Published: 21 Jun 2013

Transcription

1 Current State Analysis - Hong Kong Datacenter Market Published: 21 Jun 2013 This market insight discusses the current state of Hong Kong's datacenter market by outlining the key market drivers, challenges and trends that impact this market. Hong Kong, along with Singapore, has been a traditional datacenter hub in Asia given its unique political and financial positioning in the region. Its strategic location also helps it to tap the burgeoning demand from Mainland China. While financial services have been a significant driver for the datacenter market, the government has also emerged as an important demand generator over the last five years. The proliferation of cloud computing has a disruptive impact on business models and fueled a new phase of IT evolution among enterprises and service providers in Hong Kong. Through this market insight, we will discuss the following important aspects of the market: Figure 1: Major Aspects of the Hong Kong Datacenter Market Source: Frost & Sullivan analysis

2 Geographical and infrastructural advantage Geographically, Hong Kong is located near Mainland China and is also a central region in East Asia. Its strong political connection to Mainland China allows it to act as a gateway for global companies that seek to tap into opportunities in China's market. Moreover, Hong Kong's business-friendly and free-trade environment have drawn a number of multinational corporations (MNCs) to set up their regional headquarters in the country. This has brought in numerous investments and job opportunities, and created demand for datacenter services. Among all the advantages, Hong Kong s robust IT infrastructure and reliable network serve as a solid foundation for its highly developed datacenter and cloud computing industry. Most global telecom service providers are present in the country. It is also an important place for submarine cable landing, with nine submarine cable systems currently connecting to it, such as NTT Communication's Asia Submarine-cable Express (ASE), Pacnet's EAC-C2C, and 17 overland cable systems. These submarine cable owners are leveraging their existing facilities to build high-tier datacenter capabilities, which can ensure incomparable security, low latency, and reliable connectivity services. Given that many participants own multiple datacenters in the region, they are leveraging their redundant infrastructure to meet disaster recovery and business continuity requirements. Moreover, a lot of Network Operation Centers (NOCs), which usually operate out of cost-effective locations, such as the Philippines, Malaysia, or India, are being set up to provide constant monitoring and visibility for their infrastructure. Increasing emphasis, support, and investment from the government To stimulate the local datacenter market, the Hong Kong Government has been playing a pivotal role, by launching several initiatives and injecting government investment. The Office of the Government Chief Information Officer (OGCIO) has already recognized the datacenter industry as a strategic development area and taken actions to facilitate stakeholders in the industry and for government self-adoption. Government strategy and initiatives In line with its commitment to position the country as a prime location for large tier-3+ datacenters in Asia-Pacific (APAC), the government came up with its "CENTRE strategy" - an integration of Cloud computing hub, Ease of mind, New measures, Technological infrastructure, Reliability, and Easy access to the mainland of China" - to fully support the datacenter market's development. To substantiate its strategy, the government established the Data Center Facilitation Unit to make it easy for investors to set up datacenters and allocated about 19 hectares of land, since 2011, in various industrial estates dedicated for datacenter use. To address scarcity of land, the Hong Kong Government launched incentives in 2009 that encouraged the redevelopment and wholesale conversion of existing industrial buildings to datacenters and opened up more Greenfield land for sale.

3 Government investment As Hong Kong is also a major consumer of IT services, the government expects to spend HK$626.5 million (U.S$80.7 million) on IT in Eighty percent of this amount is likely to be spent on IT used by the government, while the rest will be used to implement IT infrastructure, standards, and initiatives, which aims at facilitating the wider use of IT in the business sector and the community, as well as building a digitally inclusive society. The government presently operates three datacenters in Wanchai, Tsuen Wan, and Sai Kung. It is also aiming to set up three cloud environments - an in-house private cloud, an outsourced private cloud, and the use of public cloud services. The first in-house private cloud computing platform was launched in December 2011 by OGCIO, to host applications that carry sensitive data. This platform was overhauled from the OGCIO's existing datacenter in Wanchai. The government is building an outsourced private cloud, called GovCloud, and is planning to rollout the service before the end of 2013.This private cloud will host its computing resources in a third-party contractor's datacenter. When GovCloud is up and running, the OGCIO will migrate some of its services, such as e-procurement, electronic information management, paperless meeting, and electronic HR management, to it. Limited availability of land and high real estate prices are key deterrents Due to the limited availability of suitable land and high real estate prices, service providers are more cautious when they consider further expansion of their physical infrastructure. This, combined with rising costs, have led to an escalation in capital and operating expenses in Hong Kong's datacenter market, leading to new concerns for service providers. Moreover, other countries in the region, such as China, Malaysia, the Philippines, and Vietnam, where costs are lower, have already emerged as strong contenders to Hong Kong by putting in efforts to develop themselves as new datacenter hubs. The Hong Kong Government has proposed four methods to accommodate new datacenters: Conversion of existing industrial buildings Purchase of Greenfield sites Permission to build in the Industrial Estate owned and managed by Hong Kong Science & Technology Parks Corporation (HKSTPC) Purchase or rent sites and building space in the open market For example, a data center operator converted a rice warehouse in Fo Tan to give them sufficient floor height. Similarly, Fujitsu converted three floors into two in an industrial building in Tsuen Wan in late 2012 to gain additional headroom and floor loading capacity. Despite various concerns, many large MNCs, such as Google, continue to witness significant dynamics in the Hong Kong datacenter market and are making investments to build new datacenters, to serve the local and regional demand. Cloud computing witnessing greater momentum as service providers beef up portfolios and enterprises demonstrate increasing interest As Hong Kong has one of the most developed datacenter and cloud computing markets in Asia, enterprises in the country have relatively high awareness about the services and are more open to adopt new trends, such virtualization and cloud computing. Virtualization has facilitated the consolidation of datacenters, by compressing more virtual machines into the physical server and significantly increasing servers' utilization efficiency.

4 Cloud computing emerged as the fastest-growing segment of the datacenter market over the last three years and helped to add value to service providers' traditional portfolios. This created new revenue streams and led to strong growth in revenue. Frost & Sullivan estimates that each dollar spent on cloud services drives an additional spending of cents on other services, such as connectivity services, hosting services, and information security services. The popularization of cloud computing has led to the emergence of cloud-centric datacenters, such as CITIC Telecom CPC's cloud centers and Pacnet's HKCloudSpace2 datacenter, which are built with multi-tenancy and pay-per-use models as a key theme. Enterprises in Hong Kong are opting for a multi-delivery-model environment to meet the requirements of different sets of applications. While core applications need high reliability, security and performance, and low scalability, non-core applications may not require all these characteristics. Hence, it is becoming pertinent to identify these differences and adopt solutions that are specific to the workload or application. Consequently, there is a strong demand for a federation on cloud computing, with standardization and open interface as key themes. The cloud federation can give rise to new business opportunities for professional services, which provide expertise to guide enterprises that adopt new norms. In future, this multi-delivery model environment is expected to give rise to IT-as-a-Service, where IT budgets would cease to exist at an organization level and instead, become embedded into business units' budgets. Consequently, IT departments would shrink and Chief Information Officers (CIOs) are likely to evolve into internal service providers, whose roles revolve around business innovation, rather than technology innovation. Increasing power consumption results in raising datacenter power densities An increasing number of enterprises are either in the process of setting up virtualization platforms or owning high performance computing machines. This is leading to an increase in the power requirement at a rack level. Presently, the power requirement per rack is around 6-8 KW in a typical tier-3 datacenter and can reach an average of KW per rack for advanced datacenters in Hong Kong. However, due to the increasing demand for high-performance computing, peak power per rack has risen to more than 20KW at the higher end and service providers are unable to support this requirement in most cases. This increase in demand is being driven by two factors: Greater advancements in technology - with advancements in technology, the capabilities of each unit of infrastructure have increased immensely. For example, a blade server can displace around 6-8 racks of traditional servers. Consolidation - while the overall power requirement has reduced, consolidation has resulted in each rack requiring greater power than before. To respond to this requirement, datacenter service providers are either upgrading their facilities or looking at effectively managing loads over a greater floor area by creating clusters of high density and low-density clients to meet current restrictions.

5 Local players expanding beyond Hong Kong to Mainland China and the Rest of Asia A Majority of the MNCs headquartered in Hong Kong foresee growing demand in most parts of the Asia-Pacific region. Hence, they are actively expanding their footprint and shifting their business focus beyond the country. As a consequence, besides strengthening the local business, datacenter and cloud computing service providers are also looking to set up overseas facilities, to tap regional businesses - not only to develop new customers, but also to facilitate their current customers' expansion pace. Singapore, Malaysia, and tier-1 cities in China, such as, Beijing, Shanghai, and Guangzhou, are the most popular choices. Prime examples of this trend are CITIC Telecom CPC, Pacnet, and PCCW, which are expanding their footprint beyond the local market to other countries in Asia-Pacific. All three have set up operations in Mainland China, as well as other parts of the region. What is in store for 2013? Frost & Sullivan predicts the following three trends may take place in the Hong Kong datacenter market: Hong Kong is expected to remain a key datacenter market in Asia-Pacific. However, service providers may choose to locate a part of their facilities outside the country for two reasons. Firstly, to reduce their capital and operating expenditure and secondly, to tap into the increasing demand for business continuity planning and disaster recovery service. Service providers in other parts of the region and across the globe are also expected to follow this trend. As a result, competition in the region is projected to increase significantly. Service providers are likely to build smart clouds, with a high level of automation and managed functionalities. Cloud computing services that are self-aware, self-learning, and self-healing are set to become a common goal in the near future. Service providers are expected to focus on intelligent systems and integration of technology, energy, and facility management, to improve efficiency and synergy. This will enable the transition to IT-as-a-Service model where self-service is a major criterion. The opportunity for supporting services of cloud computing, such as migration, integration, consulting, and implementation, is expected to be sizeable. As an increasing number of businesses are likely to choose various cloud-based delivery options for their solutions, a new segment in the market - Cloud Implementation Services - will be fostered significantly. The segment is already witnessing the foray of a multitude of players including system integrators, telcos, consulting firms, etc., looking to tap into this opportunity.