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December 4, 2024
In technology, talk is cheap. Enthusiasm often supersedes execution as businesses clamber on-board the latest marketing bandwagon, kick-starting a hype cycle of emotions and expectations.
Today, artificial intelligence (AI) is the focal point of such enthusiasm in Australia.
But the true test of potential lies in side-stepping the rhetoric to assess practical applications and real-world implementations.
“As companies accelerate their AI journeys, it’s critical they adopt a comprehensive approach to implementation and connect the dots to link AI ambition with readiness,” outlined Dave West, President of Asia Pacific, Japan and Greater China (APJC) at Cisco.
“To fully leverage the potential of AI, companies need a modern digital infrastructure capable of meeting evolving power needs and network latency requirements from growing AI. This must be supported with the right visibility to achieve their business objectives.”
In this dynamic and rapidly evolving field, a balanced and consultative approach is required to help organisations harness the benefits of AI. Hence the value of a partner ecosystem capable of pioneering AI adoption from strategy creation to solution deployment and then organisational scale.
One network already building such muscle is Cisco, powered by a spider web of innovative partners offering solutions ranging from integration and resell to consultation and services.
“The opportunity for AI to offer growth, technology expansion and business transformation for companies across the world is huge,” added Rodney Hamill, Managing Director of Partner Sales across Australia and New Zealand (A/NZ) at Cisco.
“Partners are the conduit to this opportunity and play a critical role in the effective delivery of this transformation.
“It’s exciting to witness the opportunities that partners foresee in how AI will transform their revenue models. Their focus on infrastructure, security and customer experience aligns perfectly with Cisco’s strengths, positioning us to support and enhance this journey effectively.”
At the heart of such opportunity is the Cisco 360 Partner Program, designed to accelerate the value partners bring to customers by better addressing their “rapidly evolving and complex needs” – modernising infrastructure, powering AI workloads anywhere and keeping organisations “secure, resilient and high-performing”.
Developed in collaboration with partners and customers, Cisco will guide the channel through a 15-month transition period leading up to the program’s launch in February 2026.
“It’s the biggest change to our partner program in our history,” Hamill explained. “We’re focusing on the value index and assessing the value that our partners and Cisco are bringing to customers, and how that’s manifesting in the way that customers use our technology.
“We’re not pulling any punches here, we have plenty of work to do over the next 12-15 months. We’re ramping up activity and support for local partners during this transition period and we’re looking forward to helping partners on that journey.”
AI Strategy
When assessing market opportunity – and according to the Cisco 2024 AI Readiness Index – AI has become a cornerstone of business strategy due to an increased urgency among companies to adopt and deploy AI technologies.
In Australia, 92% of organisations acknowledge such urgency, driven primarily by the CEO and leadership team. Additionally, companies are committing a significant number of resources towards AI, with 38% reporting that as much as 10-30% of their IT budget is now being allocated to AI deployments.
“Some Australian businesses have already developed strong AI strategies and are seeking partners to help strengthen areas such as security, governance and data,” observed John Tan, Chief Customer Officer at Data#3.
“There’s a huge challenge around the workforce also and the skills available in market – either internally or with a partner. But that will continue to evolve over time.
“Our view is that AI strategies are definitely there and the commitments are there but the execution is a little lagging at this stage. We’re helping our customers through AI readiness assessments which is paramount at this moment.”
In alignment on market appetite, Chris Noonan – Victorian State Manager at NTT – acknowledged that AI strategies are already in place for many businesses across Australia. This has triggered a wave of proof of value and proof of concept projects, usually targeted in nature and focused on building specific use cases depending on the industry sector.
In that context, understanding how to best maximise a return on investment (ROI) is crucial when selecting the key areas in which to invest budget and resources on AI initiatives.
“The analogy I use is that five or six years ago, the market rushed off to embrace that shiny thing called cloud,” Noonan recalled.
“During that movement, the value of the network was forgotten and as applications became separated from the database, that’s when a low latency, high-performance and well secured network was recognised to be very important.”
In that instance, a lot of remediation work was triggered after deployment whereas Noonan suggested a shift in approach on AI, suggesting corporate lessons have been learned.
“It’s more front of mind in terms of understanding the infrastructure requirements and also landing a platform to run those AI initiatives,” he shared.
The Cisco 2024 AI Readiness Index measures AI readiness of companies across six key pillars: Strategy, Infrastructure, Data, Governance, Talent and Culture.
Based on their readiness score, companies are categorised into four levels: Pacesetters (fully prepared), Chasers (moderately prepared), Followers (limited preparedness) and Laggards (unprepared).
In Australia, current AI market readiness ranks as:
Only 4% of organisations in Australia are fully prepared to deploy and leverage AI-powered technologies, down from 5% a year ago. This decline underscores the challenges companies face in adopting, deploying and fully leveraging AI.
“IT leaders have had a little fear around adopting AI,” noted Lisa Fortey, National Sales Director, Logicalis. “Firstly, they have had to ensure that their data is governed and that the framework is correct to actually make use of the ethical part of the AI platform.”
Concern also extends to the adoption of generative AI (GenAI) and large language models (LLMs), chiefly with regards to workload impact and subsequent cost from a potential “budget blowout” scenario.
“Then finally, security of their data,” Fortey added. “That’s why Australia – which is usually an early adopter of new technology – has been a lot slower to embrace AI.
“We have seem businesses put the brakes on, particularly when putting up their own corporate data to the general knowledge pool of ChatGPT. That isn’t a smart idea and we’ve seen some big rules coming into effect because of that.”
Fortey’s air of pragmatism reflects an industry inundated with AI intent yet hamstrung by ongoing issues related to cost, ethics and security. This remains the dominant theme of the business world however, flooding strategy updates, earnings statements and almost every stakeholder communication.
“The top priority for CIOs and IT leaders in Australia is embarking on AI and LLMs,” Fortey confirmed. “Yes, there’s barriers associated to that but it’s an exciting journey for partners like us to help businesses continue their digital transformation journey.”
According to Logicalis’ annual CIO Report, 63% of Australian CIOs identified AI as the number one priority area for 2024, significantly above the global average of 55%.
At the same time, 89% of IT leaders reported substantial organisational demand for AI, with 94% establishing working groups dedicated wholly to the technology, 7% above the global average.
AI Solutions
Based on the Cisco 2024 AI Readiness Index, AI also ranked as a “priority spend” for Australian organisations during the past 12 months. Notably, 38% of businesses allocated 10-30% of IT budgets to AI projects.
AI investments have focused on three strategic areas – cyber security (32% of companies are at a “full or advanced” stage of deployment), IT infrastructure (31%) and data analysis and management (29%).
The top three outcomes that businesses aim to achieve are:
For Noonan, customers of NTT are landing on two key AI use cases in Australia – assisted service and content creation.
“Assisted service is a big one and we’re seeing a lot of activity in the contact centre domain which is a traditionally strong area for NTT Data,” he said. “The next evolution of chatbots and virtual assistants are creating co-pilot style initiatives which is enhancing the assisted service channel.
“On content creation, development teams are streamlining processes and using AI to get code out faster. Customers are becoming very self-sufficient in that space, including in content discovery.”
The role of a global system integrator (GSI) such as NTT in those scenarios is predominantly centred on helping businesses tackle unstructured data through strategic consolidation efforts. For example, the consolidation of data warehouses and data lakes to centralise data in one place with the aim of providing value back to the organisation through enhanced insights.
“We’re currently working with a large manufacturer on the data readiness element of AI,” Noonan explained. “They’re exploring mainframe consolidation as well as building out a data lake platform to ingest data into one place for better analysis.
“Part of that is also building an AI governance model around that – plus a target operating model – because the organisation needs to move a lot faster than a traditional organisation.”
In March 2024, NTT rolled out its proprietary Japanese LLM to businesses under the banner of “tsuzumi2”. The “ultra-lightweight” model was first implemented in the medical and contact centre sectors, designed to provide operational efficiency while enhancing employee experience and customer experience levels.
“Some of the proof of value work that we’ve undertaken with customers has examined smaller data sets through a smaller model to create very targeted use cases,” Noonan added. “This reflects the approach of walking before you run through a smaller investment.”
Even though the importance of data in the successful use of AI workloads is not underestimated, knowledge is seldom translating into execution in the form of effective data management strategies.
According to Cisco findings, less than a fifth (19%) of companies in Australia report high readiness from a data perspective to “adapt, deploy and fully leverage” AI technologies. That number has declined during the past 12 months.
Echoing insights shared by Noonan, organisations still face significant challenges in establishing a strong data foundation for AI, which includes:
As outlined by Cisco, 93% of Australian businesses acknowledge inconsistencies or shortcomings in the pre-processing for organisations.
Meanwhile, 51% of companies rate the level of awareness about potential biases and fairness in data sets across their organisation as “moderate”, with only occasional training or awareness programs in place.
At Data#3, the Brisbane-based solutions provider is an early adopter of Microsoft Copilot with learnings shared with customers to trigger widespread adoption of AI across the country.
“We’ve seen a huge number of customers take up Copilot and leverage those capabilities in the workforce,” Tan noted. “That has been an encouraging step which has resulted in increased adoption across different verticals and government agencies.”
Why such adoption is important is because organisations are now taking the first steps on their AI journey, prompting additional projects and initiatives in the process.
“It’s proved to be a segue into leveraging AI further across company environments and into the infrastructure space,” Tan said. “Our role is to help customers make the linkage between using AI in the workforce to leveraging LLMs from an infrastructure perspective.”
Tan reported “mixed adoption” between enterprise and mid-market organisations in this space but regardless of company size, the motivations are similar. At this stage, focus is on using AI for productivity gains and cost savings.
“Think about productivity gains and that obviously has an impact on the workforce in terms of efficiency and cost,” Tan added.
“Initial use of AI around document management has evolved to leverage GenAI to now add context. That means businesses are not only using AI to crunch the data but actually provide useful information out from that.”
Specific to AI development, 87% of organisations in Australia now require further data centre graphics processing units (GPUs) to support future AI workloads. Similarly, 91% of companies lack confidence in the availability of computing resources for AI workloads.
According to Cisco findings, the readiness of infrastructure to support AI initiatives has seen a “significant decline”, with 30% of organisations in Australia categorised as “Pacesetters” or “Chasers” in 2024, down from 41% a year ago.
When asked how they would rate their own overall readiness of their IT infrastructure to accommodate AI technology adoption and scaling, more than three quarters (79%) of organisations said they feel “moderately ready” at best.
This is a key issue that needs to be addressed, not least because 88% of respondents in Australia predict that the workload of their organisations’ infrastructure will increase with the deployment of AI-powered technologies.
However, almost a quarter (23%) acknowledge their infrastructure has limited scalability and flexibility to accommodate these increasing needs. Honing in on specific areas of IT infrastructure, systems are struggling to keep pace with accelerating and cleaning of data for AI projects.
“We need to further focus on the AI use cases,” Tan explained. “The focus on the infrastructure and the technology needs to extend out to the use cases.
“Then from our perspective it becomes about how you service that and build the right model to support alongside. That requires a shift in terms of the skills required to consult around security, data and governance.”
Despite increased investments on AI, on average half of businesses surveyed by Cisco have either seen no gains or the gains have fallen short of their expectations, in “augmenting, assisting or automating current processes or operations”.
“At this stage, we’re seeing deployments of Microsoft Copilot and AI solutions that are off-the-shelf ready,” Fortey added. “But customers are now looking at their own data sets and building out LLMs – it’s not quite there yet but we’re seeing the evolution of strategies that may take the form of future implementation.”
Today however, a relentless pressure to succeed now exists in AI. For 42% of companies in Australia, such mounting urgency is originating from the very top to implement AI technologies – chiefly the CEO and leadership team.
“There’s an element of rogue AI occurring but that can be a good thing,” Fortey added. “We see the same in our business with team members willing to experiment with AI and move into LLMs – that’s where the investment starts.”
A local, regional and global levels, Logicalis partners with Cisco to deliver future workplaces that include smart buildings leveraging advanced AI technologies.
“This provides efficiencies in terms of staff comfort but also building sustainability and security by connecting facilities into the corporate network,” Fortey explained.
“We have a large consulting and advisory team helping customers on their AI journey, starting with the use cases,” Fortey said. “Our focus is on helping the customer actually understand how they’re going to use AI, as well as the data governance and ethical piece.”
Adoption and utilisation is also critical to success, in addition to modernised infrastructure and network capabilities.
“Ensuring the right infrastructure is embedded into their environments, ensuring that edge computing is utilised and close to the data source and ensuring that latency isn’t an issue,” Fortey outlined. “Then wrapping that up with a security service is crucial.”
AI Scale
When assessing the age-old problem of scale – a common challenge facing any technology on the cusp of mainstream adoption – Tan posed the following question… do businesses view AI as an individual pillar within a go-to-market or across the entire go-to-market?
“The answer to that question will evolve over time because we see that across the Cisco portfolio today – AI is invested into the data centre portfolio and is also embedded across security and the network,” he responded.
“So, I guess the answer is both and we must cover both aspects to ensure our solutions showcase the power of AI within solutions and in their own right. We’ve learned from what happened with cloud as that technology became accessible across everything.”
Building on Tan’s approach at Data#3, Fortey added that Logicalis is running focus groups for key customer segments across public sector and private sector verticals in Australia.
“The aim is to share use cases with our customers and ensure that if we can create a go-to-market solution for a specific industry, then we are able to repeat and scale that – not just within Australia but also globally,” Fortey confirmed.
For Noonan, the issue of scale is “domain specific” and reflective of the tailored use cases emerging in sectors such as the contact centre space.
“Through our pedigree in this market we’re creating use cases that can absolutely scale across the sector,” he noted.
“Take the financial services industry as another example – whether banking, insurance or superannuation – we’re seeing repeatable solutions and use cases from an assisted services perspective.”
According to the Cisco Global AI Partners Study, scale is central to future partner success in AI.
And the potential upside is significant – more than one in four partners believe 76-100% of their revenue will come from AI technologies in the next 4-5 years, with the greatest revenue drivers being around infrastructure (33%), cyber security (20%), and customer experience (9%).
“Based on those results, and what we’re seeing in Australia, we probably haven’t quite got the uptake that some of the other markets have seen at this stage,” Hamill summarised.
“But a very big shift in the industry is underway. We’re really just at the beginning of what promises to be a an exciting period in the market.”
Even in the very short-term, booming demand for AI-related services and solutions is set to fundamentally change the revenue mix of partners.
Based on Cisco Global AI Partners Study findings, 23% believe that the majority of their revenue will come from AI technology deployment in the next 12 months. A further 38% consider that AI technology deployment will generate between 26% and 50% of their revenue one year from now.
Underlining the benefits of economies of scale in relation deploying AI technologies, larger partners tend to feel better prepared to take advantage of these opportunities, in both the short- and long-term.
In the short-term, between one-third and one-quarter of larger channel partners expect the deployment of AI technology to account for the majority of their revenue over the next 12 months, compared with only around one in six (17%) of channel partners with 51-250 employees.
Of the different types of partners, system integrators and value-added resellers are the most bullish about the prospects for AI technology deployment to take up revenue share in the short term.
One in four (24%) of these partners are forecasting AI technologies to account for the majority of their revenue over the next 12 months. This compares with just 7% of IT distributors who forecast the same.
“The market is starting to see AI in our story and how it’s changing our product portfolio, whether in security, networking or collaboration,” Hamill added.
“AI is driving adoption and helping our customers operate more efficiently and more securely. AI is infused into all of our products and through data sets and what customers are building with partners, now it’s about unleashing AI onto all of that.”
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