2020 may have been a forgettable year for business leaders in Asia, but 2021 may be a different story altogether. With growth forecasts of about +5.4%, we are expecting cautious optimism and investments to move forward.
Analysts are predicting the digital economy to accelerate recovery. IDC forecasts that over 65% of the APAC GDP to be digitalized and spending to hit US$ 1.2 trillion between 2020 and 2023. To power this growth are data centres springing up in the region.
Datacentrepricing estimates that there is one square metre of data centre for every 522 people in the Asia Pacific region, with hubs such as Australia, Hong Kong, and Singapore having a notably higher data centre (DC) floor space “per head” than the rest of Asia.
China has the largest data centre space in the APAC (and second largest globally), accounting for 43% of DC space in the region with 1.7 million sqm of space forecast for 2021. Australia and Japan each account for 11% while Singapore rounds out the top four at 10%.
Asked why the region is seeing a proliferation of data centre operators, Darren Hawkins, chief executive officer with SpaceDC, responds by declaring that data centres are the custodian of business-critical information.
The banks for data
“Data centres are becoming the new banks. While it is increasingly possible to do business globally thanks to the connected world that we live in, having a regional or local presence is critical for companies looking to expand in the region. From an IT perspective, having a physical data centre closer to your target audience makes it easier to connect and deliver digital services,” he elaborated.
No one will argue that the CIO has oversight over the IT infrastructure. However overall business strategy and direction are driven by the dynamic duo of the CEO and the CFO, with the latter taking on many of the operational issues that the business must straddle with daily.
So why should the CFO care about the data centre investments of the company? Aside from the financial investment that will flow over several years, the other issues can cover compliance, operational efficiency, and how it impacts customers.
Hawkins cited two key areas where finance gets involved in the selection of a data centre: capital requirement to purchase the equipment to go into the data centre; and the operating costs which comes down to monthly service fees and consumption charges.
“Unlike renting an office or warehouse space, you don’t move between data centres very three years. Every investment needs to be done with a long-term view of 10+ years. While a 5-year contract may seem attractive from a liability perspective, it is more efficient for a business to negotiate a 10-year contract given that it is unlikely you’ll move from that facility within that 5-year time frame. Obviously, there are IT life cycles to be considered in there as well,” Hawkins elaborated.
The COVID-19 pandemic in 2020 saw businesses adopt cloud computing more openly. Hawkins noted that it wasn’t just public cloud that benefitted. Private clouds, which housed most of the business’ mission-critical applications, also got pulled forward.
Public or private clouds – the untold differences
Hawkins said businesses were attracted to public cloud because of the lack of real capital investment on the part of the user. However, you must be willing to share your infrastructure with other cloud users.
Private clouds are owned by the business, not the data centre operator. There is no sharing, and so you mitigate against the risks of shared servers, storage and networks. Asked about the economic story that comes with public cloud, Hawkins cautioned that there is a tipping point when the private cloud solution becomes the less expensive option for the enterprise.
“A lot of elements go into getting an accurate measurement of the total cost of ownership, and it can become quite complex when you factor in utilities, bandwidth, storage, software licenses, human labour, support costs, maintenance, auditing and compliance. If I’m a CFO, I’d want to make sure I’m addressing the risks in my business on whether I’m going for a public or private cloud,” said Hawkins.
Criteria for evaluating DC operators
When considering a data centre operator or service, he suggests that management look at three areas: security, sustainability and scalability.
Understanding regulations around customer data, and where it resides, is becoming more intense. The certification process of data centres is becoming more stringent – which is good and bad according to Hawkins.
“It’s good because it will improve the efficiency of the sector in terms of being carbon neutral and things like that. However, that all comes at a cost. As a business consumer of DCs, you may pay a price for that,” he opined.
Click on the PodChat player above to listen to the full dialogue with Hawkins to listen to his responses in more detail.
- Give us the 30-second elevator pitch of SpaceDC (in the context of the C-Suite)?
- What is the role of the data centre today in the context of ASEAN organisation’s business transformation goals/aspirations? Should we generalise it to information technology needs (to give it a neutral tone)?
- What questions should the CFO be asking the CIO/CTO as it relates to the computing needs of the business (viewed against the backdrop of a transformation initiative)?
- To what extent should the CFO provide input when it comes to strategizing whether to stay on-prem, move into the cloud, and decide what options to take (if the cloud)?
- What metrics should the CFO discuss with the CIO/CTO when deciding the direction to take (to make an informed decision)?
- COVID-19 saw companies adopt cloud computing? How should CFOs weigh the opportunities and risks between public and private clouds?
- Beyond metrics, how else should senior business decision-makers screen data centres (E.g. sustainability, security, remote access, on-site support, migration services)
- What can we expect in 2021 when it comes to data centre services that CFOs need to bear in mind especially as they start to look at orchestrating business in the region?