As 2014 draws to a close, let’s take a step back to reflect on some of the drivers behind the growth of data centers in the Asia Pacific in general, and Southeast Asia in particular.
A number of trends stand out, one being the good economic growth in the region as a whole, as well as the sheer number of new users that are hooking up to the Internet here. There are other factors at play too, such as the increasing need for an infrastructure refresh in older data centers, and the growing role of data sovereignty as data privacy laws mature in Southeast Asia.
Following the users
When we spoke to Joe Kava, vice president of data centers at Google about the company’s future plans for Asia, he told us that Asia’s Internet users grew by the equivalent of the entire population of Canada in Q3 of this year. According to him, the majority of people in the world that have yet to come online are living in Asia.
One catalyst here is surely the proliferation of cheap smartphones and tablets, which is putting compute devices within the financial reach of more people than ever in the history of the world. Moreover, these mobile devices also serve to depress the prices of entry-level computers, culminating in great levels of use in both homes and businesses.
While Internet penetration in Southeast Asia countries such as Singapore and Hong Kong is unlikely to increase significantly, there is tremendous room for growth in countries like Cambodia with a population of 14.8 million, Indonesia with 237.5 million, and Vietnam with 88.0 million - just to name a few. And this is excluding the more than a billion people each living in the Asia countries of China and India.
Ultimately, the strong growth of Internet-connected users coupled by good economic growth means that there is an increasing need to reach people in the region. And as enterprise businesses and cloud service providers like to place their servers close to the users who will be accessing them for the best latencies and reaction times, this directly translates into more data centers being built here.
Indeed, it is for this reason that Google set up its first data centers in Singapore (above) and Taiwan last year, while Amazon Web Services has built data centers in Singapore, Tokyo (Japan) and Sydney (Australia), as well as an upcoming one in Beijing (China). In addition, Microsoft has also talked about plans to build an unspecified number of data centers in India by end-2015 to support its cloud services in the country.
The cloud paradigm and data sovereignty
Unsurprisingly, another factor driving demand in the region is the rise of cloud computing, which is drastically shortening the traditional life cycles of data centers. After all, even older facilities of just five to ten years old are unlikely to possess the requisite infrastructure to properly support the dense compute hardware that modern cloud architectures demands.
“About 20 percent of the data centers in the region are [more than] eight years old and are not really geared up to handle the demands of modern high density computing platforms,” explained Simon Piff, the associate vice president of enterprise infrastructure research at IDC Asia Pacific to Datacenter Dynamics. “Retrofitting a data center is an expensive proposition so many organizations are building new to cater for this refresh cycle.”
And as economies mature in this region, another driver that is coming up on the horizon would surely be concerns over data sovereignty. In our report on Indonesia titled “The challenges with operating in Indonesia”, we pointed to Government Regulation No. 82, which prohibits financial data from being kept outside the country without prior approval. Such laws could well be extended beyond financial institutions to cover all IT services, suggested Clement Goh, managing director for South Asia at data center operator Equinix.
Bernard Geoghegan, the managing director of Digital Realty in EMEA and APAC, agrees on the growing relevance of data sovereignty. “As Asian regulators become more protective of their domestic technology market and relevant data, there could proportionately be a growing need for data centers to be stationed locally,” he said to Datacenter Dynamics. Geoghegan does note that regulations pertaining to data sovereignty in the region “are still unclear” at the moment, however.
With the writing already on the wall, not everyone is waiting around for actual laws to be enacted before acting though. As we reported in August, SAP is already looking to establish data centers in six new locations in Asia. On that front, Simon Dale, who is the head of SAP HANA Enterprise Cloud for the Asia Pacific and Japan (APJ) regions, was also able to share about some data sovereignty challenges faced by SAP customers operating in the region.
Finally, government interest in the region means that data center developments are not always dictated entirely by the private sector. Countries such as Malaysia is driving data center growth under the guidance of the powerful Multimedia Development Corporation (MDeC), while the government-led Singapore Data Center Park looks to be finally taking off with the awarding of the first plot of land to Telin Singapore earlier this month.
Even Hong Kong too, had in recent years formally recognized the development of data centers as the backbone to its economic growth, and has implemented a slew of measures to facilitate data center development in the land-scarce city.
Of course, not all data center operators may find it profitable to build a data center in each of the markets here; lack of economies of scale means that it could make more sense to establish partnerships in some cases. For example, Data center operator 1-Net Singapore in October announced a strategic partnership with Cyber CSF in Indonesia and TCC Technology (TCCT) in Thailand to offer their services across borders.
Yet there is an upside to it, according to Piff. Some “protectionist legislation”, and a lack of the economy of scale, means the data center market here is not one that will be dominated by a few players. The result: “There will be an ongoing demand for both data center services and new data center builds that are enterprise-owned,” he said.
“The future looks bright in this space as the demand for compute power will continue,” concluded Piff, who also noted that demand for data center floor space will continue “for the foreseeable future”.