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Indonesia takes center stage as rise in cloud adoption drives more hyperscale data center investments

Published 29 April 2020

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Stuart
W.media | editor
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New market research by Arizton shows Indonesia as a ‘hotspot’ for hyperscale data center investment within the next five years, driven by the rise in cloud adoption.

The country is expected to experience investments worth over US1$ billion and an annual growth rate of 11% between 2019 and 2025.

More than US$600 million in data center construction opportunities for contractors is projected during 2019-2025, while the colocation data center market will witness growth of around US$300 million.

The research revealed that hyperscale cloud providers like Alibaba, Microsoft, Google and AWS have been a strong boost to the Indonesian market with announcements to open their own data centers due to the rapid adoption of cloud computing in the country.

Joko Widodo, President of Indonesia, said at DevCon – Digital Economy Summit 2020 in Jakarta: “Microsoft wants to invest immediately in Indonesia.”

Alibaba Cloud also announced US$28 billion worth of data center investments covering 21 regions, including Indonesia, Malaysia and Singapore to support digital transformation in a post-pandemic world.

New entrants like SpaceDC, Keppel Data Centres and Princeton Digital Group are also making moves to invest in hyperscale facilities.

Stephanus Tumbelaka, Managing Director of PDG Indonesia, said: “We continue to see strong market demand from our current customers and from global firms looking to enter the market. 

To keep up with demand, Princeton Digital Group is planning two additional greenfield builds, one in Jakarta and one in Surabaya as well as upgrading their five existing facilities. PDG removed a lot of uncertainty away from entering new markets by having a strong local partner, XL Axiata, which gave them a strong foundation to grow their business.

Mr Tumbelaka added: “Given the growth that we are experiencing, we continue to try to recruit and onboard new employees which can be a challenge, especially in times like now with Covid-19.”

SpaceDC will add to their vast experience of building data centers by launching their first facility in the second quarter of 2020, with a second planned for Q2 of 2021.

Carolyn Harrington, COO of SpaceDC, said: “We are already planning additional facilities in Jakarta as well as other key locations throughout Indonesia. It is a key feature in our interconnected data center platform we are rolling out throughout Asia.”

As the location of their first data center, Indonesia always plays a key role for SpaceDC. The data center provider recently announced they are making investments to implement thermal wall cooling technology in their first data center to increase efficiency and reduce plant space required to cool the data center.

Water-based cooling currently dominates the market in Indonesia, but increasing adoption of air-cooled chillers is expected to drive the cooling systems segment between 2019 and 2025.

Amongst other segments, the storage devices segment is predicted to grow at the highest growth rate with the increased adoption of all-flash and hybrid arrays in cloud data centers at the expense of solid-state drives.

It is important to keep in mind that some of the biggest challenges when developing a data center in a new market is finding the right team.

Ms Harrington said: “Your team should be comprised of key local talent who understand how to work with Government and respect local culture.”

What is driving the need for data centers in Indonesia?

The country’s data center market is fuelled by the increasing number of Internet and social media users as well as greater connectivity across the country. 

Demand for facilities is exponentially increasing with 150 million Indonesians expected to access the internet by 2023 and 20 million new social media users added in the last two years.

The Government’s 2020 Go Digital Vision and Industry 4.0 is also likely to drive the need for more data centers, as one million fishers and farmers will be given online support from thousands of tech startups along with efforts to digitise eight million SMEs.

Companies that have already embraced Industry 4.0 through digital transformation have experienced over 30% increase in productivity and efficiency. Once more organisations learn of these benefits, even more will go online and require data centers to achieve this.

The Government will also implement the Internet of Things into their public infrastructures like roads, streetlight and traffic signals, all of which will need data centers to run effectively.

These initiatives are projected to boost Indonesia’s digital economy by more than US$150 billion in 2025, fuelling the exciting growth of the Indonesian data center market in the years to come.

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