Telkomsigma Data Center in Sentul, Bogor (Image credit: Telkomsigma)

JAKARTA (TheInsiderStories) – The emergence of a number of regulations in various sectors of economic activity over the last ten years requiring companies operating in Indonesia to store data in the country has encouraged the growth of the data center business and has boosted cloud computing technology.

One analyst suggests that multiple companies sharing the same data center could prove an efficient strategy and the way of the future of economy.

In the financial sector, for example, government regulations require electronic payment systems to store their data in Indonesia.

In the oil & gas sector, the Special Task Force for Upstream Oil and Gas Business has required all oil & gas companies to have data centers located in Indonesia, since 2013.

In Indonesia, a surge in mobile data and internet users, an ongoing reliance on fossil fuel electricity generation, and rising energy prices due to the removal of widespread energy subsidies contribute to substantial operational costs and increased carbon emissions from energy-intensive data centers.

At the same time, Indonesia’s Government Regulation No.82/2012 requiring all Indonesian-related data to be contained in data centers within the country by 2017, will drive information technology industry growth and further increase energy use from the sector.

With this growth is the potential for significant energy savings in Indonesian data centers. Presently, many well-known technologies and practices of varying costs that data center operators can deploy to improve their data center energy efficiency are available.

On the investor side, Indonesia is home to a cloud data center and technology development business as the return on investment capital (ROIC) reaches 11.6 per cent, or the highest in Asia Pacific. In Singapore, the ROIC rate is only 9.5 per cent, while in Australia, due to expensive urban facilities, the ROIC is only 3.8 per cent, or the lowest in the region.

Data centers are defined as facilities to store computer data, back up information, work as a website server or database, and safeguard related components. Meanwhile, cloud computing is a service of information storage technology, operating through an Internet-based network that can be accessed wirelesly via electronic devices.

Prior to the rise of data centers and the cloud computing business, they were normally regarded as parts of telecommunication companies. H-owever, the latter two units of this business now can stand alone because they have demonstrated a clear operational and cashflow focus.

“Telecommunication companies should divest their own data center business because (if not separated) it has the potential to reduce the business value of the data center up to 16 times,” wrote Sachin Mittal, Tsz Wang Tam, Toh Woo Kim and Chris Ko Cfa in DBS Group Research Data Center.

The report includes examples in developed countries (such as the United States), where telecommunication companies have divested their data center businesses. Funds earned from the divestment are then used to enable cloud technology facilities or invested in other businesses such as Big Data Analytics.

There are two types of cloud services: private and public clouds. A private cloud is an exclusive service provided for an internal organization or company. This facility is more secure because it is self-managed, but the operational costs are quite high.

Public clouds serve users more widely, such as those provided by Adobe Reader Cloud, Windows Azure, Amazon Web Services, and Google Cloud.

Therefore, many companies – including 48 out of Fortune Global 50s – are choosing public services rather than private ones. This clearly undermines the income of the private cloud business. Thus, players in the private cloud business are also expanding into other areas, such as the provision of security support services and management and monitoring of cloud technology.

According to a Bain and Company survey, a business consultancy agency, there has been an increase in global cloud technology usage from one per cent in 2010 to 16 per cent by 2015, worth over US$ 17 billion. In addition, based on McAfee’s report, a global cyber security service company, the use of hybrid cloud computing has also jumped from 19 per cent in 2015 to 57 per cent in 2016.

The Synergy Research Group report calls Amazon Web Services the largest public cloud player, with 34 per cent of the global market share. Next is Microsoft, which controls 11 per cent and Google 5 per cent. In Indonesia, the biggest player at this time is Telkomsigma which is a subsidiary of PT Telkom Indonesia Tbk (IDX: TLKM). Telkomsigma has 100 cloud computing clients, ranging from SMEs to large national companies.

In 2014, the central market value of flat transactions and cloud computing Indonesia amounted to Rp 4.4 trillion. According to the Ministry of Communications and Information Technology, Indonesia’s data center market is predicted to grow around 20 per cent per year in the 2015 to 2107 period, in line with the development of digital and online technology.

With an estimated population of 250 million, Indonesia is the fourth most populous country on earth and the largest economy in Southeast Asia. Data centers there have some ground to make up, but they are expanding rapidly.

Facilities built in Indonesia now are more reliable, and operators are working hard to meet booming demand while complying with regulations, although sourcing reliable power and trained staff remain key problems.

Of course, the growth of data center facilities in Indonesia will be influenced by the development of national infrastructure, especially in the outer islands. Currently, the data center industry in Indonesia can be categorized as in an early phase, with 60 per cent of its activities centered in Jakarta.

Written by Elisa Valenta, Email: elisa.valenta@theinsiderstories.com

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