The state of the cloud in Latin America
When it comes to the cloud, Latin America is a mixed bag. On the one hand, it faces unique problems. On the other, investment is on the rise. Learn more.
In the cloud world, we like to talk about digital transformation as though it's universal. It's certainly global – there's no corner of the earth that's not undergone some kind of cloud migration.
That's different, however, from saying that cloud services are distributed equally across the world. Some regions are cloud hubs: centres of innovation and deployment. Others are lagging behind. And others still are in the process of transformation but at a slower rate.
The picture in Latin America is mixed. On the one hand, there's been an uptick in cloud adoption since the pandemic – and signs that further investment is on the cards. But it's also the case that the region (in all its diversity) is beset by obstacles that are currently stopping it from being a contender with, say, Western Europe or China.
In this article, we review the recent history of the cloud in Latin America, before taking a look at the available forecasts to see where things might be heading.
What are the challenges?
Overall, the trend in Latin America is in line with the rest of the world – an increase in migration from legacy systems to the cloud in both the private and public sectors.
But there's a catch – one that threatens to undermine one of the cloud's biggest selling points.
When you read about the glories of the cloud, you'll often hear people (ourselves included!) come back to the fact that these services are available anywhere, any time, from any device. Universal availability – all you need is an internet connection and login details and you're good to go.
That's all well and good – but what if you live in an area with limited access to high-speed internet?
Yes, Latin America has a connectivity problem. Many users experience latency as a result of the large distances that internet traffic has to traverse – from public cloud services (mostly in North America) all the way down to Latin America.
This means that the UX for Latin Americans often just isn't as good as elsewhere in the world. Similarly, there's a lack of data centres in the region. Brazil and Mexico aside, most businesses rely on servers in North America.
The upshot of this isn't just the latency that we mentioned. It also creates additional costs when transferring large amounts of data across borders.
What all of this means is that, on the whole, Latin America is paying more for less.
However, things have been changing. First, the pandemic gave the region a much-needed shot in the arm – and since then, investment has been on the rise.
Seeds of change
The pandemic saw a huge adoption of the cloud across the world in response to global lockdown measures. Latin America was no exception.
Research in 2021 revealed that "39% of organisations in the region [planned] to invest in cloud computing".
This came after a year of intense cloud adoption, with cloud-based storage across all sectors jumping from 25% to 38%.
After the COVID-19 pandemic, big-name cloud providers put more money into Latin America, with Brazil, Mexico and Chile benefitting especially. These new "cloud regions" are,
some believe, a forecast of more future investment.
Cloud adoption, says Alexandre Magnani, is "becoming increasingly mainstream in Brazil's financial services and fintech industry, as companies are looking to reduce costs, improve scalability, and access new technologies".
It's also leading to a rapid rise in eCommerce as well as an increased – and related – rise in APMs (alternative payment methods that don't involve cash or card).
The continual growth of the cloud isn't inevitable, but all signs are pointing in that direction. Barring a major economic disaster, it seems likely that the cloud will be adopted at an accelerating rate in Latin America over the coming years.
What's next?
Predicting the future with confidence is a mug's game. However, there are signs that cloud investment will continue to grow in Latin America.
Take Vultr – the world's largest privately-held cloud computing provider. In 2023, it announced that it was expanding its cloud footprint in Latin America.
In practice, this means a threefold increase in capacity in São Paulo, Brazil's most populous city.
The company is also launching a VIP Digital Startup Program with the aim of promoting innovation across Latin America. It's also bringing Vultr Cloud Alliance to the table – a privately-held alternative to the biggest of big tech offerings.
Some people raise concerns about "cloud colonialism". Big tech investment in the region can be seen as altruistic, but some see it as an attempt to stifle home competition, with one
commentator going so far as to call investments in the region "pox-laden blankets".
It remains to be seen just how this investment will play out. It seems highly likely, however, that there will continue to be growth in the cloud sector as more and more public and private organisations adopt cloud solutions.
In Chile, the market is expected to grow at a CAGR of 22.5% from 2020 to 2025. Similarly, Mexico is expected to grow at a rate of 22.2% in the same period.
The region as a whole is forecast to grow by $18.7 billion between 2022 and 2027 at a CAGR of 16.32%.
Conclusion
The picture in Latin America is mixed. On the one hand, the region is dogged by a lack of infrastructure, limited access to high-speed internet and a dearth of home competition.
On the other, the pandemic saw a huge increase in cloud adoption – and since then, major cloud providers have ratcheted up their investment in the region.
Will Latin America become a player to rival North America, Western Europe and China? Or will it continue to fall behind in spite of growth? We can't be sure – but we'll definitely keep you updated.
Are you looking for a
managed cloud migration partner?
Get in touch with Ascend Cloud Solutions for a no-obligation consultation.
