What do Edward Snowden and a data centre provider have in common?

They’re both boosting the Middle East’s cloud market. Ben Rossi reports.

The NSA leaks by whistleblower Edward Snowden will go down in the history books as a heroic or reckless (depending on what camp you’re in) example of press freedom and the public’s right to know.

Even more so, it will act as a landmark moment when the masses finally realised the dark consequences of the celebrated digital age; that their personal information is available to people who they may or may not think have their best interests at heart.

Whilst the global debate has been much an ethical one up to now — albeit with the word ‘terrorism’ batted around a lot — a new report from the Information Technology & Innovation Foundation (ITIF) has highlighted the potentially drastic financial implications of the fiasco.

Taking the main hit in the report is the US cloud computing industry, which the ITIF believes could lose between $22 and $35 billion over the next three years. Forrester Research took a much broader view and estimated a maximum loss of $180 billion.

These grim projections are a direct result of the NSA’s PRISM programme, an “immediate and lasting” problem that will grow even larger “if foreign customers decide the risks of storing data with a US company outweigh the benefits”, the ITIF report claimed.

In recent years, cloud services have emerged as the next generation of IT platform. As organisations look for more cost-efficient and productive ways to store data and support functions, the cloud has materialised to be one of the more revolutionary, not to mention lucrative, products of the Internet.

To date, it has been the US who has taken the lion’s share of this new global market. The ITIF reports that $13.5 billion in investments was pumped into US cloud computing companies in 2011 alone, with nearly half of that coming from overseas. Today, about half of all spending on cloud services comes from US sources, with the remainder originating from the non-US market.

If these reports are to believed, there is an awful lot of business up for grabs, especially considering the cloud is still in the very early stages of adoption when compared to the huge scope of CIOs who freely admit that cloud is indeed the future of their organisation’s IT, but not quite yet

That is certainly a description that can be applied to Middle East CIOs, who have so far largely cited security concerns as holding them back from entrusting their data with a cloud company. The NSA debacle could just be the tip of the iceberg for completely disregarding American cloud vendors.

At the same time as all of this, the number of cloud offerings from regional companies is ever-increasing, giving Middle East enterprises the opportunity to store their data with a local company they already trust, and without the headache of their data ever having to cross borders.

This surge in offerings has largely been driven by the arrival in the region of Equinix, a provider of carrier-neutral data centres. Equinix essentially builds and operates the physical infrastructure of a data centre, and then sells the space to carriers, cloud providers and managed services vendors, who use the infrastructure to offer cloud services to their own customers, as well as enterprises who wish to use the space to set up their own private cloud.

Equinix operates in 31 strategic markets around the world, and counts 900 carriers amongst its customers. It announced its presence in the Middle East in November last year, when it also revealed an alliance with du, one of the UAE’s leading telcos.

The data centre, based in Dubai, officially opened on January 1st 2013, and since then has brought 11 carriers into its “transit zone”, which acts as the heart of the data centre. Those carriers include global tier 1 providers bringing large connectivity to the region, as well as Middle East players looking to boost regional distribution.

“It was a good first half-year,” says Jeroen Schlosser, Managing Director, Equinix MENA. “We’ve built up a good team and good momentum in carriers.”

Schlosser says he believes Equinix’s position as the first carrier-neutral data centre provider in the Middle East is creating an environment where regional cloud companies can be successful.

“That’s what we aim to achieve in this region,” he says. “We see the demands and we believe that we can create the place for them to grow.

“We see cloud as one of the significant growth drivers of the Internet and of our data centres, so that’s what we recognise in the Middle East, and that’s one of the reasons why we moved into this hub position because we believe in the UAE we can create, with our international carrier base, a hub position for cloud providers to be successful in this region.”

Whilst Equinix provides the necessary tools for regional cloud providers to grow, it is ultimately down to them to capitalise on the market opportunity; an opportunity which has grown even bigger with Middle East cloud business being driven away from the dominating American powerhouses.

Government surveillance is of course not unique to the US. All countries watch Internet traffic, but what varies is how transparent they are about it. Indeed, Middle East entities have historically had little qualms with revealing the extent of their own surveillance.

Furthermore, if enterprises assume their data is accessible by the state in which it is stored, they’ll likely feel more comfortable with that being the state where they are based, and which is open about its access.

“People recognise that they now have the opportunity with Equinix to bring their central systems into the region,” Schlosser says. “We see many enterprises that still have their systems outside the region.

“With a facility like Equinix, they suddenly have an opportunity in the country to run their systems. That has been very successful, and that is the opportunity that the enterprise market now has.”

Equinix’s first key focus, he adds, is to drive network density to ensure that global carriers connect to the UAE and are able to make sure there is an easy access for content into the region.

“We then use regional carriers to get a low-cost and efficient distribution into the region,” he says. “Then technologies like cloud are suddenly given an environment where they can benefit and grow.”

Through a mixture of natural progression and pure circumstance, the motions are now firmly in place for the Middle East cloud industry to flourish. It will be down to the regional telcos and service providers to grasp the opportunity.