Strategic Analysis of the Asia Pacific Infrastructure Hosting Market

Infrastructure Hosting Market Witnesses Sturdy Demand and Offers Respectable Growth Potential in the Asia Pacific Market

Data center co-location and managed hosting services came into existence in the Asia Pacific region around 2000. While the region's data center market is not as advanced as that of the United States and Europe, its pace has picked up considerably, with China and Vietnam at the forefront. Despite the global economic downturn and other restraints such as security concerns and high operative costs, the demand for data center services remains strong due to the need for third party infrastructure hosting in ongoing business operations across the major verticals including banking, financial service, and insurance (BFSI), manufacturing, online content providers, government and education etc.

The rapid growth of various industries and the rising complexity of current information technology have posed tough challenges in handling business. Small and medium businesses (SMBs), in particular, lack the in-house capabilities to deal with these impediments. "Companies have increasing requirements for redundant bandwidth, high-speed connections to multiple network backbones, and near 100 percent system up-time, which cannot be achieved in a normal office environment as most SMBs only have a limited in-house IT resource," notes the analyst of this research service. "In addition, cyber space is vulnerable to various attacks; hence, only a professional data center can offer better protection against these attacks and recovery measures are also in place should natural disasters happen." At present, the demand from large enterprises and SMBs in terms of revenue is in the ratio of 78 to 22 percent. SMBs may outnumber the large enterprises, but the amount they contribute is not substantial. SMBs are a good addressable market, but concerns over the cost of outsourcing still prevail. As operators enhance their sales position to SMBs, especially on a hosted model for several ICT applications, demand will support growth.

Cost Factor Dampens Market Prospects for Participants

The cost of running a data center is escalating steadily. Power costs comprise 50 percent of the overall operation cost of a data center. Real estate pricing is another factor that ratchets up operational costs for participants that build data centers or those that lease data centers from others. In some countries high labor costs prove to be an additional burden for data center operators. Higher computing requirements and greater server density are creating problems both with regard to power supply and cooling specifications. In 2008, more than 50 percent of the data centers were affected by inadequate power and cooling capacity. Nearly 70 percent of the data center operators considered power and cooling to be their greatest impediments as power and cooling alone account for 35 to 50 percent of the total operational cost, depending on the standard of the facilities.

"Energy saving and green data centers have become popular topics among the data center operators across the world," says the analyst. "New concepts such as green data centers, utility computing, virtualization, and data centre consolidation are being initiated by the global system integrators and global telecom operators that have identified its market potential." However, few data center owners have adopted these technologies due to budget constraints and shortage of skilled personnel. Nevertheless, novel technologies such as virtualization and cloud computing and new service models such as Software as a Service (SaaS) and utility computing will be the next pull factors for customers to opt for infrastructure hosting services instead of managing their own data centers. As service models stabilize and prove their cost effectiveness and data centers focus on educating end users, demand is set to rise significantly in the near future.

Market Sectors

Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:

By Geographic Region:

• Indonesia
• Malaysia
• Philippines
• Singapore
• Thailand
• Vietnam
• Mainland China
• Hong Kong
• Taiwan
• India
• South Korea