As the world turns to cloud computing, the data center market has never looked brighter for Malaysia. Under the auspices and guidance of the Multimedia Development Corporation (MDeC), the country is now one of the preferred locations for data centers in the region. For example, NTT recently launched its fourth data center facility in the country, while Huawei last year announced that it will be building a new data center in Iskandar Malaysia, a special economic zone positioned as a major port and financial services district in the State of Johor.

The country’s success is perhaps not surprising, given the long list of advantages it holds. For one, Malaysia has ample land, good infrastructure, an educated workforce and political stability. Many of the global network providers are already in Malaysia, which means that its international network connectivity is good. Moreover, the country has access to renewable power from hydroelectric dams, which would no doubt be appeal to organizations with an environmental mandate.

Prices are attractive too, compared to alternative locations in the region like Singapore and Hong Kong. Finally, there are ample government initiatives to bolster the local data center industry. As pointed out by Phan Yok Hin, the VP of business development at data center infrastructure service provider HDC Data Centre Sdn. Bhd, there is also strong government support to market Malaysia as a regional data center hub.

Some speed bumps along the way

Malaysia does, however, have strong competition from Singapore, the neighboring and more established data center market. IO, for example, chose to launch its Asia Pacific operations in Singapore last year after evaluating various options. In a conversation about its decision to come to Singapore, Daniel Ryan, the senior director of Sales at IO Singapore, cited higher demand and the presence of infrastructure such as power and networking, which he said is “a little bit more established” to support IO’s regional headquarters.

“When we looked at the market, we are really looking for establishing an international HQ,” says Ryan. “Singapore has done quite a bit to encourage business growth in the region.” On the flip side, he admitted it was “a little bit more arduous” sourcing for large tracts of land in Singapore. This should presumably be less of an issue in Malaysia.

Another bump on the road may be Malaysia’s electrical tariff, which was revised upwards in January this year as the Malaysian government sought to reduce its subsidy on the cost of fuel. This resulted to an increase in operating cost, which led some data center operators to urge for special rates with national utility company Tenaga Nasional Bhd.

Not everyone saw this development as a case of a cup that is now half-empty though. Wong Ka Vin, the managing director of data center operator 1-Net Singapore, says he feels the rise in tariff should have no impact on decisions to migrate to commercial data centers. “From a Malaysian perspective, whether you outsource or own your own data center, it [the new tariffs] affects you too.”

The opportunities ahead
With half a decade of experience managing Malaysian data centers under his belt, Wong notes Malaysia still offers the cheapest electricity across the ASEAN region. “There will be some impact, but it is purely correctional in nature,” Wong says.

He suggests there is tremendous potential as the price spike causes many companies with private server rooms to realize the real operational cost of their antiquated facilities and migrate to a modern energy-efficient data center in Kuala Lumpur and Cyberjaya.

Malaysia has not been known for great cloud uptake. IDC Malaysia’s Dan Fadalini Sukia last year said the country’s cloud update has been “lethargic”. He cites research that shows the country is not as yet cloud ready. With many CIOs and IT executives holding on to the conservative mindset of building and operating their IT entirely in-house, convincing them about the merits of cloud computing will generate a groundswell of demand for Malaysian data centers.

The Malaysian government appears to recognize this, and has launched multiple initiatives to encourage content and application providers, as well as SME businesses to embrace the Cloud.

The bustling development that is Iskandar Malaysia is also generating new levels of interest for data center developers. Located just across the border from Singapore, data centers here are well positioned to potentially displace some of the pent-up demand for data centers in Singapore, and to serve financial institutions and businesses that are being established in Iskandar. The Malaysian Government has already earmarked Iskandar for the establishment of a second hub for data center parks in the country.

Looking at the big picture, there is no question that the necessary pieces are in place for Malaysia to make a serious bid as a premium data center location in the region. All that is left is the requisite persistency and follow-through to make it a reality.