Brazil Data Center Market - Growth, Trends, and Forecasts (2020 - 2025)

Brazil Data Center Market - Growth, Trends, and Forecasts (2020 - 2025)

  • November 2020 •
  • 166 pages •
  • Report ID: 5989478 •
  • Format: PDF
The Brazil Data Center Market is expected to grow at a CAGR of 7% over the forecast period from 2020 to 2025. The growing cloud computing (further fuelled due to COVID-19), increasing penetration of different cloud vendors, government regulations for local data security, and increasing investment by domestic players are some of the major factors driving the demand for data centers in the country. There are almost 120 data centers in the country. The need for low latency and high performance, along with the recent work from home culture due to nationwide lockdown, is mainly accelerating the adoption of data centers located near customers and businesses to enable hybrid multi-cloud ecosystems.

- The Brazilian government is also playing a significant role in the development of local data center infrastructure. According to the government, the country’s General Data Protection Act (LGPD), to be implemented from August 2020, is expected to force many enterprises in the country to migrate their cloud access to private networks and updating their encryption services to extend user data protection. Cloud is one of the fastest-growing markets in the country, and the growing investment in the segment is expanding the scope of the studied market. In July 2019, Ascenty opened four data centers in the greater São Paulo area of Brazil. The latest facilities are already fully leased and are located in Jundiai, Paulinia, and Hortolandia. Further, the data centers add 24MW of capacity to Ascenty’s network.
- In 2019, Oracle announced that it would build a third data center in Brazil. Insurance company Porto Seguro, the logistics company VLI and the satellite operator of AT&T, Sky are some of the Oracle’s big clients in Brazil. CenturyLink also recently expanded its capacity in Rio de Janeiro, owing to the growing demand for cloud and data center services. Recently, in August 2020, AMT, Brazil-based hybrid cloud services provider, selected CenturyLink to meet its increasing demand for cloud services as part of business expansion with management systems provider Sankhya, in the country. China-based Huawei is also planning to build cloud computing nodes or availability zones in Brazil, mainly to expand its global footprint in the cloud segment and compete with US competitors like AWS in the region.
- In June 2020, Amazon Web Services announced to invest BRL 1 billion to expand its data center presence in São Paulo and strengthen its cloud infrastructure in South America. São Paulo is the company’s only South American cloud region and has three EC2 availability zones with five edge network locations. In October 2019, the company announced its plans to spend approximately USD 800 million over a decade on a new South American data center in a free trade zone. In May 2020, Brazil-based market vendor, Scala Data Centers, established by US-based Digital Colony from its purchase of UOL Diveo in April 2020, announced the construction of a new data center in São Paulo. In 2019, Digital Colony also acquired Brazilian telecoms infrastructure solutions provider Highline from Pátria Investments.
- Furthermore, the recent COVID-19 has put high pressure on end-user companies to support remote working and are fast-tracking their cloud and digitization journeys. Companies like IBM and Microsoft claim that this will boost the data center market in the country as data center expansion enables organizations and government institutions to uphold data sovereignty by keeping data within their legal basis. As companies in Brazil look to gain greater control of their data in the face of upcoming tighter compliance and protection regulations, data center vendors, like IBM, are targeting customers by providing cloud capabilities and a hybrid multi-cloud environment. Many industry experts believe that the Latin American data center market is expected to witness significant growth in the coming years, in which Brazil will be a substantial driver for this growth.

Key Market Trends
Colocation Type is Expected to Hold Significant Share

- According to the data center map, currently, there are 65 colocation data centers from 21 areas in Brazil. São Paulo and Rio de Janeiro are the major hubs for colocation vendors. Many industry experts expect that the Multi-tenant data center markets will grow 15% in Sao Paulo and 8% in Rio de Janeiro in 2020, owing to the significant expansion of data center in 2019, and indicators point to a continuing upward trend in the coming months. Colocation services are mainly dominating the country’s data center revenue. Most of the local vendors are primarily leveraging on colocation services for growth expansion. Increased merger and acquisition activities have laid the foundation for significant investments in the industry.
- Brazil-based colocation service provider, Ascenty, has two data centers in São Paulo with Tier III certification, ISO 27001, SSAE 16 and ISAE 3402 Type II. In June 2020, the company started its operations for its third data center in São Paulo, with BRL 150 million and 4 MW of energy. By the end of 2020, the company announced to have 16 data centers in operation in Brazil. The company is also planning to expand its presence in Mexico and Chile and plan to have a total of 22 data centers across three countries, further expanding its ability to meet national and multinational clients’ needs. Like CenturyLink, companies reported that Rio de Janeiro is one of the main economic zones in Brazil; hence, they are investing in the region to have a strong customer base.
- Equinix provides colocation in Brazil and is one of the country’s significant carrier-neutral data center providers. The company’s data centers in the country’s top two business markets provide 17,695 square meters of colocation space. The company’s Brazil data centers have Uptime Tier III, ISO 9001:2008, ISO 27001:2013, ISAE3402 / SSAE16 SOC1 Type II, SAP Infrastructure Operations Services and PCI DSS 3.1 certifications to meet quality and security requirements. Their São Paulo data center SP1 is located less than 200 meters from the Bovespa stock exchange and houses numerous networks authorized to connect to it.
- According to the company, they are preferred vendors in Brazil to many thriving, diverse business ecosystems, including SMEs. More than 1,500 companies colocate in Equinix’s data centers in Brazil to connect to business partners and customers in their digital supply chains. Financial services in Brazil are the major end-users of the company’s data center services. According to the company’s survey, 76% of IT decision-makers named Interconnection as a fundamental facilitator in digital transformation. Therefore, by opting for Interconnection, a private and secure route for data traffic between partners, enterprises from various industries can respond efficiently to digitalization challenges.

IT & Telecom Sector Expected to Hold a Significant Share

- IT and Telecom is the most prominent segment for the Brazil Data Center Market. The IT infrastructure demand is the highest for this segment. Colocation providers, who are a substantial adopter of data center racks, are also considered under the study’s scope under the IT & Telecom sector. According to the Brazilian Software Association (ABES), Brazil is Latin America’s largest technology ecosystem. Also, according to the data published by Equinix, the IT investment in Latin America witnessed a 1.3% growth in 2019 and is expected an upswing of 4-5% in 2020. And in 2020, Brazilians’ investment in the IT industry and telecom sector will be around USD 40-50 billion, respectively. This is expected to provide a massive boost to the cloud computing market, and hence in the data center market too.
- The region is undergoing some enormous investment from IT & Telecom providers. For instance, Ascenty launched Its USD 73 million Data Centre Facility In Brazil, and the infrastructure has an available energy capacity of 20 MVA and 12,000 sq m of total area. By the end of 2020, the company aims to complete four more projects, totaling 17 data centers in Latin America (16 in Brazil and Chile). Besides, Digital Colony Management has announced the establishment of Scala Data Centres, a hyperscale data center platform headquartered in Sao Paulo, Brazil. Scala is Digital Colony Management, LLC’s second investment in Brazil and fourth in Latin America.
- The amount of data that is being stored and processed by this segment is huge. The advent of mobile data and subscriptions and their rapid usage have increased data traffic growth and, hence, data centers in Brazil. With the introduction of 5G and Cloud, the demand is expected to grow exponentially in the region. Owing to mergers and acquisitions, the increase in the market share of IT & Telecom companies are also rising sharply in Brazil. For instance, in 2019, Digital Colony acquired Brazilian telecoms infrastructure solutions provider Highline from Pátria Investments. In April 2020, it also funded Vantage Data Centers’ acquisition of Next Generation Data, and in March, it closed its USD 8.2 billion acquisition of Zayo.
- In April 2019, Angola Cables opened a data center in Fortaleza. The government of Ceará state estimates that by the end of 2021, Fortaleza will have 18 submarine fiber optic cables in operation. Therefore, Angola Cables also announced to invested BRL 100 million in the site, which is expected to provide international connectivity through SACS to local corporations, telecoms, and ISPs. Apart from that, the Brazilian government has invested heavily in the country’s internet connectivity to bridge the technology gap between rich and poor, where 83% of the Brazilian population has internet reach. According to Cisco Systems Inc., internet traffic will reach 4.8 Exabytes per month in 2021, up from 2.1 Exabytes per month in 2016.

Competitive Landscape
The Brazil Data Center Market is fragmented, and the competitive rivalry is high. The key players in this market are Arista Networks, Inc., Cisco Systems, Inc., Dell Technologies Inc., IBM Corporation, among others. Through research & development, strategic partnerships, and mergers & acquisitions, they have been able to gain a stronger hold in the market. These players are gradually growing their presence in the market by offering the latest technologies, thereby increasing their revenues in the market.

- April 2020 - Digital Colony Management LLC has announced the establishment of Scala Data Centres, a hyperscale data center platform headquartered in Sao Paulo, Brazil. Valued to be worth USD 300- USD 400 million, the scala Data Centers will be one of the largest in Brazil, and the company will attempt to grow the new facility through acquisitions.
- September 2019 - IBM Corporation announced to build a second data center in Brazil, its third in Latin America, to provide public cloud services. With this, IBM expects to deliver more robust cloud services, from infrastructure to services such as artificial intelligence. In addition to the new datacenter, IBM also announced to spend USD 10 million for the development of a research and engineering center focused on AI in São Paulo in partnership with state research promotion agency Fapesp.

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