Authored by: Jonathan King, Group Chief Operating Officer & Head of Investments, STT GDC
This pandemic has forced the world indoors and made everyone pick up new habits to make up for the lack of in-person socialising and travelling. Netflix added 15 million subscribers by the end of Q1 – a 22 per cent YoY increase, and Spotify recorded a 13 per cent YoY increase in paying subscribers to 138 million at the end of Q2. Video game streaming platform Twitch saw 1.49 billion gaming hours watched in April – a 50 per cent uptick. Shopee saw sales in Indonesia climb by 120 per cent during the pandemic, and Redmart experienced a tripling in its weekly grocery sales in Singapore. There is a clear pattern here – people were turning to e-commerce, on-demand streaming and content services during their lockdown induced boredom.
Such observations are indeed in line with the roles these sectors play in the region’s internet economy boom. E-commerce, gaming and content streaming have established themselves as key drivers of this growth. This is evident by the number of regional businesses that are blazing a trail in these industries – Lazada, Shopee, Tokopedia, Razer, SEA and iFlix just to name a few. Consumers in the region are now more connected than ever before due to the explosion of mobile devices, and are demanding more convenience and personalised models. Enterprises across the region continue to roll out digital offerings such as augmented reality-based mobile applications to meet evolving customer demands.
Businesses are embracing cloud-based infrastructure and services to not only power their growth, but also foster greater cross-border collaboration and a lighter operational footprint that will allow for cost-effective yet aggressive competition. For start-ups, adopting cloud technologies is especially helpful, as it affords them the flexibility to scale when business is booming and yet helps to keep costs manageable.
Exponential growth in regional cross-border data flows
The majority of data traffic – 52 per cent in 2018 - is Intra Asian, as more enterprises store data to serve local customer bases. This helps in ensuring lower latencies and lag-times. Enterprises must ensure that their regional digital infrastructure is both robust and scalable enough to keep up with the growing torrent of data from within the region that they will store and process.
Regional data economy initiatives
Governments in Asia are prioritising the rapid development of the digital economy by implementing strategies and investing in digital infrastructure, capability building, and providing economic incentives such as tax rebates, grants and funding for reskilling employees. It would serve in an enterprise’s best interests if they take advantage of such available schemes as they deepen their capabilities and put down roots in each market.
Data sovereignty regulations
Greater scrutiny and importance is being placed upon the location of data and how it’s accessed, stored and used. This has never been more prominent, given the spate of data leaks and breaches in the past years. There is also a need to adhere to many data sovereignty laws that require some physical infrastructure to be situated locally. Enterprises must distribute their critical digital infrastructure across the region to abide by these data sovereignty regulations enacted by many governments in the region, both current and proposed.
All this technologically powered disruption and growth will continue to create a barrage of data. In order to underpin Asia’s position as a beachhead for growth and expansion, Asia has to emerge as its own data custodian in that sense. In this regard, the foundations are already there to establish the region as a global data centre hub.
A Frost & Sullivan survey of over 400 enterprises across the region showed that 92.1% of respondents identified data centre infrastructure as being the technological factor most critical to their regional expansion, ahead of communications networks and cybersecurity.
Yet challenges faced with setting up and maintaining an in-house data centre has fuelled outsourcing demand for data centre services. In ASEAN alone, Frost & Sullivan estimates that the size of the outsourced data centre market stood at US$2.23 billion in 2018, with the market expecting to more than double in just five years to reach US$4.69 billion in 2023.
But as a region, Emerging Asia is well placed to support that surge in demand. A Cushman and Wakefield Data Centres in SEA report solidified Singapore as the regional data centre hub due to its stable governance, strong data privacy and protection laws and a superior connectivity and power infrastructure. Our SEA neighbours Thailand and Indonesia have also emerged as prime locations for data centres – the latter already counting Alibaba, Google and AWS as firms that have set up or plan to set up DCs in the country. A Cushman and Wakefield Data Center Market Comparison report highlighted high levels of interest in Mumbai and the global leadership of Beijing and Shanghai as DC hubs, fuelled primarily by local players and telcos.
However, it is important to bear in mind that a DC does not only comprise of engineering infrastructure – power, cooling and security systems. People play a crucial part in ensuring the entire facility runs smoothly. IT, engineering, infrastructure and business talent are all the lifeblood of data centres – a facility is only as robust as the team that it can assemble. To operate in this fragmented Emerging Asian market, DC operators with regional or international ambitions should aim to populate their ranks with personnel that bring with them the technical know-how along with business leaders that are able to navigate challenging landscapes and chart expansion strategies. The industry has to work with educational institutes to groom talent to staff DCs of the future – a prime example is what Singapore’s Nanyang Technological University is currently doing with Facebook.
Asia is proving to be a huge opportunity for DC expansion. DC players are looking at a wider range of markets as possible points of expansion with all the ingredients needed to power this expansion – be it infrastructure or talent. The region is generating and consuming more data than ever, and there needs to be infrastructure to service it – to put it bluntly. Asia’s rise as a technological, financial and business titan in its own right will in turn supercharge the vibrancy of the region’s DC industry.