South-East Asia is one of the key regions driving global data center growth. The research company Technavio has estimated that data centers in South East Asia will grow at a high CAGR of 14 percent from 2019 to 2023. The Covid-19 pandemic raises obvious questions: how is it currently affecting the region’s data centers, and how will this affect growth?
Moderated by DCD’s Stephen Worn, the panel consisting of Tom Duncan, Executive Director, CBRE; Boon Keong, Technical Director, DSCO Group; and Asher Ling, Managing Director, Princeton Digital Group; discusses key questions such as: Since South East Asia comprises a number of markets at different stages of maturity and with very different profiles, how will the impacts differ? How do you develop strategies for the key opportunities that the region will continue to present? What are we learning about future-proofing those strategies?
The panel members weigh in on key growth factors in the South East Asia data center industry
First to share their thoughts is Tom Duncan, who mentions how South East Asia is lagging behind the rest of the world in terms of data center availability and infrastructure. However, hyperscale clients in the region are driving a lot of growth due to their own challenges with increased demand for their services. Another key impact on growth is the speed at which new data center operations can be completed in the region - typical six to nine month timelines are difficult to meet in the region.
Similarly, Asher Ling describes the region as the final frontier for the data center industry. The ‘new generation’ in South East Asia is not tied to traditional methods of doing business, and often connected to data for business, leisure and lifestyle. The increasing demand of data driven services has seen an increase of hyperscale and large enterprise organizations attempting to set up footholds in the region too.
Boon Keong also highlights another key factor: government driven initiatives like smart grid systems. These systems also require large amounts of raw data, as well as data processing and analytics. The requirements of these applications demonstrate an increased demand for data, and reliability.
All of the panel members addressed the elephant in the room: Covid-19. The huge uptick in data demand because of internet services has put a large strain on the data center industry in the region. The increased data usage has rapidly shifted perceptions of data centers (which was already changing), with many now seeing it as a utility itself, like water and electricity.
The state of the market - trends, technology, adoption
So what does the current state of the market look like? For a long period of time, Singapore has dominated the SEA market due to easy business logistics, strong global connectivity and a general feeling of ‘comfort’ and reliability by large multinationals. Singapore has also historically had strong government policies on business and infrastructure which have significant impacts on medium and long term availability.
Yet other locations are growing in popularity; Indonesia, Malaysia, Philippines and Thailand are becoming increasingly attractive due hyperscale clients looking to diversify their base points. One major inhibiting factor however of growth in these countries however is their limited capacity to house data centers.
South East Asia is a hub of roughly 800 million potential customers. As demand in this area grows, hyperscale clients may look to reevaluate their presence across the region. Another key example of this is how data centers are now being treated as a unique asset class. Previously, major corporations treated data centers as an industrial logistics, however they are now being seen as unique investment opportunities, equally important to other utilities such as water and power. A maturing perspective on data centers will make South East Asia a prime place for investment into infrastructure like data centers, as well as increased demand for their services.
What about Australia?
One key nation in the region is treated slightly differently - and for good reason. Compared to the rest of South East Asia, Australia has multiple factors that have made it a different opportunity for hyperscale clients. Being one of the strongest countries in the world in terms of cloud adoption, while also being one of the most remote regions, means it is a unique case for hyperscale clients. While Australia and SEA share some common factors, there are a number of unique elements that mean hyperscale clients have to take a different approach.
But what does the industry want? And what does it actually need?
Duncan raises a good point: people don’t care about IT infrastructure until it fails. We know that people rely on data centers to make sure there is a seamless continuity across work, play and lifestyle. IT and data center professionals work around the clock to make sure lives go on as normal, but the infrastructure across SEA is struggling to keep up with demand.
Increased usage of data center services due to the Covid-19 pandemic has demonstrated how data center infrastructure needs to be more reliable and able to manage black swan events. There is a dependency on data centers to support customer needs across the region. So how is this impacting growth?
The answer circles back to Singapore as a hub of business. Due to Singapore’s strong reliability, and central location to multiple points, hyperscale clients may feel more strongly about housing infrastructure there during times of crisis. What countries across the SEA region need to ensure to secure long lasting growth is reliable, efficient and predictable infrastructure.
South East Asia is a rapidly growing market. Tune in to the full webinar to discover how various organizations are tapping into the region.