Where is cloud computing on Cambodia’s horizon?
Since I moved to Cambodia a year ago, I realised that cloud computing is not often heard of and its adoption is still low in the country. I found this situation a little surprising as I became more familiar with Cambodia’s ambitious digital transformation objectives, while having witnessed the tremendous rise of cloud computing globally over the last decade. I started wondering how Cambodia will meet its digitalisation goals and which role cloud computing could play as they materialise. While I continued moving forward in my own cloud journey, I decided to investigate this situation. As a result, I wrote this piece to share my perspective and bring a reflection about cloud computing in the country’s technology landscape of today and tomorrow.
Executive Summary
- Asia is the battlefield of a fierce competition between Chinese and American cloud computing providers. The battle is particularly intense in major ASEAN economies, such as Indonesia, and may expand to smaller neighbouring states in the near future. An increasing interest in the Cambodian market will raise both offer and demand for cloud services.
- Cloud computing adoption is still low in Cambodia. Whereas a number of organisations have already started using cloud services, their maturity level is usually weak as they use a narrow range of capabilities and fail to grasp the full potential.
- Cambodia’s digital transformation ambitions are solid drivers that could bring cloud computing adoption to the next level. A small, yet burgeoning startup ecosystem is leading the trend by embracing cloud capabilities without the burden of legacy. Businesses with existing infrastructure may also find a competitive edge by migrating to the cloud. This is even truer in a country where energy costs and computing equipment are expensive, adding up to the total cost of ownership (TCO).
- There is currently no legal framework for data protection. Future regulations regarding cross-border data flows will play an important role in either accelerating or restraining cloud computing adoption.
- Awareness and education for both technology professionals and business leaders need to be addressed as a condition for swift adoption. Cloud providers’ leadership is paramount to the successful development of communities, education and training in this area.
Cloud adoption has grown globally mainstream but geographically uneven
Cloud computing has reached a tipping point where market researchers estimate that around 50% of all workloads are now in the public cloud[1]. The ‘public cloud’ refers to a set of shared cloud services offered to multiple customers by cloud providers. What we commonly refer to as a ‘workload’ can be a business function or capability. For example, it can be anything from a simple website to a chatbot function used for customer service. About half of all these workloads are already running out there in the public cloud, and this is no small thing. Different studies have shown slight differences in numbers, but we can observe that global cloud adoption is widespread across all organisations and becomes a foundation to enable access to the latest technology capabilities, such as Internet of Things, Machine Learning or Artificial Intelligence. “At this point, cloud adoption is mainstream,” Gartner said in 2019[2], adding that “adoption of next-generation solutions are almost always ‘cloud-enhanced’ solutions, meaning they build on the strengths of a cloud platform to deliver digital business capabilities.” For instance, it is becoming increasingly difficult to find a justification for an organisation to start developing internal on-premises machine learning capabilities, when those available in the cloud can be accessed at any scale with virtually no entry cost. If built internally, the supporting platforms would need to cope with large amounts of data and require significant upfront investment. On the other hand, the new generation of cloud services embeds those capabilities directly into their platforms. They are ready to use as building blocks that can be easily integrated with other services.
Nevertheless, cloud adoption is uneven and varies a lot depending on geographical area[3]. The biggest cloud players’ trio Amazon-Microsoft-Google is made of U.S.-based companies. It is no surprise that Northern America is by far where cloud adoption is the highest. Together with Northern Europe, both regions are the most important cloud users and account for most of the workloads already in the cloud. China’s cloud adoption is catching up very quickly and it will join America and Europe before long in terms of mass adoption[4]. However, the Chinese cloud market is totally different, because it is led by Chinese technology giants, such as Alibaba and Huawei, whereas U.S. providers are lagging behind. This trend is expected to continue as China-U.S. political tensions do not seem to cease anytime soon.
Now, focusing on Southeast Asia, we can see that cloud adoption is still behind in most economies. If we zoom into Cambodia, it is presumably one of the most resisting countries in the region, although there is no public data or relevant market study information to fully illustrate this. Notwithstanding this, we can observe that a few Software-as-a-Service (SaaS) cloud solutions are commonly used, such as Gmail or Dropbox. It is fairly easy to get a handle on these ready-to-use products and they are usually inexpensive if not free. On the other hand, cloud adoption seems very low if we look at the other forms of public cloud services, namely Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS). Using those services, as opposed to SaaS, the customers can go beyond the limited range of software solutions offered by the providers by bringing their own applications or developing cloud-native ones. Then the range of possibilities becomes near limitless.
Awareness, education and data security concerns among the main obstacles
There are several holding back factors that could explain why Cambodia is still shying away from the cloud, and in particular from PaaS and IaaS. First of all, there is a general lack of awareness about the real cloud value proposition. The IT industry is still very young in Cambodia and, although it certainly improved a lot in the past decade, it often still relies on technology and practices that would be deemed outdated in more developed economies. IT staff tend to focus too much on the operational and technical aspects and not enough on the business value. Business leaders fail to fully grasp the potential of new technologies if they are not educated enough by technology professionals. For many, cloud computing is not much more than virtualising and hosting servers in remote data centres. At best, it is considered as a potential source of cost saving, but rarely as a catalyst for innovation and agility. However, architecting cloud-native applications is a must to fully embrace the potential beyond ‘lifting and shifting’ one’s infrastructure to the cloud. That means integrating new paradigms and higher levels of abstraction where we cannot go back to following the cables and rewinding the network to understand how things work. Both require critical thinking and the ability to constantly learn new technology and practices in a fast-changing world. Such skills are still critically lacking in Cambodia and the educational system does not sufficiently prepare the future workforce to fill the gap[5][6].
Besides awareness and education, there are other issues. Cloud computing is too rarely heard about and user communities are very limited today in Cambodia. They consist of a handful of groups in social media with members in the low hundreds. The demand is still low, but the offer is also limited. The incentive for the big players to invest in increasing their footprint in this small market is limited when there are other, juicier arenas to fight for. Whereas Microsoft Azure does not allow local businesses to use its services and lists Cambodia as ‘unsupported country’, Amazon Web Services and Google Cloud Platform still have a limited footprint with virtually no representatives or affiliated partners in the country. The offer is complemented by small local cloud providers, which provide cloud hosting services from local data centres. Having access to a purely local service could alleviate some of the fears for going to the cloud, although the services offered by those cloud providers are far from the level of sophistication of the global big players and the interest for the customer is mostly limited to the lift-and-shift approach.
Security is also a great concern for many. Like in most places in the early phase of adoption, there are fears and misunderstandings that can be mitigated with more awareness. It is now widely accepted that the public cloud offered by the largest providers provides greater security than on-premises. However, it requires the right skillset, as most security issues in the cloud are due to human mistakes on the customer side[7]. Cambodia witnesses a great shortage of information security skills whereas those skills, together with cloud knowledge, are strongly needed to be able to embrace cloud capabilities and ensure workloads are adequately protected.
Along with Laos and Myanmar in the region, Cambodia does not have any data protection law yet and is lagging behind other countries in this area. That means there is a certain level of uncertainty because some ASEAN countries have more restrictive policies than others. For instance, Malaysia, Indonesia and Vietnam have data localisation laws preventing cross-border data flows. These laws restrain organisations from using external cloud services, unless the cloud providers provide sufficient guarantee that protected data remains within the jurisdiction. In other words, it often means having data centres in the country. It also means that the organisations may miss out on economic growth if the services delivered from within borders do not offer the same opportunities as the global ones. It is likely that Cambodia will integrate data protection in its legal framework in the coming years but it can be challenging to predict what level of restriction will be dictated by the upcoming regulation. Because of this uncertainty, some local organisations might be reluctant from engaging into cloud initiatives involving cross-border data flows.
Digital transformation, startups and costs as important drivers
Although the above mentioned factors might be obstacles for a rapid surge in cloud adoption, things can change very quickly, in particular in an emerging economy with a track record of rapid development. Similarly to many other ASEAN members, Cambodia has ambitious plans to transition to a digital economy. These are often referred to as the ‘4th industrial revolution’. The strategy assumes that the necessary foundation will be in place. The government is giving the impulse by actively modernising the policy framework. Enhancing Internet connectivity with new submarine cables, extended country-wide coverage and high-speed 5G access are high on the agenda, even besides the Covid-19 pandemic. Beyond network connectivity, Cambodia businesses will still need a platform onto which the new digital capabilities can be built. This requirement will become a clear driver for cloud adoption.
Although still relatively small, Cambodia’s startup community is growing fast. New products are launched every month, in particular in the areas of food delivery, ride services, online grocery and e-commerce. Demand is growing and the pandemic has been accelerating this trend even further. FinTech, AgriTech and EduTech are among the other areas gaining momentum. Without the burden of legacy, startups heavily rely on cloud services to build their value proposition. Often considered as a driving force of the technology industry, they are the early adopters paving the way to broaden cloud adoption in the country.
Furthermore, there is another factor that might drive cloud adoption upwards in Cambodia. That one is about costs. Energy is expensive in Cambodia in comparison to neighbouring countries. A big chunk of the energy mix is imported and that is costly for the country. Sourcing computing hardware is also more expensive due to limited supply chain channels and expensive custom duties. This means that the TCO is higher than in other places, providing even more incentives for organisations to reduce IT costs by using global cloud services.
Conclusion
With a tremendous growth over more than a decade, cloud computing has become so common globally that the question is not really if Cambodia will join the trend but rather when and how. Cambodia has solid drivers for accelerating adoption, but also other factors that could hinder its pace. There are multiple facts that could aggregate in different ways and influence the outcome, so making predictions is not easy.
Government plays an important role and the pace of adoption will depend on future policy framework developments and whether cloud computing will be fostered as an enabler in the digital transformation roadmap for the country.
Providers’ interest will be a decisive factor in developing the Cambodian cloud market. Although American and European markets are dominated by U.S. technology giants, their Chinese competitors are leading a tough competition in Asia. “We want to be the cloud in Asia, for Asia,” said an Alibaba executive[8], highlighting consistent regional investments made by the company over the past years. As stated by Tao Wu, a research executive for Gartner[9], “the rise of Chinese cloud vendors such as Alibaba has prevented Amazon and others from dominating the market in the Asia-Pacific region. The addition of Huawei cloud makes the competition more fierce.” Huawei, for instance, already has a strong foothold in Cambodia’s technology market with large projects such as the country’s 5G deployment project ‘5G seeds for the future’, and this is just a stepping stone. Cambodia has a long history of cooperation and business partnerships with China. Therefore, it would not be very surprising to see Chinese cloud providers further expanding their market footprint towards Cambodia. U.S. cloud providers might react to this by looking at Cambodia as another market of interest in their battle for leadership in Southeast Asia. Having more competition could boost both offer and demand while giving more options to customers.
One may ask what will happen to the local cloud providers in the meantime. These providers are relevant for domestic customers who want their data to remain locally in Cambodia. Yet, they sacrifice on costs and capabilities because local providers’ services are usually more expensive and far less advanced than what cloud giants can offer. Cloud is about economies of scale to drive costs down and justify large investments by sharing capabilities among large customer bases. Whether the competitive advantage of keeping data in Cambodia will justify the need for local providers will also depend on future data protection regulation. But, most likely, it will not be very restrictive for cross-border data flows because the missed opportunity might be too important for Cambodia’s digital ambitions. In the long run, local cloud providers may not survive the competition and could end up refocusing on other services or establishing partnerships with global providers.
Last but not least, customer demand will be a key element for cloud adoption to really take off in Cambodia. Building partnerships, ecosystems and user communities to develop markets and bring awareness is something cloud giants have been very successful at in other places. Yet, to materialise in the country, cloud providers will need to strengthen their presence in terms of local representation and partnerships. Another key element to drive demand is education. Executives need to understand business opportunities while technology professionals need to learn how to exploit the range of services offered by the platforms to build and support tomorrow’s cloud-based solutions. Cloud giants have been globally active for quite some time in professional training and certification. Over the past years, they have also been extending their foothold in the higher education landscape by providing training materials, curriculums and supporting institutions in embedding cloud technology in their programs. Cloud communities, education and professional training are in their infancy in Cambodia and providers’ leadership will certainly be a decisive factor for the pace of adoption in the years to come.
Note: this post was first published on LinkedIn Pulse: https://www.linkedin.com/pulse/where-cloud-computing-cambodias-horizon-laurent-mathieu
[1] Jones, Mark. “Majority of workloads will go to cloud in 2020.” Technology and business. January 16, 2020.
https://techhq.com/2020/01/majority-of-workloads-will-go-to-cloud-in-2020
[2] “Gartner Forecasts Worldwide Public Cloud Revenue to Grow 17% in 2020.” Gartner. November 13, 2019.
[3] Goasduff, Laurence. “Cloud Adoption: Where Does Your Country Rank?” Gartner. August 19, 2019.
https://www.gartner.com/smarterwithgartner/cloud-adoption-where-does-your-country-rank
[4] Hu, Minghe. “Cloud computing adoption accelerates in China as economy recovers from coronavirus pandemic.” South China Morning Post. June 16, 2020.
[5] European Chamber of Commerce (EuroCham) in Cambodia. “Addressing the ICT Skills Gap.” White Book 2019. pp 130–131. June 2019.
[6] Chan, Sok. “Challenges faced by the Kingdom to effectively adopt Industry 4.0.” Khmer Times. September 4, 2020.
[7] Rundle, James. “Human Error Often the Culprit in Cloud Data Breaches.” The Wall Street Journal. August 27, 2019.
https://www.wsj.com/articles/human-error-often-the-culprit-in-cloud-data-breaches-11566898203
[8] Yu, Eileen. “Alibaba Cloud touts Asian heritage and focus as competitive advantages.” ZDNet. May 31, 2019.
https://www.zdnet.com/article/alibaba-cloud-touts-asian-heritage-focus-as-competitive-advantage
[9] Mujtaba khan, Mohammed. 2020. “US and Chinese cloud companies vie for dominance in South-east Asia.” The Global investor. May 20, 2020.
