Digital initiatives and a country’s development has always been closely tied and the World Bank’s Digital Adoption Index introduced in 2016 aims to measure the extent of the spread of digital technologies within and across countries for all the key agents in an economy: people, business, and governments. Benefits of digital technologies include inclusive and sustainable growth, improved governance and increased economic opportunities. Information poverty on the other hand is likely to cause poor planning, inefficient markets, disempowerment, corruption and more.
Southeast Asia is a focal point for the ongoing digital transformation in emerging markets. More than half of Southeast Asia’s population now uses the internet, with the number of internet users in the region growing by 30 percent or 80 million new users from January 2016 to January 2017 according to @We Are Social.
Indonesia, Facebook’s third highest market globally, is only at 40% capacity for social media and internet penetration has much room to expand with a current rate of just 51%. Mark Zuckerberg himself has offered Facebook’s Aquila drone to boost internet access in rural Indonesia and for countries like Laos, Myanmar, and Timor-Leste, where less than one-third of the local population has access to the internet today, there is strong growth in internet user numbers with users in Laos up an impressive 83 percent.
The important thing to note that many of these new internet users are mobile first or mobile only. These digital natives in Southeast Asia are among the most technology passionate in the world (Did you know that Thailand is Line’s second largest market in the world after Japan and The World No. 2 Golden Tweet in 2014 was by Indonesian entrepreneur Denny Januar Ali?) Since Myanmar lifted restrictions on Facebook, their users has skyrocketed to 14 million, with 6 million joining between 2016 and 2017 – a YOY growth of 84%, one of the highest in the world.
What does this mean for Southeast Asia’s Digital Transformation?
Amidst this background, digital transformation of economy and society has accelerated greatly and emerging economies are increasingly using digital technologies to forge ahead in areas like e-commerce, banking and healthcare and other public services. With more mobile users contributing to the overall internet environment, the shift to a mobile workplace and the demand for more digital enterprises will no doubt increase exponentially.
The Data Opportunity
As more people and things become connected through networks, torrents of data are generated and analysts predict that emerging markets will be producing the majority of the world’s data by 2020. EMC's data division suggests the figure could be over 60% of the world’s data and emerging markets could likely leapfrog current established markets in terms of the volume of data generated.
To house this avalanche of data, especially with trends in IoT, blockchain and AI, Southeast Asia is an important market place for Cloud service providers, data centers and increasingly, edge computing infrastructure.
According to Technavio, Southeast Asia data centre market will more than double by 2021 with the increase in demand for cloud-based services as a key factor for driving this growth. Google announced its second data centre barely a year and a half after launching their first and Alibaba has also announced its plans to open an additional data center in Jakarta Indonesia before the end of Q1 in 2018, in addition to their current facilities in Malaysia and Singapore. With Microsoft Asia Pacific recording triple digit YOY growth for Azure in the first 10 months of 2016 and Visa launching a data centre in Singapore to serve the Southeast Asia market just this year, the market shows no sign of slowing down.
Vietnam recorded the fastest growth among ASEAN countries in cloud computing spend in the 2010 – 2016 period at a rate of 64.4% annually. According to Dr. Vu Minh Khuong, Associate Professor at the Lee Kwan Yew School of Public Policy, his survey on the application of cloud computing also showed that 56% of Vietnamese enterprises and 55% of State agencies are users of cloud computing. (Article here.) However with the current spend at only $1.70 per person each year (compared with over $180 per person per year in Singapore), there is much untapped potential.
Even in Myanmar, the data centre market has been heating up. NTT Communications launched Myanmar Yangon Kamayut Data Center in June this year offering 99.995% SLAs to meet the interconnection and colocation demands of large enterprises, financial institutions and government agencies. Burst Networks, together with Flexenclosure, is also providing Tier IV data centre facilities in Myanmar. Other companies involved in the construction of data centres in Myanmar include TrueIDC, KBZ Gateway and Myint & Associates. As the country continues to progress in its digital journey, initiatives driving digital financial services and eGov in Myanmar will no doubt drive more demand for data infrastructure.
The growth of IoT also means that there is also increasing need for a new kind of data infrastructure. Egde computing allows data collected by sensors to be processes as quickly as possible for actionable insights. Major cloud providers like AWS, Microsoft, Google often operate from huge hyperscale data centres which may be located far away from the IoT use case, resulting in latency issues. Edge data centre technologies can complement cloud and central data centres to effectively provide a customised data solution.
A Bumpy Ride Ahead?
While there is still much untapped potential in Southeast Asia, it is not without its challenges. Data Centres are slow to build and costly to run, they are also vulnerable to cyber attacks, system failures and power outages – issues that plague many of these emerging economies. As the financial cost of disruptions are extremely high; a recent outage of one of the largest cloud service providers in the US cost S&P companies USD$150 million, infrastructure improvements will have to be made on a nationwide basis to nurture trust.
Further education on the technologies driving this digital transformation is also important. In one of our discussions with a Myanmar data centre provider, he shared that data storage is not handled with enough integrity – often staff would cool their drinks with the data centre cooling technology.
How is your company navigating this digital landscape? What markets do you think hold the most opportunity?
Share your thoughts with us below.
Participate in the discussion with local digital stakeholders at our Asia IoT Business Platform activity in Myanmar (23 & 24 Nov) and Vietnam (29 & 30 Nov) next month by emailing me at email@example.com.