Why Philippines may not yet be a target for hyperscalers
Published 1 March 2021
With enterprises embarking on a rapid digital transformation journey, cloud spending in the Philippines is expected to grow from $1.8 billion to $2.6 billion by 2024, according to UK data and analytics firm GlobalData.
In its latest report titled ‘Philippines on the Cusp of Cloud Revolution’, the company revealed that widespread consumer usage of services such as mobile streaming and social media networking are fuelling the demand for cloud-based technology.
Users for mobile streaming are poised to grow from 53 million in 2020 to 80 million in 2024, whereas users for mobile social media are expected to also increase from 75 million to 80 million.
Malcolm Rogers, Senior Analyst of Technology at GlobalData, points out that based on figures, the country may prove to be a valuable cloud region in the near future.
The Philippines is one of the fastest IT business process outsourcing (IT-BPO) markets in the region with BPO companies using cloud-based services to support their operations.
“Even though none of the major cloud providers have announced plans to build out public cloud regions within the Philippines, the market has plenty of activity in the hyperscale space and as technologies like 5G edge computing evolve and mature there is plenty of opportunity for telecoms and data center players to grow partnerships with the leading hyperscalers,” he explained.
As such, we expect the leading hyperscale providers like Azure, AWS, and GCP as well as leading webscale companies and OTT providers like Facebook, Google, and Netflix to view the Philippines as an important market, said Rogers.
However none have announced any major plans to develop in-country cloud regions/zones. Outside of a few instances, when the large hyperscale and webscale companies look to expand their data center presence to new regions, they don’t typically build their own facilities.
They lease from high-quality DCs (e.g., those operated by ePLDT, Globe, or NTT). The Philippines may not yet be a target for hyperscalers due to a few factors:
- Proximity to Other Regions: The big three cloud providers all have cloud regions in Singapore and Hong Kong, while AWS and Google are also building out regions in Jakarta. Using direct connect into these platforms, latency between a data center in Manila connecting to an Azure Zone in Singapore or Hong Kong is manageable for most applications, said GlobalData.
- New Cloud Options: Furthermore, the hyperscalers are developing new solutions for deploying cloud services closer to customers. As more and more companies undergo digital transformation, new requirements are emerging related to privacy, latency, security, etc. Cloud providers now offer options for services to be hosted in private facilities (e.g., AWS Outposts, Google Anthos, Azure Stack), addressing these concerns by deploying hyperscale-style environments on enterprise or local third-party data centres.
- Power Efficiency: When considering a large hyperscale facility build, often the most critical factor is the cost and efficiency of power usage. Hyperscale data centers draw huge resources from the power grid to run compute resources as well as cooling systems. While the Philippines has a similar climate compared to regional neighbors (i.e., similar cooling requirements), according to a 2019 study by the Institute for Energy Economics and Financial Analysis (IEEFA), the Philippines has the highest cost of electricity in all of ASEAN due to reliance on imports of coal and diesel.
Despite some roadblocks to attracting hyperscale data center clients into the Philippines, there is still plenty of opportunity for the country to grow business from the largest webscale players. Each of the hyperscalers is trying to grow adoption of their services within the market through local partners.
Each company is building partner ecosystems within the Philippines and targeting specific verticals such as technology, telecoms, and financial services for their IaaS, PaaS, and SaaS services. Hyperscalers are also expanding their partners to include colocation providers to push their edge services (e.g., AWS Outposts, Azure Edge Zones), noted GlobalData.