Korean data centers and cloud services: friends or foes?

By April 2020Cloud, Data Center, News

Korean data centers and cloud services: friends or foes?

Korean data centers and cloud services: friends or foes?

The Korean domestic data center and cloud market remains a fledgling market. It is expected to grow more than 20% this year with many multinational companies making moves to preoccupy the industry in South Korea. 

Today, a high number of data centers are located in various parts of the country and are continuing to expand their facilities to target large IT and public data markets. 

There are various reasons for the recent increase of data centers in the country, particularly by overseas companies such as Amazon, Microsoft, and Google who are beginning to dominate the market share. The most significant of these is the emerging market of the cloud service industry in the Korean market. The size of the internal cloud service market is expected to exceed three trillion won next year after exceeding US$1.65 billion last year.

Among the numerous successful Korean firms, SK C&C is an IT service company that delivers global projects and runs the largest data center in the South Korean district of  Pangyo and Daedeok. SK C&C is also the de facto holding company of the SK Group, South Korea’s third-largest conglomerate earning over US$213.6 billion of revenue in 2018.

Could cloud services damage the Korean data center market?

Hyeon Seok Shin, the Vice President of Cloud Transformation Division of SK C&C, anticipates a significant shift from data centers to cloud services over the next ten years. The number of customers using data centers will decrease by time due to the recent trend of cloud migration. 

An increasing number of enterprises desire to use cloud due to the high expense of maintenance and big global players collaborating with Korean telcos, digital native and SI companies are also building flexible operations resulting in ideal cloud computing environments.

Or could data center and cloud services work together?

But Mr. Shin is skeptical that the data center will be a losing market in the future. Data centers remain a great business in the country as major customers of data centers and cloud are mostly identical and grow simultaneously. Global giants in cloud services like Amazon, Microsoft, and Google are big customers for data centers and attract new types of customers to the industry.

Mr. Shin added the ideal way for the traditional data center to compete in a fast-changing market is to consolidate and adopt cloud and managed services to their existing system. In the case of Korea, the Government encourages local companies to migrate their operation into the cloud, where there are free services regarding migration and its relevant consulting services.

Korean companies make moves into Southeast Asia

Korea remains one of the most promising markets for multinational companies to invest in data center and cloud services. But much like Japanese tech companies, Korean organisations like SK Group are taking grand actions to make inroads in the overseas market, especially targeting ASEAN countries.

SK Holdings laid its foundations in Southeast Asia by opening offices in Singapore, Malaysia, and Vietnam. Their mission to expand continued when SK South East Asia Investment spent $1 billion to acquire 6.1% of Vingroup, Vietnam’s most significant conglomerate group. The investment company also paid $470 million for a 9.5% stake in Vietnam’s Masan Group. Apart from the fund, SK Holdings separately invested in Grab, a Singaporean ride-hailing, and financial services provider. The two organisations also announced a joint venture to launch a T Map providing precision and greater guidance for Grab drivers.

Mr. Shin said: “ASEAN is the key partner for Korea’s future.” 

The Southeast Asia data center market has the highest annual growth rate of 14% forecasted between 2019 and 2023. Regardless of size, Korean companies see vast potential and opportunities to expand their business and development across ASEAN regions.

Along with the economic and cultural exchanges between Korea and Southeast Asian countries are actively growing, Korea’s strategic alliances with global partners and market penetrations into the ASEAN market will continue to demonstrate high growth potential.

These breakthroughs will be used as a bridgehead to reach distant countries across the world and may see Korean organisations take a larger market share in the data center and cloud service industries.

Author

Sumin Park

W.Media

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