Indonesian Data Center Colocation Services Growth Opportunities

The Indonesian Data Center Colocation Services Market offers lucrative Opportunities for both existing and new players alike with the advancement in technology such as the introduction of Edge-Computing based Data Centers also the sudden outbreak of the COVID-19 Pandemic has added impetus to the Increasing disaster recovery and business continuity requirements also the sprouting SME Industry in Indonesia is an altercation in the plethora of Opportunities offered by the Data Center Colocation Services Market in Indonesia.

Definition / Scope
Market Overview
Market Risks
Top Market Opportunities
Market Drivers
Market Restraints
Industry Challenges
Technology Trends
Pricing Trends
Regulatory Trends
Post COVID-19 Recovery
Market Size and Forecast
Market Outlook
Technology Roadmap
Distribution Chain Analysis
Competitive Landscape
Competitive Factors
Key Market Players
Strategic Conclusion
References
Appendix

Definition / Scope

A colocation data center is a physical facility that provides space for firms’ computing hardware and servers, as well as the necessary electricity, cooling, and security. Cabinets, cages, and private suites are all included in this capacity.

Colocation providers frequently lease space to a variety of tenants seeking colocation services, such as network providers, cloud providers, and businesses. These tenants can then communicate with one another and conduct business together within the colocation data center. This enables firms to concentrate their IT activities and establish a cost-effective architecture.

Benefits of Data Center Colocation

Reliability
Security & compliance
Lower Cost of ownership
Scalability
Interconnection
Hybrid cloud

Indonesian Data Center Colocation Services Market – By Type

Wholesale Colocation
Retail Colocation

Indonesian Data Center Colocation Services Market – By Organization Size

Large Enterprises
Small and Medium Enterprises (SMEs)

Indonesian Data Center Colocation Services Market – By Segment

Healthcare
Retail
IT and Telecom
BFSI
Research & Academics
Energy
Manufacturing
Others

Market Overview

Colocation Service is Expected to Grow Significantly

Jakarta is growing as a connectivity hub, a major banking and financial center that handles a large percentage of Indonesia’s trade and services. It is the key site for colocation providers. Indonesia’s SMEs are developing, and they have a lot of potential to assist the data center business flourish as well. In 2020, Indonesia is expected to have a large number of SMEs, including e-commerce, B2B, manufacturing, retail, and other types of businesses. SME concerns about high costs encourage them to use colocation data center services.

Indonesia’s data center services income is growing due to increased demand for colocation from worldwide cloud service providers. The Indonesian data center market is regarded as one of the world’s most basic data center markets. Because of the increased migration of OTT participants in Indonesia, increased IT spending, and the deployment of 5G, the data center industry is predicted to rise at an exponential rate.

The colocation provider will offer the server with the appropriate bandwidth, IP, and power. Colocation hosting allows a small firm to benefit from the advantages of a large IT department without the expensive cost of setup. According to the Jakarta Post, not all organizations in the region are eager to go to the public cloud because they want complete control of their data without it being in the hands of others. As a result, despite considerable interest in cloud services, colocation remains popular.

The region’s colocation data centers are working to implement sustainable solutions. For example, Lintasarta, an Indonesian data communications and internet service provider, achieved a 99.982 percent service level agreement with its corporate clients in October 2020 after implementing Schneider Electric data center technologies. Lintasarta intends to utilize a sustainable data center solution, Schneider Electric’s EcoStruxure for Data Centers, on three of its colocation data centers in Banten in the future.

Due to the lack of efficient fibre infrastructure outside of the Golden Triangle and the vast domestic outsourcing market, it is extremely difficult for outside data center colocation operators to enter or expand in Indonesia.

Market Risks

Some of the Major Market Risks in the Indonesian Data Center Colocation Services Market include

Power outage

A mission-critical data center’s existence can be jeopardized by a power outage. Organizations must ensure that UPS-backed power pathways to each rack and cooling system provide sufficient resilience. Dual power sources for the site with direct access to a multi-substation power grid provide the bare minimum of protection against local substation power outages. Backup generators might also be kept on standby as a final option.

Security

A data center’s security breaches could range from a network breach to sabotage and damage performed by people on the premises. Cyberattacks that result in the loss of account data or personally identifiable information (PII) from customers are one of the most serious concerns.

Security professionals may be unable to authenticate card holders’ identities or authorize them to access specified locations due to application or system faults. Video cameras and access control doors may also lose contact with the central system.

Ransomware breaches and threats can only be addressed with a multilayered approach to data protection that includes three components: prevention, detection, and recovery. End-user education, regular vulnerability scanning, role-based access control, and regular data backups are all examples of specific protection techniques (the proverbial last line of defense).

Top Market Opportunities

The Top Market Opportunities in the Indonesian Data Center Colocation Services Market are

Sprouting SME industry in Indonesia

Indonesia’s SMEs are developing, and they have a lot of potential to assist the data center business flourish as well. In the year 2019, Indonesia had 41 million SMEs, which included enterprises such as e-commerce, B2B, Manufacturing, Retail, and others. Because of their high costs, SMEs are turning to co-location data center services for cloud services like SaaS. Due to its need for low-cost data centers and cloud services, SME is a prominent end-user in the SaaS industry in Indonesia.

Increasing disaster recovery and business continuity requirements

Data center users all across the world are concerned about disaster recovery. Disasters such as earthquakes, security assaults, fire outages, and other unanticipated events can all affect IT infrastructure facilities. Businesses must have effective disaster recovery strategies in place to avoid suffering significant losses as a result of such events. Data center colocation facilities are less vulnerable to disasters because they are located distant from the users’ premises. These facilities can be controlled remotely, enhancing their disaster recovery capabilities.

Edge Computing

The Internet of Things (IoT) has been a major trend in recent years, with Gartner predicting that there are currently over eight billion linked ‘things’ in use. However, one trend leads to another, and in order to handle and process the real-time data provided by devices and sensors, a new development in the shape of edge computing and its data center application is emerging. Established colocation companies could use their market position, purchasing power, and infrastructure expertise to open smaller regional locations. This will entail shifting the focus away from huge corporations that demand low latency metro-based sites and toward a much wider collection of smaller customers who will all connect through their data providers.

Market Drivers

The Major Factors driving the growth of the Indonesian Data Center Colocation Services Market include

Reduction in the overall IT cost

The management of a data center infrastructure hosted on-site necessitates the use of competent IT personnel. On-site hosting also entails a variety of costs for server management and infrastructure upkeep. Furthermore, establishing a new data center facility necessitates a significant initial expenditure and raises the enterprise’s overall CAPEX. As a result, businesses are paying more attention to the CAPEX spent on establishing mission-critical data center facilities and searching for ways to cut costs and increase ROI (ROI). One of the key factors that encourages businesses to investigate new IT infrastructure options is the pressure to reduce IT costs.

As a result, based on their size and requirements, businesses are increasingly turning to data center colocation providers for power, space, bandwidth, and Value-Added Services (VAS), such as interconnection services, internet solutions, and expert managed IT services.

Rapid digitization across industries

One of the primary drivers driving the growth of the data center colocation market is rapid digitization across industries, as well as the increasing use of hybrid cloud computing and virtualization systems. Colocation data centers are located distant from the user’s premises and can be controlled remotely in the event of a disaster. Additionally, growing adoption of dependable, scalable, and secure infrastructure for efficient data recovery and business continuity requirements is propelling market expansion.

Indonesia, modular data centers are being deployed in greater numbers to keep up with the increasing network complexities.

Growing adoption of cloud services

The industry is being driven by the increasing adoption of cloud services. Cloud services have accounted for a growing share of data-center usage over the last five years, while colocation and in-house systems have stayed relatively stable. Customers can take advantage of a 100% uptime SLA and concentrate on their main business rather than operating a data center. The supplier of cloud services provides and controls hardware infrastructure, such as servers, storage, and network components.

For Instance, Lintasarta, an Indonesian data communications and internet service provider, achieved a 99.982 percent service level agreement with its corporate clients in October 2020 after implementing Schneider Electric data center technologies. Lintasarta intends to utilize a sustainable data center solution, Schneider Electric’s EcoStruxure for Data Centers, on three of its colocation data centers in Banten in the future.

According to CBRE, Indonesian businesses paid a record-high 140 megawatts of power in the country’s top data-center markets in 2020, up 33% from 2018 due to growing demand for cloud services. This meets the market demand for data center colocation in a big way.

Market Restraints

The Major Factors Restraining the growth of the Data Center Colocation Services Market in Indonesia include

High startup and maintenance cost

The initial cost of setting up IT equipment in data center facilities is astronomically large. Businesses that choose to lease colocation facilities must buy their own IT equipment. Enterprises must also transport their equipment to colocation centers. The cost of transporting the equipment is determined by its size and weight. Furthermore, the initial cost and complexity of deploying data infrastructure solutions is substantially higher. Enterprises are also responsible for maintenance tasks linked with the equipment when it is deployed in colocation facilities.

These maintenance procedures are carried out off-site at the data center, which adds to the associated cost. Remote help for maintenance activities is available at the colocation facilities, as well as services like remote hands and smart hands. These services, on the other hand, come at an additional expense to the customers. The higher setup and maintenance costs are likely to stifle the global data center colocation market’s growth.

Capital market conditions

Because the colocation business model is so reliant on real estate, it’s no surprise that it’s a capital-intensive endeavor. While an IT security company, for example, may have to pay substantially higher salaries to expand its team, colocation data centers are one of the few IT industries with such high entry hurdles. As part of their constant need to obtain capital – especially venture capital – from real estate investment trusts (REITs), bankers, and investors, CEOs must keep up with capital market conditions.

Industry Challenges

Some of the key challenges, it would seem, are caused by the country’s lack of network infrastructure and its unstable power supply. And much of this is down to the government.

Power in Indonesia is also unreliable. In May, state-owned power utility Perusahaan Listrik Negara (PLN) scheduled a series of rolling blackouts to compensate for deficits at its 900MW gas-fired power plant, which serves Jakarta and Tanerang. The power plant has a 600MW shortage, according to the report.

Power concerns in Indonesia can be overcome, according to Clement Goh, managing director for South Asia at data center operator Equinix, by developing within select industrial parks that have their own private electrical business. The private facility can be utilized to enhance or backup the national grid’s power supply. though not every location would have it as an option. And then there is the issue of rising prices. The increase will affect data center operating costs, especially since energy contributes around 40% of the TCO.

Building a private data center is certainly a significant financial investment, but the costs do not stop once the structure is completed. A data center’s day-to-day operations involve a significant amount of recurrent maintenance costs. Colocation hosting has a larger initial investment than hosting companies that hire servers. They must purchase their own hardware and upgrades. Instead of bandwidth, variable monthly leases make budgeting difficult. Time or financial constraints limit the amount of maintenance that can be done.

Technology Trends

Technology is shaping the way business is done and some of the key emerging technology trends in the Indonesian Data Center Colocation Services Market include

Automation

Automation is undoubtedly a major part of the industry that has accelerated as a result of the Coronavirus outbreak. More data centers are turning to remote capabilities for monitoring and routine activities like updating and patching in order to limit contact with other individuals. However, as both hyperscale and edge data centers proliferate, expect and predict that these will continue to grow. Furthermore, according to a 2020 poll of data center managers, staffing constraints are still a concern and are most likely a cause of these automation requirements.

Furthermore, robotics will begin to handle everything from rack rollouts and swaps to site monitoring and even physical security, as automation expands.

5G Finally Realized

The realization of 5G technology will also have an impact on the requirement for edge data centers and promote the rise of the IoT. Despite the fact that numerous carriers have advertised 5G capabilities, many have yet to experience its speed or reliability in the real world. Edge computing will drive faster demand for 5G technologies and the installation of nodes to support that form of network, much as data centers spurred industries and businesses to use data differently. It is necessary for the Internet of Things to function. As a result, expect ideas for edge data centers outside of large metropolitan regions to gain traction.

Pricing Trends

The Pricing of the Data Colocation Services depend on the following factors

Rack Space
Setup
Internet
Support

The various plans and pricing of Data Center Colocation Services in Indonesia include

PLANS & PRICING	1 U BUNDLE	2 U BUNDLES	4 U BUNDLES	8 U BUNDLES
Units	1	2	4	8
Bandwidth	100 GB	100 GB	100 GB	100 GB
IP’s	2	2	2	2
Free Reboots	Yes	Yes	Yes	Yes
Free Setup	Yes	Yes	Yes	Yes
KVM Access	On Demand	On Demand	On Demand	On Demand
Rated Power	200W	300W	400W	600W
Power Supply	Yes	Yes	Yes	Yes
Price (US$)	60/Month	120/Month	165/Month	240/Month

Regulatory Trends

Due to the government’s data localization regulation (GR 82), which requires enterprises to store their data locally within the country, there is a boom in demand for local data centers in Indonesia. This rule was enacted by the government to combat data theft and data breaches in the country.

The policy is an attempt to safeguard the country’s data by preserving it within the country and instilling trust in end-users. End customers have grown more wary of their data storage after the implementation of GR- 82, and are now looking for local data centers in the country to choose as their data center service provider. The regulation has led the global cloud players to build their data center locally to store the data of Indonesian end-users’ data within Indonesia.

Post COVID-19 Recovery

Colocation is becoming a more crucial aspect of remaining connected, cooperating, and moving forward in a cost-effective and safe manner as a result of the Covid-19 epidemic. Data is being used in healthcare to examine patient outcomes, and artificial intelligence is being used to forecast disease transmission. In comparison to the previous five years, the Indonesia cloud computing market increased at a rate of over 45 percent in 2020. Many businesses are turning to cloud-based services. For example, Amar Bank Indonesia launched Indonesia’s first digital-only bank, and XL Axiata is shifting to Google Cloud to offer cloud features like Google Kubernetes Engine (GKE) to its on-premises data centers.

Alfamart, a retail and e-commerce service provider with over 10 million customers and 10,000 connected stores, has adopted cloud services. COVID-19 has accelerated cloud adoption in the country, with healthcare and educational institutions adopting both public and private clouds, with SaaS playing a prominent role. During the forecast period, the PaaS and IaaS markets are predicted to develop at the quickest rates.

Market Size and Forecast

The Indonesian Data Center Colocation Services Market is valued at USD 1.24 Billion in 2020 and is poised to grow at a healthy Compounded Annual Growth Rate of 16.2% to reach a Market Size of USD 5.57 Billion in 2030.

The Primary Factors adding impetus to the growth of the Data center Colocation Services Market in Indonesia include Enterprises migrating their IT infrastructure to the public cloud, strong consumer demand for cloud-based app/OTT services, and rapid growth in internet data usage are all factors. Furthermore, the government’s data localization policy is encouraging public cloud providers and huge tech corporations to house their data in Indian data centers. As a result, it’s helping to fuel the need for hyperscale data center colocation.

Retail colocation is expected to account for the largest market share during the forecast period

During the projection period, retail colocation is predicted to have the greatest market share in the data center colocation industry. Power, space, cooling, cabling, and support are all provided by retail colocation. It also enables flexibility in terms of IT infrastructure, which is beneficial to Small and Medium-Sized Businesses (SMEs). Retail colocation’s utility is predicted to boost its market share in the global data center colocation industry.

The Retail Colocation Services segment accounted for 66% of the Market Share and it generated revenues to the tune of USD 820 Million in 2020 and it is projected to grow at a CAGR of 15.2% to reach a Market Size of USD 3.38 Billion in 2030.

Because leading global firms like as Microsoft Corp. and Oracle Corp. use wholesale colocation centers for their servers, the wholesale type segment is expected to grow at the quickest rate of over 16 percent from 2021 to 2030.

The Wholesale Colocation Segment attained a Market Share of 34% and is poised to grow at a CAGR of 16.8% to reach a Market Size of USD 1.98 Billion in 2030 from a value of USD 420 Million in 2020

Large enterprises are estimated to have the largest market share during the forecast period

SMEs and Large Enterprises are among the data center colocation end-users, with large enterprises predicted to have the largest market share over the forecast period. Vast businesses are more likely to use colocation services since they may rent large spaces and meet their power and computing requirements. Furthermore, colocation services enable large organizations to fully control their data center infrastructure. Because of their disaster recovery capabilities, these services also help with business continuity. During the projected period, this is expected to boost the data center colocation market.

In 2020, product demand in the small- and medium-scale business group accounted for approximately 37% of total demand. From 2021 to 2030, the segment is expected to see an increase in demand, with a significant CAGR.

The Large Enterprises accounted for 63% of the Market Share and it is expected to reach a Market Size of USD 3.21 Billion in 2030 from a value of USD 781 Million in 2020 growing at a CAGR of 14.3% in the forecast period (2021 – 2030).

SMEs are expected to grow at the fastest rate in the forecast period (2020 – 2030) to attain a Market Size of USD 2.12 Billion in 20230 from a value of USD 458 Million in 2020

Healthcare end-use segment is estimated to register the fastest CAGR

Due to the increasing need to properly store and manage patient data and greater attention on medical services amid the pandemic, the healthcare end-use segment is expected to grow at the quickest rate from 2021 to 2030.

End-User	Market Size in 2021	CAGR (2021 – 2030)	Market Size in 2030
Healthcare	USD 173.6 Million	16.8%	USD 820 Million
Retail	USD 98.7 Million	16.2%	USD 438.9 Million
IT and Telecom	USD 426 Million	14.2%	USD 1.6 Billion
BFSI	USD 186 Million	14.3%	USD 707.9 Million
Research & Academics	USD 221 Million	15.1%	USD 901.8 Million
Energy	USD 74 Million	14.2%	USD 279.9 Million
Manufacturing	USD 148.8 Million	12.5%	USD 483.2 Million
Others	USD 86 Million	11.6%	USD 257.7 Million

Market Outlook

Smartphones are used by a huge percentage of the population, increasing the number of people who use OTT platforms and streaming services. Large data volumes are projected to result, driving up demand for high-capacity storage and faster processing rates.

Technology Roadmap

Digital transformation is a game changer that I&O leaders need to manage as well. As blurred barriers, induced by digital business, merge the real and digital into a new paradigm, applications and heaps of data enable change and boundaries alter. According to Gartner, 75 percent of company data will be processed outside of traditional data centers in edge locations in a very short time. The data center will no longer be the data center as more items get connected.

Consumers will expect a more engaging and personal digital experience as the industry moves to the edge. Leaders must ensure that the proper people, processes, and technology are in place to deal with latency, bandwidth costs, privacy and legal obligations, and the need for local autonomy when connections fail. This push will push the corporate infrastructure’s border all the way to the edge. The task will be to administer those facilities with minimal involvement, maintaining their availability and security.

Distribution Chain Analysis

The Value Chain of the Indonesian Data Center Colocation Services Market is as in the below image

Competitive Landscape

Both large global vendors and regional companies compete in the Indonesia Data Center market. Cisco, Dell, HP, and Pure Storage are just a few of the leading solution providers in the market. Vendors are scaling up their capabilities to maintain and gain new clients as a result of the prospects presented by 5G adoption and the predicted rise in data traffic. Overall, the competitive competition between the players is predicted to stay high over the projection period.

Key Market Developments

In August 2020, Telkomsigma established Multi Cloud Management Platform to assist more MSME sectors amid the Covid-19 pandemic with transparent, safe, and effective ICT services (MCMP). Customers using MCMP may easily pick and control their services from a single centralized dashboard, making cloud computing management more efficient.

In June 2020, PT DC Indonesia (DCI) has completed the construction of its third Data Center Building (JK3), which has a capacity of 12 megawatts. DCI expands the data center market in Indonesia by up to 20% with the JK3 building, which adds to the total available capacity of roughly 50-70 MW.

Competitive Factors

The primary strategies used by players in the data center colocation market include partnerships and acquisitions, as well as product releases. Equinix, Inc., Rackspace, Interxion Holding NV, CenturyLink Technology Solutions, Navisite, Inc., Verizon Communication Ltd, NTT Data Corporation, Global Switch Corporation, KDDI Corporation, Digital Reality, and others are among the leading participants in the data center colocation industry as of 2019.

Key Market Players

Some of the Major Players in the Indonesian Data Center Colocation Services Market include

Digital Realty Trust Inc. is a real estate investment trust that invests in real estate (REIT). The business of owning, purchasing, constructing, and running data centers is the focus of the company. It offers customers data center, colocation, and interconnection solutions in a variety of industries, including cloud and information technology services, communications, and social networking, as well as financial services, manufacturing, energy, healthcare, and consumer products. PlatformDIGITAL is the company’s platform for data exchange, connectivity, and colocation.

Cyxtera Technologies, Inc., formerly Starboard Value Acquisition Corp., provides data center colocation and interconnection services. The company runs around 60 data centers throughout the world, serving over 2,300 businesses and federal government organizations in the United States. Structured cabling, secure cabinet and cage, on-demand cabinets, and gold support are among its colocation services. CXD Platform, Cross connections, Metro connects, Cloud on-ramps, and Internet protocol (IP) bandwidth are among the company’s interconnection offerings. The CXD Platform provides a software-defined intra-data center network that is programmable.

Alibaba Group Holding Ltd is a holding company that provides technical infrastructure and marketing reach to assist merchants, brands, and other businesses in using the potential of new technology to interact with consumers and customers. The business is divided into four segments. The Cloud Computing segment offers a full range of cloud services, such as database, storage, network virtualization, big data analytics, and more. Consumer services are provided by the Digital Media and Entertainment sector in addition to the core company operations. The goal of the Innovation Initiatives and Other section is to develop new services and products.

Amazon Web Services is an Information Technology Company that offers website hosting, backup, digital marketing, analytics, application integration, blockchain, networking, and other related services. Amazon Web Services serves clients worldwide. AWS offers a set of technology services, including compute, storage, database, analytics, machine learning, Internet of Things, cloud and serverless computing.

Alphabet Inc. is a holding company. The Company’s segments include Google and Other Bets. The Company’s Google segment includes Google Services and Google Cloud. Google Cloud Platform and Google Workspace are two enterprise-ready cloud services offered by Google Cloud. Developers can use Google Cloud Platform to build, test, and deploy applications on the company’s infrastructure. Gmail, Docs, Drive, Calendar, and Meet are among the Google Workspace collaboration tools.

Microsoft Corporation is a computer software and hardware corporation. Software products, services, devices, and solutions are developed and supported by the company. Productivity and Business Processes, Intelligent Cloud, and More Personal Computing are the company’s segments. It delivers a variety of services, including cloud-based solutions that deliver software, services, platforms, and content to customers, as well as solution support and consulting. Original equipment manufacturers, distributors, and resellers are all used to promote and distribute the company’s products and services.

Strategic Conclusion

The surge in the adoption of Data Center Colocation Services in Indonesia can be ascribed to a number of factors, including businesses migrating their IT infrastructure to the public cloud, increasing consumer demand for cloud-based app/OTT services, and a rapid increase in internet data usage.

While hyperscale demand is likely to drive the majority of data center colocation development in India in the next years, enterprise/retail demand from the BFSI and IT verticals will contribute to the market’s long-term growth. Enterprises are migrating from captive data centers to colocation data centers to save money on capital, improve operational efficiencies, and take advantage of colocation facilities’ cutting-edge equipment. The COVID-19 outbreak has bolstered enterprise migration from captive data centers to colocation providers in order to maintain business continuity.

References

Appendix

SMEs – Small & Medium Enterprises
e-Commerce – Electronic Commerce
B2B – Business to Business
OTT – Over-the-Top
PII – Personally Identifiable Information
SaaS – Software-as-a-Service
IoT – Internet of Things
CAPEX – Capital Expenditure
VAS – Value-Added-Services
REIT – Real-Estate Investment Trust
PaaS – Platform-as-a-Service
IaaS – Infrastructure-as-a-Service