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With the region embracing cloud-enabled digital technologies, companies race to build digitally-enabled internet infrastructure

Asia Pacific is embracing digital transformation and by 2022-23, around 87 percent of companies in the region will be well on the way in their digital transformation journeys, ahead of their counterparts in Europe and the Americas [1]. Robust internet infrastructure, provided by modern data centers, is the key to the region’s digital transformation.

IDC estimated spending on technologies and services that enable the digital transformation of business practices, products, and organizations in Asia Pacific to be US$375.8 billion in 2019 [2]. The research agency added that digital transformation spending will expand steadily throughout its 2017-2022 forecast period, with a five-year compound annual growth rate (CAGR) of 17.4 percent. According to another study [3], done earlier this year, 43 percent of nearly 600 respondents in the region cited digital transformation as their top priority, followed by cloud infrastructure deployment (38 percent).

The emphasis on cloud infrastructure deployment is important. Although technologies like artificial intelligence (AI), machine learning, IoT (Internet of Things), big data and blockchain are the building blocks of digital transformation strategies, the cloud is the fundamental enabler. A robust cloud computing infrastructure is the pre-requisite for digital transformation as it offers the perfect platform for rapid prototyping and scaling of projects in a cost-effective manner within a secure environment [4].

With such a close connection between digital transformation and cloud computing, Asia Pacific’s internet infrastructure is the key enabler for a region with a combined population of 4.6 billion people [5] who are increasingly connected to the Internet and use digital technologies.

The region has become one of the fastest growing markets for data centers in the world today. It is set to become the second largest data center and hosting services market with a revenue of US$32 billion by 2023, second only to the United States [6]. The introduction of AI and machine learning workloads is expected to contribute over 40 percent in the internet infrastructure investment in Asia Pacific by 2025 [7].

The colocation market for the region will grow at a CAGR of 12.2 percent from 2018-2024 [8]. Much of the demand will come from social media platforms, media content and video streaming, e-commerce and banking, all looking to cash into the digital transformation of the region. This demand is attracting both global cloud computing service providers as well as regional players and both categories of companies are looking at colocation as a quick way to ramp up capacity in fast growing countries in the region.

Last year, China and Hong Kong led the market in terms of data center development, followed by India, Australia, Japan, and Singapore [7]. There is also a significant increase in investment in submarine cable projects by hyperscale operators to improve the internet infrastructure and connectivity in the region.

Growth across countries
As China pursues its objective of digital transformation in its economy, it is planning to build “industrial big data” centers nationwide, enabling massive amounts of information – mostly production data – to be used for developing more efficient industries [9].

The increasing adoption of IT infrastructure for digital transformation is a major driver in the data center market growth in India, with high adoption of servers, storage, and networking infrastructure. Around 70 percent of startups in India are adopting IoT in their business [10]. Healthcare and manufacturing are also popular verticals attracting a lot of investor interests as they ramp up their digital services.

More than 30 percent of Australian enterprises is using AI-based infrastructure solutions for experimental as well as production workloads. Over 50 percent of the business IT budget is spent on the migration to cloud-based services in Australia, with IaaS (Infrastructure as a Service) spending leading the chart followed by SaaS [10]. The Australian market will also witness the increased demand for managed data center services. IT infrastructure spending will be dominated by cloud-service providers.

In Japan, the IT Infrastructure market is gaining traction with the increasing popularity of cloud-based services, IoT, and AI. As an example, Rakuten, Japan’s largest e-commerce player, with more than 1.2 billion customers around the world [11], is planning to deploy 4,000 edge data centers throughout Japan covering 96 per cent of the population coverage by March 2026 [12].

The South-east Asia (SEA) cloud computing market revenue is estimated to reach US$40.32 billion by 2025 because of an increased demand for cloud computing among small and medium-sized enterprises (SMEs) [13]. The countries in the region are looking to expand digital technologies and internet infrastructure to promote the widespread use of ICT (InfoComm Technology) in AI industry verticals.

Increasing use of IoT
With the Asia Pacific region already being the global manufacturing hub, particularly for electronics manufacturing, the region’s manufacturing sector is embracing Industry 4.0 technologies as part of their digital transformation initiative.

IoT, particularly industrial IoT, is a crucial component of the digital factory and hence it is no surprise that the region is leading in its adoption. According to IDC, last year Asia Pacific was the leader in IoT spending accounting for 35.7 percent of global spending, followed by the US and Western Europe with 27.3 percent and 21.2 percent, respectively. Within the region, China was the top spender, followed by South Korea and India. IDC predicts that by 2023, IoT spending in the region will reach US$ 398.6 billion [14]. According to IDC, the three industry verticals that will spend the most on IoT solutions are discrete manufacturing, process manufacturing, and utilities. The success of IoT systems lies in the collection and analysis of data and this is a major factor that is driving demand for cloud computing.

To sum up, with the adoption of IoT, AI, and big data analytics, the demand for high-performance computing infrastructure is increasing [10]. With data analytics being an important part of digital transformation companies across the region are increasing the deployment of machine learning, deep learning, and other AI technologies to power cloud services. This represents both a challenge as well as an opportunity for data center operators. Data center operators are focusing on how they can deliver the performance their customers need for AI-enabled cloud services [15]. This is also a big driver in data center build-out in the region.

PDG, with its best in class design and data center services that cater to the needs of hyperscalers, is well-equipped to provide the digital infrastructure required for AI-powered digital transformation in the region.

About PDG
Princeton Digital Group (PDG) is a Warburg Pincus-backed investor, developer and operator of internet infrastructure. Our portfolio of data centers powers the expansion of hyperscalers and enterprises in the world’s fastest-growing digital economies. Our agility, speed and unmatched experience in scaling global internet infrastructure provide our partners and customers immediate access to growth opportunities across Asia. To engage with us, email us at: info@princetondg.com

Chris Street

Author Chris Street

Executive Vice President, Market Development at PDG

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