Factors that Enhance Data Center Industry Growth

5 Key Factors that Enhance Data Center Industry Growth In Indonesia

In recent years, especially since 2009 data center industry began to grow rapidly, starting with the construction of data center tier I and II. Afterwards data center tier III and IV began to be developed to meet uptime industry needs up to 99%. Indonesia as a developing country has big plans to build and prepare IT infrastructure that is expected to be ready by 2019. This is done to realize the ideals of the Indonesian to be able to follow the development of global economic trends by applying e-governance management system and educate conventional industry in order to compete in this digital era.

The following is a summary of five key factors driving the growth of data center industry needs in Indonesia:

Indonesia’s potential as the largest market in Asia

Indonesia as the fourth most populous country in the world with a population of 250 million people has tremendous potential. Indonesia has become a reckoned country in the world economy because of the world’s fourth population density with a population of 250 million people and now dominates Southeast Asia’s economy as the largest consumer. Growth in advanced economies countries in Asia will continue in 2018 and beyond. Until 2032, the strength of the Asian economy will dominate the world. Indonesia as a country with a large population will contribute more data growth in Southeast Asia about 40% of the total population of South Asia data.

As the third largest data center market in Southeast Asia, and has strong international networking cable and active Internet Exchange, Indonesia will be ready for further developments. In a study estimating the total value of investment equipment and data center solutions in Indonesia in the coming 2020 will experience significant growth up to more than 70% compared to the estimated value of investment in 2016. It encourages the industry to be able to grow to follow the needs and investment value growth. This is also supported by the optimism of the Ministry of Communications and Information Technology which estimates the growth of data center market of Indonesia as much as 20 percent per year in the period 2015 to 2017 in line with the development of digital and online technology. Data centers as the backbone of online activities are required to be better prepared in many ways such as: providing electricity, storage / reserves and processing necessary as the foundation of the growth of the digital world.

The rapid development of Indonesia’s e-commerce industry

Based on APJII data November 2016, the number of internet usage in Indonesia has reached 137 million people. Rapid growth is also experienced by start-up companies in Indonesia, even estimated to reach 13 thousand startups in 2020. Industry shift to industry 4.0 which emphasizes technology and digitization in its production process to improve efficiency and pursue technological developments in the industry world.  Indonesia is one of the countries with the highest e-Commerce growth in the world. Evident in recent years, more and more companies and retails, switch or expand their business toward digital.

The Economic Census on 2016 from the Central Bureau of Statistics (BPS) said that the e-commerce industry in the last ten years has been grew by about seventeen percent with the total number of e-commerce businesses reaching 26.2 million units.

This is in line with the research conducted by Bloomberg states that by 2020, more than half of Indonesia’s population will be involved in e-Commerce activities.

McKinsey said in a report titled ‘Unlocking Indonesia’s Digital Opportunity’ that the switch to the digital realm would boost economic growth to $ 150 billion by 2025. The report also states that Internet access through mobile devices will reach 73 percent in Indonesia. In the next five years, this figure is expected to continue to grow. One of the factors supporting the growth of e-Commerce industry in Indonesia is the rampant usage of smartphones.

Meanwhile, Director of Digital & Strategic Portfolio Telekomunikasi Indonesia (Persero), Tbk. (Telkom), David Bangun stated that e-Commerce is currently so massive that requires the support of a strong and extensive infrastructure.

In addition, the Minister of Communications and Informatics declared the current era of digital economy. All businesses, especially e-commerce and those that are related to new processes utilize internet-based technology. The Indonesian government has also anticipated the development of the digital economy and Industrial era 4.0, ie where there is a change of economy, which commodity-based service has changed to service-based economy. Regarding to the potential of digital economy in Indonesia, Minister Rudiantara said that currently there are four unicorns from the start up, namely GoJek, Traveloka, Tokopedia, and Bukalapak.

In addition to unicorn targets, Minister of Communications and Informatics explains the major development of e-commerce in Indonesia. Indonesia has a huge $ 130 billion dollar obtrusive in 2020. When calculated from the market exchange rate, that figure is 11% of our economy. Indonesia’s economy will be estimated at USD 1.2 trillion.

To realize that, Minister Rudiantara acknowledged the government cannot work alone, but involves the entire ecosystem of digital economy to create directions or e-Commerce Indonesia Master Plan that has been put in the Presidential Regulation.

Government regulations encourage industry to improve customer data security guarantees

Based on the information from Menkominfo RI there are several sectors that must be in Indonesia, such as defense sector and financial related sector. The obligation to have data center in Indonesia itself has been regulated in Government Regulation No. 82 of 2012 on Electronic System and Transaction which is a complement to the Electronic Information and Transaction Act (ITE) Number 11 2008.

PP no. 82 of 2012 is a derivative of Law no. 11/2008 which regulates the series of systems and electronic transactions to ensure that the Electronic System operates properly. This Government Regulation governs the obligations of the Electronic Systems Provider in general and the Operator of Electronic Systems for public services. Electronic System Organizer for public service, among others, is required to place data center and disaster recovery center in Indonesian territory, must obtain Certification of Electronic System Election from Minister, and must be registered at ministry that conducting government affair in communication and informatics field.

Although the Minister of Communication and Information Minister of the Republic of Indonesia declared to revise the contents of Government Regulation No. 82 of 2012 by not requiring companies from abroad to build its data center in Indonesia. This issue raises the question that Indonesian sovereignty is at stake by allowing the discourse to revise the government regulation on ITE. However, because this is only a statement and has not changed the content of the PP formally so there is still hope for the presence of investment from overseas companies to build its data center in Indonesia.

The Future of Data Centers In the Age of the Internet of Things (IoT)

The development and adoption of advancements in digital technologies such as big data, social networking and the Internet, mobile devices, the cloud, the Internet of Things – often called third platforms – have driven the need for agile, efficient, intelligent and future-proof data centers. Digital transformation has forced IT managers and businesses to think creatively in providing an IT environment that fits the current conditions and provides flexibility in developing a business in the future; because of the potential emergence of such business opportunities arise in a fast-moving world.

IoT will have a significant impact on the data center and this forms a big data era where all the processing will be centered in the data center, here we can see how much data center needs will increase from year to year.

For example, if 1 device requires 100 Gigabyte of data per month, then a 10 billion device alone will provide a total of 10 billion GB or 1,000,000 Tera Byte data. And per year will be required storage of 12 million TB. Therefore, the future of data center in IoE era will increasingly have an important role, especially in storage capacity management.

In the short term, many discussions about the edge data center in response to the challenge of building a large data center. Smaller data centers can be built closer to the users, where processing speed is more prioritized. For example, location and data mapping on your smartphone may be processed in a data center close to your current location.

The massive transformation of industry into digital

Data Center is one of the key factors that play an important role in the development of digital transformation. The data center business is expected to grow rapidly as many industries are planning digital transformation and the emergence of a data boom that IDC says will reach 44 trillion GB of data globally by 2020. IDC also predicts Indonesia will contribute data usage of 1.5 trillion GB of data from a total of 44 trillion GB of global data by 2020, assuming the population in Southeast Asia averaged 3.7 trillion GB of data from a total population of 650 million in Southeast Asia by 2020. Thus, Indonesia as a country with a population of 260 million will contribute the largest data growth in Southeast Asia about 40% of the total population of data in Southeast Asia.