ask a question about adoption,” he says, “I don’t know, and no-one seriously of any credibility knows, but of course we live in a competitive marketplace and companies with commercial interests want to say that they’re the wave of the future.”

According to Cranswick, there are a few important factors that mean that the usage of cloud services is unlikely to explode in the next couple of years, despite what some are forecasting.

Firstly, he points to the timing of the NBN. While there are some trials going on right now, Cranswick reckons there won’t be any significant NBN penetration in the next couple of years.

“If you look at NBN Co’s own projections, they’ll pass about 1.7 million premises as of June 2013. And they’re looking at a CAGR rate of 1.6%. That means that you’re not looking at anything like a meaningful level of market penetration until something like 2016/2017,” he says.

Secondly, he says that providers require a certain scale of market to sustain a cloud business - scale that the NBN is not going to provide anytime soon.

“NBN Co’s business plan is predicated on a very aggressive house construction rate - which we know is declining in the last 6 months - of about 177,000 new houses constructed per annum up to about 2021,” Cranswick says.

“So even if a company said ‘We’re going to do all this stuff for businesses and households and it’s all cloud and it’ll all be on the NBN,’ the fact is if you’re looking at a 1.6% CAGR rate, and you look at the number of homes, you start pushing out to 2017/2018,” he says.

“And with eight million households currently, if you’ve only got a total penetration of something like 10 or 15% of households, it just doesn’t economically make any sense,” he says.

This is because “you can’t build a business in cloud services unless you have scale. That’s how it works. That’s why Google can do what it does. That’s why Amazon S3 can do what it does,” he says. “Unless [scale] is present, there is no business.”

Lastly, there is the matter of end-user pricing for NBN services, which will influence the uptake of any services that rely on the NBN.

The NBN itself is only a layer 2 network, with the remainder of the layers to be taken care of by service providers. Thus, Cranswick says, the publicly available monthly NBN cost estimates don’t represent the final cost consumers will have to pay.

“[Wholesale NBN access] works out as about $50-70 per month. If you add another $5-7 billion to build up the apps, quality of service, privacy, security and so on, you could add another $40 per month for a return on investment for those organisations - presumably Optus and Telstra - who are going to be providing the application layer,” he says.

And as Cranswick points out, price is one of the most critical elements when it comes to adoption of any technology. In other words, NBN access itself might be too costly for consumers, so any talk of services that rely on it - such as cloud services - is meaningless.

Given these ambiguities, Cranswick says, “Anyone who talks about [the NBN] being a boon for their business - it’s based on absolutely nothing.

“Any company that’s talking about this at this stage as if it’s around the corner - as in the next couple of years - has not got a very realistic strategic setting as to what they can really accomplish. Because if NBN is only going to pass something like 1.7 million premises by two years from now - there’s no business in that.”

Keen on the cloud but worried about security? Keep your eyes on VoiceandData.com.au in the coming weeks for some tips from McAfee on capitalising on the cloud while keeping your data safe.