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Asean data center market unfazed by credit crunch

Despite the financial meltdown, businesses in Southeast Asia will continue to spend on data centers and expand site space, says data center consulting specialist.
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Written by Vivian Yeo on

SINGAPORE--The financial meltdown is not likely to dampen enterprise spending on data centers and data center outsourcing in Asia, according to new findings from consulting firm BroadGroup.

As testimony to that, data center floor space in Southeast Asia is set to increase an average of 68 percent over the next five years, Steve Wallage, managing director of BroadGroup, said Wednesday at the Data Centres Asia 2008 conference. The report, which collated data gathered from interviews with major companies and data center hosts from Indonesia, Malaysia, Singapore, Thailand and Vietnam, is due to be published this month.

Among the five Asean economies, Vietnam is the fastest growing market in terms of data center floor space. By 2013, BroadGroup expects the country to dedicate 31,000 sqm of land area for data center facilities, an increase of 86 percent from 16,785 in 2008. Land-scarce Singapore, however, boasts the largest floor area, growing from 171,202 sqm this year to an estimated 293,000 sqm in 2013.

"We have a lot of reasons to believe that data center demand will hold up pretty well," Wallage said, adding that trends in the market "suggest the credit crunch will create good news for third party data center providers".

The optimism is partly driven by businesses' shift from capital expenditure to operating expenditure, he noted. On top of that, many large corporations are increasingly willing to outsource, rather than build, their data centers as they are "worried that today's data center can become tomorrow's shed".

The growth of online media and social networking sites would also spur the need for an increasing number of data centers. In addition, more regulations are expected to come into play as a result of the financial turmoil, thereby possibly creating the need for more areas of data archival.

Financial institutions still investing
According to Wallage, a study of global banks before the onset of the financial crisis revealed that a quarter indicated that their data centers were already operating at full capacity. Some 23 percent of respondents said their facilities would reach that stage within a year, while 34 percent indicated the same situation within two years. This showed that there was a need for the banks to act on their data centers, Wallage pointed out.

In fact, a bank in the United States had a data center operating at full capacity which was so hot that every summer the bank would hire students to "hose down the building", he said.

Industry players present at the event noted that momentum around data center needs will still continue in the region, even for the financial sector.

Joel Pereira, chief operating officer of Vinadata, noted that there are plenty of opportunities for growth in Vietnam, where the data center provider is based. Banks in the country, he noted, are "just beginning" to think about outsourcing rather than building their own data centers. Foreign banks are also starting to enter Vietnam, and will further add to the investment in data center facilities.

Ispran Kandasamy, Commscope's vice president and managing director for the Asia-Pacific region, said that he expects data centers to continue to "play strongly" in the region, as businesses still need to manage their information.

Norris Hickerson, vice president of Hong Kong's COL, an IT services subsidiary of Wharf T&T, admitted that "the financial services meltdown is not good for us", as a significant proportion of COL's corporate customers--70 out of 120--are banking institutions. The financial services industry is also a key driver of the data center market in Hong Kong.

Hickerson, however, acknowledged that the banks, for now, are "continuing commitment to ongoing projects".

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