data-asia
Data Center

Datacentre Connectivity Options Growing in APAC

In the second of three reports on datacentre location economics, we examine the Asia-Pacific region.

The Asia-Pacific region has around two thirds of the world’s population but only 15% of its internet users. The potential for growth is being held back by its lack of IT infrastructure but those barriers could soon come down. In the words of the Chinese proverb, business in the region may be living in ‘interesting times’.

One remaining blockage to growth in the APAC region, connectivity, will disappear with the completion of the Asia Pacific Gateway (APG) cable in September 2014. Linking Malaysia, Korea, Japan, Hong Kong, Singapore and Taiwan, among others, across 10,000 km of fibre could act as the catalyst for massive economic growth in the region, reflected in the number of datacentres.

The Australia-Singapore Cable (ASC) and APX-West Perth-to-Singapore infrastructure will be a massive boon when they become operational in the next couple of years. APX-West is predominantly a four fibre pair cable using an ultra-long haul design to connect Australia with the US and Singapore, by 2014. Similarly, ASC will offer much better fibre connectivity to Singapore by 2015.

However, China’s strict regulations continue to be a barrier to entry for many global datacentre operators and datacentre supply is still led by incumbent providers, according to Cushman & Wakefield’s Data Centre Risk Index 2013. Foreign end-users are increasingly pushing the market for carrier-neutral solutions with global operating standards.

Interestingly, Shanghai, where most Chinese datacentres are concentrated, is currently hampered by severe power shortages which could lead to supply constraints. This is why China is expected to add about 160 new coal-fired plants to the 620 operating now, within four years, says the Global Warming Policy Foundation.

As a result of Shanghai’s power crisis there could be a movement to second-tier cities. Local government restrictions make it hard to find suitable properties. One obvious beneficiary would be Hong Kong but suitable industrial buildings are hard to come by in the densely packed province.

For foreign end-users the challenge is to find a datacentre operating partner who can offer the same operating standards that the rest of the organisation’s infrastructure adheres to. For this reason, many established operators are planning to enter the market through partnerships, acquisition or directly. The risk could be rewarded because many local datacentre operators struggle to operate efficiently in a market in which there is no clear pricing pattern.

That situation could (and probably will) change as the market matures, but meanwhile the market is in flux. One has to be brave to take a chance on a market like this.

Here is a summary of conditions in the main datacentre territories in this region.

Australia

With a booming economy created by demand for natural resources from manufacturing nations, it has comparatively high power and labour costs against its APAC neighbours. More worrying is the lack of new investment in international bandwidth. The carbon tax introduced in June 2012 has increased the cost of fossil fuels and hasn’t helped the datacentre industry.

China

Businesses are investing heavily in the Chinese datacentre market, which is expanding by 20% a year over the next five years. Getting a licence to operate is the biggest barrier to entry so most foreign investors are forced to team up with a local business or developer.

Hong Kong

Hong Kong's great telecoms infrastructure underpinned its datacentre sector and the government is committed to fostering it, but the lack of available premises is a handicap.

India

Opportunities for growth are substantial but the ease of doing business is still a barrier. Power stability remains a significant risk stemming from the lack of diversity of energy imports and increasing reliance on imported oil.

Indonesia

The nation with the lowest cost of labour in the region, energy supply and costs are competitive. The difficulty of doing business and the rate of inflation make it a high risk. Low labour costs are far from the most important consideration when setting up.

Japan

Japan is rated a big risk after 2011’s earthquake, though it still has impressive international bandwidth and new submarine cables will build on it.

Malaysia

Malaysia enjoys low power costs and is an easy place to do business, says the World Bank, but political instability and poor international bandwidth make this a risky home for data.

Singapore

Power prices are getting better, says the Economist Intelligence Unit, and it’s rated an easy place to do business by the World Bank, which sees Singapore as an attractive place for investment and datacentre business. The comparatively high labour costs are insignificant given the other factors.

South Korea

Energy prices are rising but are still comparatively low against others in this region. South Korea is anxious to improve its datacentre market on the strength of its international bandwidth which, as mentioned before, is about to be improved by the Asia Pacific Gateway.

Thailand

Rising power costs, limited bandwidth and political instability are challenges but the economy is growing which could attract more infrastructure investment.

Summary

Options across APAC are growing. However, the Far East can be a false economy for European companies and offshoring a datacentre to save money is a disastrous strategy, warns analyst Clive Longbottom at Quocirca.

“If you are worried about data leakage, go for a country that pays a good living wage. If a sysadmin in a datacentre is paid a lot less than your own sysadmins are, then it won’t take much for a Western black hat to offer them to hand over full root access,” says Longbottom.

 

Nick Booth worked in IT in the UK’s National Health Service, financial services and The Met Police, witnessing at first hand the disruptive effects of new technology.

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Nick Booth

Nick Booth worked in IT in the UK’s National Health Service, financial services and The Met Police, witnessing at first hand the disruptive effects of new technology. As a journalist and analyst, his mission is to stop history repeating itself.

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