Cloud is making it rain in African tech ⛈️

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African startups need to be on the cloud to stay alive.

So, tech giants like Amazon, Google, and Microsoft are moving into African cloud.

But the costs are becoming too expensive.

And local providers might be the answer.

The Story

Think of your favourite apps.

Gmail, Instagram, and X - they all live in the cloud.

But, the cloud is built on data centres → huge computers that hold websites, apps, videos - the internet as you know it.

Most startups who build a digital product host it on the cloud so it's available to users anywhere in the world.

Cloud companies charge you for storage space, so the more users you have, the more you pay.

And big tech is blowing a bag on African cloud:

• Google Cloud launched its first African cloud region (read: data centre) in South Africa.

• Microsoft and G42 invested $1 billion to build a data centre in Kenya.

• Huawei is supporting Nigerian startups with $10 million worth of cloud credits.

• Oracle is opening two data centres in Morocco this year.

So much buck, but where’s the bang?

The Context

A Software-as-a-Service (SaaS) startup with 100 employees will spend an average of $1.16 million on the cloud annually.

Even for well-funded startups, that’s a bitter pill to swallow.

But they stomach the costs - or die at the altar of no growth.

Last year, Twiga got sued by Incentro, a Google Cloud partner, for owing $2 million in cloud fees.

It had been racking up a cloud bill of $84,000 every month.

Twiga is huge and heavily funded, so imagine a young startup with barely a million dollars in the bank.

Meanwhile, cloud companies are printing money.

Global cloud spending will reach $678 billion by the end of this year.

In Africa, demand for cloud services is growing at 30% yearly.

And it’ll grow into a $17 billion market in four years.

Which is why big tech is expanding its cloud reach here.

And they’re not just opening data centres.

They’re getting down and dirty with startups - creating developer communities, engaging startups, and offering free cloud services.

For instance, Google offers $200,000 worth of free cloud space to African startups.

By the time they run out of space, so much of their infrastructure will run on Google Cloud that they’re unlikely to switch.

But this doesn’t always go down well.

Because in Africa, cloud costs could really kill your startup.

Global cloud providers like AWS and Azure currently bill in USD.

The high USD costs are one thing, but exchange rates are in bad shape on the continent.

And for a startup earning in local currency, their dollar revenues are declining while their costs rise - it’s a bad deal.

Fortunately, Africa has a bunch of local cloud companies:

• MainOne Cloud is a Nigerian company that serves telecom operators, governments and ISPs.

• GigaLayer currently serves 16,000 businesses on the continent.

• And Nobus Cloud Services is helping local startups host their software as cheaply as possible.

They may not have the deep features the big guys have, but they’re gaining ground quickly.

And they could answer the cost question for startups.

The Tech Safari Take

Founders have started voting with their feet to save cost.

They’re switching to providers who bill in local currencies - mostly local providers.

And the results are interesting.

Bento Africa switched to a local provider and dropped their cloud costs from $48,000 to $3,200 a year - that’s a 93% discount.

Mark Essien of Hotels.ng, Nigeria’s largest hotel booking site, talked about hosting the site on their dedicated server - and how other companies can do it too.

Some global cloud providers like Servercore have read the leaves and have started billing Kenyan startups in shillings.

African startups need lower cloud costs.

And as VC funding slowly dries up, more startups will make the switch.

Big tech companies need to consider billing in local currencies, like they currently do with their consumer services.

Their moves on the African cloud are a plus, but we think cheap tech will win - and they need to face that fact.

What’s your answer to the high cloud costs African startups currently pay?

Hit reply and let us know.

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