Times are a-changin for the data centre industry in Malaysia
By Sharmila Ganapathy April 25, 2018
- Many enterprises are building next-generation data centres
- Entry of global cloud players will positively influence multinationals to invest in Malaysia
THE data centre industry in Malaysia has grown significantly in recent years, and with the entry of Alibaba Cloud, more changes are expected to happen within the industry, according to previous data. Digital News Asia spoke to two different experts for their opinions on the future of the data centre industry in Malaysia.
Vertiv Malaysia country manager Hitesh Prajapati (pic, right) says that according to published data, the data centre industry in Malaysia is worth an estimated US$229.5 million (RM900 million) and is expected to experience double-digit growth for the next three years. Vertiv is a global company that designs, builds and services critical infrastructure that enables crucial applications for data centres, communication networks, as well as commercial and industrial facilities.
“We see a big trend towards a lot of enterprises building next-generation data centres, which means people are evaluating the older facilities they have. More than 50% of enterprises here have built data centres over the past five to fifteen years so as their need for more data and data analytics grows, they all have to evaluate their data centre strategy,” he explains.
IDC Asia/Pacific Datacenter Group and IDC Asean Research Group research director Jun Fwu Chin noted that the data centre industry in Malaysia has changed dramatically over the last 10 to 15 years. “Many lessons learned from best practices and continued innovation have not only raised expectation but also delivered better value and, most importantly, managed services are increasingly seen as a strategic initiative within many organisations,” he says.
What companies are doing
Jun says that as IT organisations seek to lower the overall cost of their IT operations, hosting, outsourcing and even cloud computing models become a reality for offloading ongoing maintenance costs or even the requirement for new data centre construction.
“IDC has already observed hybrid models for hosting and outsourcing that still allow customers to customise their own data centres without holding the title on the building or having the day-to-day responsibility of managing the facility,” he says.
Vertiv’s Hitesh notes that companies are now checking out their legacy facilities and seeing whether they can optimise the existing facility or doing a mix of consolidation of that facility. They’re also seeing if they can move partly or fully into cloud or do a hybrid model of possibly having replacements of the old sites and upgrading to a next-generation data centre and putting the not-so-critical applications on the cloud.
“A lot of these decisions come from IT, how they decide the cloud strategy and the digitisation strategy, and how they are going to deal with customers. A lot of consumer-facing companies are changing the way they are dealing with customers, mainly driven by digital methods.”
He explains that as these companies employ digital strategies, they are all having a relook right now at their IT applications and the data centre infrastructure they have.
“They look at what they want to own, to drive to the cloud, or what they want to outsource, and data centre strategy is a big part of that. One of the big trends we’re seeing is a full review of legacy facilities, doing a scope for the optimisation of the facility to make it more efficient, and possibly deciding to partly or fully utilise the facilities of the hyperscale guys, the large investors like the co-location companies or the cloud providers.”
Opportunities for the big players
What does that mean for the hyperscale companies, who are building the large data centres? “More demand, so they are also expecting many of the larger co-location companies to increase their facility sizes to expand and build larger data centres.
“We see a lot of co-location companies on expansion mode, and they are catering to Malaysian clients as well as their international clients who want to take up space or applications with them. Also many of these companies are also moving upwards into providing cloud services and that’s one trend we see is in an early stage in Malaysia,” Hitesh says.
When you have a lot of companies that can run cloud services for the Malaysian economy and Malaysian customers, that will further spur the demand and growth for data centres, he adds.
Another trend he foresees is that some of the larger companies in the communications space such as telecoms, who migrate towards being more data-driven companies as opposed to just voice, also have to consolidate and upgrade their data centres.
“They also have to build new, more resilient and efficient data centres. Compared to the traditional infrastructure they had in the past, they were more focused on supporting voice, but now it is on the data that is going through their networks. They are processing and storing more data so we see them investing in large data centres, which is also going to increase the demand for data centres.”
“We would definitely like to see more of the global players in the co-location business come and set up facilities in Malaysia and that is something we are watching for and we hope they can do it. Some of the global cloud providers and cloud services providers can also make Malaysia a possibly regional base.”
He adds that other initiatives such as the Digital Free Trade Zone and the Malaysian government’s roadmap for e-commerce, as well as the government’s initiative to make Malaysia a big data analytics hub -- all of these basically spur more corporations to invest in those particular ecosystems and this means the need for more data centres.
Future performance of the industry
According to IDC’s Jun (pic, right), with growth comes the challenge of data centre obsolescence. “Businesses will confront facilities mismatches and change climate risk profiles, reducing their spend on the upkeep of existing data centres.”
“The data centre ecosystem is large and complex, where managing the sourcing and implementation of a new data centre is challenging for CIOs. Fewer new on-premises data centres will be constructed, data centre facility providers will seek infrastructure, network, and management partners, and these partners will set the standards and prices.
“Replacement and migration are key IT priorities among IT infrastructure decision makers in Malaysia; as new data centre infrastructure investments are for systems of engagement, insight, and action rather than maintaining existing systems of record,” he explains.
There are certain issues such as bandwidth costs and availability as well as electricity costs that need to be addressed. What are the other barriers to progress for the data centre industry in Malaysia?
“You have addressed the barriers that have traditionally been in the news. I find that Malaysia has a lot of positives: the availability of land, good engineering talent, definitely a good supporting ecosystem of talent that understand how to design good data centres.
“From the point of view of the factors that can grow the data centre industry, they are all there. As communication and energy costs get better, companies will expand faster. Global companies when they make plans for the Asian region, they have a broader outlook. So they are also looking at places where customers are concentrated, or they follow the industry they are catering to. That might also help Malaysia for industries where Malaysia becomes a hub, for example manufacturing, logistics, big data analytics,” Hitesh opines.
Hitesh believes that some of the cloud providers who are providers for these industries will obviously see Malaysia as a better location.
“Some of the other mega-sized, large scale companies when they evaluate options in the region, I guess they also look at where to house their regional centres or offices, they also look at other factors.
“It’s an overall framework, my feeling is while MDEC and the Malaysian government are doing the right things, it’s a matter of speeding it up and communicating a lot more to the outside world so that people get more convinced about not just moving their data centres but a lot more things operationally to Malaysia.”
Commenting on the issue of bandwidth and electricity costs in comparison to that of Singapore, which is cheaper, Jun notes that the presence of global cloud service providers in Singapore has driven the huge variance in infrastructure investment from Malaysia, while exploring business continuity and disaster recovery location across the border to Malaysia.
“This trend is expected to continue given its political stability, IT maturity and lower power cost, thus driving consultancy, assessment, network design and integration services. IDC believes the presence of local cloud infrastructure or data centre service providers will have a positive impact on local revenue generation, especially regional and/or global decision of multinational customers in Malaysia.”
He adds that the concern of data sovereignty is valid, but it’s currently migrated by direct operation presence and local partner ecosystem. “IDC believes the ripple effect of the presence of cloud infrastructure of these global cloud service providers will positively influence decisions of multinational enterprises on investing into Malaysia.”
Commenting on the entry of cloud players like Alibaba Cloud in terms of their impact on the data centre industry, Jun believes that cloud environments that feel like a data centre will win enterprises over unbranded solutions.
“SME customers are among the most likely to go to cloud first; they should be looking seriously at SaaS [software as a service] for common apps such as email, collaboration software; while large businesses should be experimenting with public/hybrid cloud now. Lastly, most existing apps won’t be replaced/rebuilt; rather will be augmented and extended using cloud native apps,” he concludes.