What Telecom buying Revera means for the local Cloud market (opinion)

eye-of-the-tornadoFor those of you who missed it, we just saw a minor consolidation in the New Zealand Cloud Market today as Telecom and Revera announced a $96.5 conditional sale of the latter to the former. The Revera sale has been one of the hot rumors in Wellington for the last few weeks and it seems the chatter was pretty accurate.

2012 stats on the ICT industry in New Zealand show that of the $23B in total, $767m was attributable to hosting and Cloud services. If we assume that hosting migrates over time to Cloud services then this is a large chunk of that $767 million will be locally delivered Cloud services eventually, and to bolster that Stats estimates its growing at 5% per annum. Which, as an aside, seems really low.

In short, this means very little for the onshore Cloud service market. In fact the global trends with Cloud computing will continue to roll on unabated.

The number of New Zealand Cloud Services Providers (CSP) drops by one

Why would Telecom continue to support and invest in its ReadyCloud product when it has Revera? The Revera product will do everything that ReadyCloud does I assume, plus more. Therefore, ReadyCloud surely must be merged into Revera’s Cloud services.

Telecom buys into Government IaaS

You’d hope that Telecom hasn’t bought Revera just for this purpose. There are three IaaS providers currently, Revera, IBM, and Datacom. But there are some peculiarities with the service:

  • It’s not really IaaS in the true sense of the Cloud definition. Think of it more as the ability to NOT go to RFP and buy capacity on demand.
  • I’m seeing pricing in recent days that is, challenging, to IaaS. The price may need to come down for it to be sustainable.
  • The IaaS service is based on a ten year business model, to my understanding. That is a very long time in this kind of volatile market.

IaaS will become an increasingly unattractive option unless it a) brings a degree of maturity to the service (Revera has this in my opinion), b) is a true Cloud service (subscription based, lite or no contract, easy to turn off and on), c) remains cost competitive in a market where costs are currently plunging.

It is still a risky proposition for Telecom

It’s my opinion that it is only a matter of time before Amazon, Azure, or Rackspace  lands in Auckland. It’s probably a couple of years away at this stage given they’d need to fire up a data center and get the services up and running. They’re running around Sydney at the moment starting up the services so they are getting geographically closer.

However, when that happens, they will chop the price out of the New Zealand market Cloud Services. This is happening with every major Cloud service provider on the planet. The big boys are running year on year at a loss to kill the lower end competitors who can’t sustain that financial bleeding. We’ll see consolidation, then we’ll see price drifting back up.

It doesn’t mean much for the majority of the market; SMB’s

The Revera offerings are driven at the enterprise market, large corporations and government primarily.

The most rapid growth area is small through medium business buying Cloud services. Large corporations and government are slow to make decisions and wary of losing control. The time for them to purchase and implement Cloud is long. The time for an SMB is minutes.

The FUD is burning off as the market becomes educated and that puts local CSP’s at a disadvantage

The fear, uncertainty, and doubt that has kept the Cloud consumers on New Zealand shores is rapidly burning off.

The simple fact is that it is cheaper to buy overseas Cloud services for the most part, and if you are in Auckland, the latency between your business and Sydney is milliseconds. It is likely that those services are more mature than a Revera offering ( I don’t know this for fact).

The point is, the New Zealand Cloud market will need to find some points of difference, rapidly, to justify companies using their more expensive Cloud services. If they don’t, there will be a slow migration away from those onshore providers. Using the old FUD tactics of Privacy, Security, and Data Sovereignty is not going to work.


  • This makes little or no difference to the local Cloud market.
  • Cloud services in New Zealand have a finite life, unless they can come up with some clear advantages and points of difference over their overseas counterparts.
  • If a global Cloud provider lands in Auckland, the local Cloud services market will contract rapidly.

It does raise an interesting thought… Telecom aren’t stupid. Perhaps they’ve bought Revera given it is probably one of the best Cloud providers in New Zealand so it can be on sold to one of the global giants at a later date? Makes sense. No one is building datacenters anymore, Amazon could buy up Revera and have an overnight base. In that case, Revera would make a good strategic investment.

As always, caveat, this is opinion.

Updated: It occurred to me after a few beers last night that the other advantage to Telecom buying Revera is being able to sort out their own ICT infrastructure. Telecom has thirteen or so, for the most part old, data centres. Buying Revera could allow them to decommission those data centres, and move all their ICT workload into the Revera sites and onto the existing service. A massive Private Cloud effectively. This would save millions and allow them to further reduce their workforce.

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