Microsoft Cloud Region launch sparks hybrid infrastructure debate in New Zealand

As New Zealand's digital infrastructure rapidly evolves, a new Microsoft Cloud Region in the North signals an essential milestone for the country's cloud computing landscape.

However, the latest push into cloud technology raises pressing questions for New Zealand's businesses, suggesting that a hybrid approach—balancing public and private data storage options—may be the most effective strategy moving forward.

The history of digital infrastructure is one of gradual shifts. Initially, businesses relied heavily on on-premises data centres; later, many of these facilities transitioned to colocated data centres before the push towards cloud migration.

As Frazer Scott, Chief Executive Officer of Plan B, noted in his keynote during the 2024 New Zealand Cloud & Datacenter Convention: "The reality is more complex as these options now co-exist, each as different options and 'hybrid' combinations have evolved on the basis of meeting different IT requirements—one approach certainly does not fit all."

The new Microsoft Cloud Region, Scott explained, offers a timely opportunity to meet New Zealand's "Cloud First" policy, especially in supporting the country's 2020 Privacy Act.

This legislation requires overseas-stored data to meet the same protection standards as domestic storage. "The new Region will offer the benefit of reduced latency for NZ-based applications and services," Scott stated, adding that scalability and flexibility are significant advantages as digital activity continues to surge across New Zealand.

While Microsoft's entry into New Zealand's cloud market brings new possibilities, Scott raised concerns about the adequacy of a purely cloud-based approach for all local business requirements. Historical challenges with cloud adoption globally indicate that a hybrid infrastructure—integrating both cloud and traditional data centres—could better serve New Zealand businesses by addressing diverse needs in security, cost management, and reliability.

Scott referred to past studies to illustrate why a hybrid approach may hold more promise.

"A study conducted by Unisys Corporation in 2019 indicated that 58% of New Zealand organisations had failed to realise notable benefits from cloud computing, largely because they had not integrated their migration plan into their broader business transformation strategy," he said. Cloud uptake has been strong, with 94% of New Zealand respondents reporting some degree of cloud adoption, and the country notably leads in multi-cloud usage. Yet, cloud does not always deliver as expected, with Scott noting, "The process of buying and deploying cloud does not always lead to expected outcomes, and the key emerging trend is towards hybrid infrastructure."

A 2023 survey by W.Media among New Zealand's data centre community further underscored this sentiment.

The survey showed that while 47% of respondents were inclined to invest in data centres, 41% were interested in public cloud investment, and 19% favoured private cloud solutions. "Usually, a single company's investment was spread over a number of different options," Scott remarked. These choices highlight the complex mix of needs among New Zealand businesses, where one-size-fits-all solutions fall short.

The limitations of cloud-only infrastructure are evident in both cost management and responsiveness, Scott suggested. "Higher-than-expected costs can be linked in part to poor customer usage of cloud and/or to the selling of solutions that did not really match customer needs," he explained, stressing that the importance of "more immediate and local 'hands-on' technical support" is particularly critical in sectors like finance, healthcare, and government. These sectors, Scott said, often face unique challenges around data sensitivity and latency that demand fast, local response capabilities.

This concern around support extends to cloud reliability and trust, an issue not confined to New Zealand.

"A Citrix poll of 350 business and IT leaders in the US found 94% had moved some of their workloads back from the cloud to on-premises facilities over the previous three years," Scott said. Among the top reasons for this "cloud repatriation" were security concerns (41%), unmet expectations (29%), and difficulty meeting project targets (23%).

Considering these challenges, Scott argued that "One of the most logical solutions to these issues is to deploy a hybrid configuration such as public cloud… in combination with private data centres." The hybrid model, he explained, allows sensitive data to remain secure in private facilities while offering the scalability and adaptability of the cloud when needed. Scott highlighted that "Not all workloads are suited for public cloud," particularly in cases involving mission-critical or legacy systems.

A hybrid configuration, Scott added, allows companies to "offload less critical or seasonal workloads to the cloud while keeping control over essential systems housed elsewhere."

This setup not only optimises cost and resource allocation but also reduces the risks of relying too heavily on any single provider, supporting resilience and ensuring that mission-critical operations remain under company control.

"New Zealand Hybrid," Scott posited, would be a fitting approach for the country, offering benefits like quick response times and solutions tailored to local needs. Localised hybrid strategies, he said, allow New Zealand businesses to strike a balance between international cloud giants like Microsoft and smaller, in-country data centres. "The process encourages relevant innovation," Scott noted, suggesting that collaboration between global providers and local firms could foster new technologies and services uniquely suited to New Zealand's businesses.

Scott acknowledged the Microsoft Cloud Region launch as a significant milestone but warned that it should not be viewed as an all-encompassing solution.

"Microsoft's new Cloud Region is a step forward for New Zealand's digital infrastructure, but it cannot be viewed as the entire solution," he said. Scott advocated a hybrid approach as the best way to meet diverse needs in scalability, control, and security, aligning both with corporate priorities and national data processing requirements.

The shift towards hybrid systems is likely to increase the demand for colocation services as well, with more enterprises moving into modern, high-capacity data centres that can support hybrid configurations. To meet these growing demands, Scott explained, "Plan B offers a full range of ICT and business continuity services including those focused on delivering connectivity and networking, business internet, cloud and cloud services, data centres, colocation and managed services."

Microsoft's expansion in New Zealand is an exciting development for digital infrastructure, yet the need for a balanced, adaptable hybrid model will remain essential.

For now, the future of New Zealand's data landscape appears to rest on a collaborative approach, combining international cloud capabilities with local expertise to address the unique requirements of Kiwi businesses.