ASIA
26 March 2014
Hong Kong Datacenter Market
This market insight by Frost & Sullivan discusses the current state of Hong Kong datacenter market by outlining the key market drivers, challenges and trends that are having an impact on this market.
This market insight by Frost & Sullivan discusses the current state of Hong Kong datacenter market by outlining the key market drivers, challenges and trends that are having a distinct impact on 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, and its strategic location to tap the burgeoning demand from Mainland China. While financial services vertical has been a driving significant demand for the services, government has emerged as an important demand generator over the last five years.
With cloud computing becoming mainstream in the market, it has had a disruptive impact on business models and driven a new phase of IT evolution among enterprises and service providers in Hong Kong. Through this market insight, we will discuss a number of the important aspects of the market.
Meanwhile, the business-friendly and free-trading environment has helped Hong Kong to attract a number of MNCs to set up their regional headquarters in the country, bringing in numerous investments and job opportunities, as well as creating demand for datacenter services.
Among all the advantages, Hong Kong’s mature IT infrastructure and reliable network serve as a solid foundation for its highly developed datacenter and cloud industry. Most global telecom service providers have presence in the Hong Kong market. Hong Kong is also an important place for submarine cable landing, with nice submarine cable systems currently connecting to it, such as NTT Communication’s Asia Submarine-cable Express (ASE) and Pacnet’s EAC-C2C, and 17 overland cable systems.
These owners are leveraging their current facilities to build high-tier datacenter capabilities within their cable landing facilities, which can ensure incomparable security, low latency and reliable connectivity services. Given that many players own multiple datacenters in the region, they are leveraging this network to meet disaster recovery/business continuity requirements, as well as set up Network Operation Center (NOC) to provide constant monitoring and visibility for their infrastructures. These NOCs operate out of cost effective locations such as the Philippines, Malaysia or India and are able to provide a cost advantage over other service providers.
For example, the government established Data Center Facilitation Unit to ease investors’ datacenter set up, and has allocated about 19 hectares of land in various industrial estates dedicated for datacenter use since 2011.
To solve the land scarceness issue, Hong Kong government early launched incentive measures in 2009 to encourage the redevelopment and wholesale conversion of the existing industrial building into datacenter, as well as open up more Greenfield land for sales.
The first in-house private cloud platform was launched in December 2011 by OGCIO to host applications that carry sensitive data, which was overhauled from the OGCIO’s existing datacenter in Wanchai. The Government will start building an outsourced private cloud in January 2013, called GovCloud, which will host is computing resources in a third-party contractor’s datacenter. When GovCloud is up and running, the OGCIO will migrate some of its services to GovCloiud, such as e-procurement, electronic information management, paperless meeing and electronic HR management.
To accommodate new datacenters, Hong Kong government has proposed four ways, which are to convert from existing industrial buildings, to buy Greenfield sites, to build in the Industrial Estate owned and managed by Hong Kong Science & Technology Parks Corporation (HKSTPC), and to purchase or rent sites/building space in the open market. For example, there was a data center operator that converted a data center from a rice warehouse in Fo Tan to give them sufficient floor height, and in the case of Fujitsu, the company had converted three floors into two in an industrial building in Tsuen Wan in late 2012 to gain additional headroom and floor loading capacity.
Despite the concerns, many large MNCs such as Google, continue to observe significant upside in the Hong Kong datacenter market and are making investments to build new datacenters to serve local and regional demand.
Cloud computing remains as the fastest growing segment of the datacenter market over the last three years and adds values to cloud service providers’ traditional portfolio. This enhancement in portfolio has created new revenue streams and lead to strong growth in revenues.
Frost & Sullivan estimates that for each dollar spent on cloud services drives an additional spending of 20-25 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 dedicated to offer cloud services and are built with multi-tenancy and pay-per-use models as a key theme.
Enterprises in Hong Kong are choosing to go for a multi-delivery model environment to meet the differing 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 different solutions for different workloads/applications. This is creating strong demand for cloud federation with standardization and open interface as key themes. This reveals new business opportunities for the professional services and right expertise to advise and guide enterprises adopting the new normal in the right way.
Going forward, this multi-delivery model environment will give rise of IT-as-a-Service where IT budgets would collapse at an organization level and would get embedded into business units budgets; IT departments would shrink; and CIO role would evolve into an internal service provider and would revolve around business innovation than technology innovation.
This increase in demand is being driven by two factors:
· Greater advancements in technology - With the advancements in technology, the capabilities of each unit of infrastructure have increased immensely, e.g, a blade server can displace around 6-8 racks of traditional servers.
· Consolidation - While the overall power requirement is reduced, the consolidation results 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 with creating clusters of high density and low-density clients to meet current restrictions.
While the service providers are looking to tap regional businesses, they are also looking to leverage this expanded presence to extend current relationships by enabling multi-geographic customers to stick to one service provider. Singapore, Malaysia, and tier 1 cities in China, such as, Beijing, Shanghai and Guangzhou are the most popular choices. Prime examples for this are CITIC Telecom CPC, Pacnet and PCCW who are expanding their footprint beyond the local market to other countries in Asia Pacific. All three have expanded their presence into the mainland China market as well as other parts of the region.
· Hong Kong is expected to remain a key datacenter market in Asia-Pacific. However, service providers will choose to locate a part of their facilities outside the country for two reasons. Firstly, to reduce their capital and operating expenditure. Secondly, to tap on increasing demand for business continuity planning and disaster recovery services. This is also a theme for future growth for service providers in other parts of the region, as well as global service providers, and is expected to significantly increase competition among the region. Expect new battle lines to be drawn over the next couple of years.
· Service providers will build smart clouds characterized by highly automated and managed functionalities – self-aware, self-learning and self-healing - will become a common goal in the near future. The vision is to marry technology, energy and facility management and to create synergies and efficiencies between components through integration and intelligent systems. This will enable the transition to ITaaS model where self-service is a major criterion.
· There is expected to be sizeable opportunities for support services, such as migration, integration, consulting and implementation, as an increasing number of businesses will choose to migrate solutions to various cloud-based delivery options. This will create a new segment in the market – Cloud Implementation Services. The segment is already witnessing the foray of a multitude of players including system integrators, telcos, consulting firms, etc., looking to tap onto this opportunity.
ABOUT FROST & SULLIVAN
Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants. For more than 50 years, it has been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community.
CONTACT?
For media queries or more information please contact This email address is being protected from spambots. You need JavaScript enabled to view it.
Hong Kong, along with Singapore, has been a traditional datacenter hub in Asia given its unique political and financial positioning in the region, and its strategic location to tap the burgeoning demand from Mainland China. While financial services vertical has been a driving significant demand for the services, government has emerged as an important demand generator over the last five years.
With cloud computing becoming mainstream in the market, it has had a disruptive impact on business models and driven a new phase of IT evolution among enterprises and service providers in Hong Kong. Through this market insight, we will discuss a number of the important aspects of the market.
Geographical and infrastructural advantage
Geographically, Hong Kong is located near mainland China and in the central point of the East Asia. Its strong political connection to mainland China allows it to act as a gateway for most global players looking to tap the opportunity in the China market.Meanwhile, the business-friendly and free-trading environment has helped Hong Kong to attract a number of MNCs to set up their regional headquarters in the country, bringing in numerous investments and job opportunities, as well as creating demand for datacenter services.
Among all the advantages, Hong Kong’s mature IT infrastructure and reliable network serve as a solid foundation for its highly developed datacenter and cloud industry. Most global telecom service providers have presence in the Hong Kong market. Hong Kong is also an important place for submarine cable landing, with nice submarine cable systems currently connecting to it, such as NTT Communication’s Asia Submarine-cable Express (ASE) and Pacnet’s EAC-C2C, and 17 overland cable systems.
These owners are leveraging their current facilities to build high-tier datacenter capabilities within their cable landing facilities, which can ensure incomparable security, low latency and reliable connectivity services. Given that many players own multiple datacenters in the region, they are leveraging this network to meet disaster recovery/business continuity requirements, as well as set up Network Operation Center (NOC) to provide constant monitoring and visibility for their infrastructures. These NOCs operate out of cost effective locations such as the Philippines, Malaysia or India and are able to provide a cost advantage over other service providers.
Increasing government emphasis, support and investment
To overcome the physical restraints, Hong Kong government has been playing a pivotal role to stimulate the local datacenter market by launching relevant strategies and initiatives, as well as injecting government investment. Office of the Government Chief Information Officer (OGCIO) has been demonstrating keen interest in the datacenter industry, both for government adoption and supporting the development of the industry in the country.Government strategy and initiatives
In line with the strong commitment of the Hong Kong government to foster the country as a prime location for large tier III+ datacenters in APAC, Hong Kong government came up with an “CENTRE strategy” for datacenter development, 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 datacenter industry development from every angle.For example, the government established Data Center Facilitation Unit to ease investors’ datacenter set up, and has allocated about 19 hectares of land in various industrial estates dedicated for datacenter use since 2011.
To solve the land scarceness issue, Hong Kong government early launched incentive measures in 2009 to encourage the redevelopment and wholesale conversion of the existing industrial building into datacenter, as well as open up more Greenfield land for sales.
Government investment
As a major IT service consumer itself, the Hong Kong government expects to spend HK$626.5 million (US$80.7 million) on IT in 2012-2013. Eighty percent of this estimated amount of money would be spent on IT used by the government, and the rest will be used to implement IT infrastructure and standards, initiatives aimed at facilitating the wider use of IT in the business sector and the community, as well as building a digital inclusive society. The government currently operates three datacenters in Wanchai, Tsuen Wan and Sai Kung. Three cloud environments, respectively an in-house private cloud, an outsourced private cloud and the use of public cloud services, will be created.The first in-house private cloud platform was launched in December 2011 by OGCIO to host applications that carry sensitive data, which was overhauled from the OGCIO’s existing datacenter in Wanchai. The Government will start building an outsourced private cloud in January 2013, called GovCloud, which will host is computing resources in a third-party contractor’s datacenter. When GovCloud is up and running, the OGCIO will migrate some of its services to GovCloiud, such as e-procurement, electronic information management, paperless meeing and electronic HR management.
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 cost pressures has led to escalation in both capital and operating expenses in the Hong Kong datacenter market and leading to new concerns for service providers. Moreover, the low cost countries in the region, such as China, Malaysia, the Philippines and Vietnam, are putting in efforts to develop themselves as new datacenter hubs and have already emerged as strong contenders to Hong Kong.To accommodate new datacenters, Hong Kong government has proposed four ways, which are to convert from existing industrial buildings, to buy Greenfield sites, to build in the Industrial Estate owned and managed by Hong Kong Science & Technology Parks Corporation (HKSTPC), and to purchase or rent sites/building space in the open market. For example, there was a data center operator that converted a data center from a rice warehouse in Fo Tan to give them sufficient floor height, and in the case of Fujitsu, the company had converted three floors into two in an industrial building in Tsuen Wan in late 2012 to gain additional headroom and floor loading capacity.
Despite the concerns, many large MNCs such as Google, continue to observe significant upside in the Hong Kong datacenter market and are making investments to build new datacenters to serve local and regional demand.
Cloud computing witnessing greater momentum
As one of the most developed datacenter and cloud market in Asia, the enterprises in Hong Kong have relatively high awareness towards the services and are more open to adopt the newest industry trends such virtualization and cloud computing. Virtualization has emerged as the key for datacenter consolidation to compress more virtual machines into the physical server and significantly increase the server utilization efficiency.Cloud computing remains as the fastest growing segment of the datacenter market over the last three years and adds values to cloud service providers’ traditional portfolio. This enhancement in portfolio has created new revenue streams and lead to strong growth in revenues.
Frost & Sullivan estimates that for each dollar spent on cloud services drives an additional spending of 20-25 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 dedicated to offer cloud services and are built with multi-tenancy and pay-per-use models as a key theme.
Enterprises in Hong Kong are choosing to go for a multi-delivery model environment to meet the differing 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 different solutions for different workloads/applications. This is creating strong demand for cloud federation with standardization and open interface as key themes. This reveals new business opportunities for the professional services and right expertise to advise and guide enterprises adopting the new normal in the right way.
Going forward, this multi-delivery model environment will give rise of IT-as-a-Service where IT budgets would collapse at an organization level and would get embedded into business units budgets; IT departments would shrink; and CIO role would evolve into an internal service provider and would revolve around business innovation than technology innovation.
Increasing power consumption raising datacenter power densities
An increasing number of enterprises are either in the process of setting up virtualization platforms or owning high performance compute machines. This is leading to increasing power requirement at a rack level. Currently, in the developed datacenter markets such as Hong Kong, the ultimate KW power per rack is around 6-8KW in a typical Tier-III datacenter and can reach an average of 10-12KW per rack for the more advanced datacenters in the region. Due to the increasing demand for high-performance computing, peak power per rack has easily risen to more than 20KW at the higher end. However, service providers are unable to support this in most cases.This increase in demand is being driven by two factors:
· Greater advancements in technology - With the advancements in technology, the capabilities of each unit of infrastructure have increased immensely, e.g, a blade server can displace around 6-8 racks of traditional servers.
· Consolidation - While the overall power requirement is reduced, the consolidation results 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 with creating clusters of high density and low-density clients to meet current restrictions.
Local players expand to Greater China and Asia region
Since most of the MNCs headquartered in Hong Kong foresee growing demand in most parts of the Asia-Pacific region, they are actively expanding their footprint and shifting business focus beyond Hong Kong. Thus, besides continuing the effort to develop local business, datacenter and cloud service providers are also looking to set up overseas facilities.While the service providers are looking to tap regional businesses, they are also looking to leverage this expanded presence to extend current relationships by enabling multi-geographic customers to stick to one service provider. Singapore, Malaysia, and tier 1 cities in China, such as, Beijing, Shanghai and Guangzhou are the most popular choices. Prime examples for this are CITIC Telecom CPC, Pacnet and PCCW who are expanding their footprint beyond the local market to other countries in Asia Pacific. All three have expanded their presence into the mainland China market as well as other parts of the region.
Looking ahead?
Looking ahead, Frost & Sullivan predicts the following four 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 will choose to locate a part of their facilities outside the country for two reasons. Firstly, to reduce their capital and operating expenditure. Secondly, to tap on increasing demand for business continuity planning and disaster recovery services. This is also a theme for future growth for service providers in other parts of the region, as well as global service providers, and is expected to significantly increase competition among the region. Expect new battle lines to be drawn over the next couple of years.
· Service providers will build smart clouds characterized by highly automated and managed functionalities – self-aware, self-learning and self-healing - will become a common goal in the near future. The vision is to marry technology, energy and facility management and to create synergies and efficiencies between components through integration and intelligent systems. This will enable the transition to ITaaS model where self-service is a major criterion.
· There is expected to be sizeable opportunities for support services, such as migration, integration, consulting and implementation, as an increasing number of businesses will choose to migrate solutions to various cloud-based delivery options. This will create a new segment in the market – Cloud Implementation Services. The segment is already witnessing the foray of a multitude of players including system integrators, telcos, consulting firms, etc., looking to tap onto this opportunity.
ABOUT FROST & SULLIVAN
Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants. For more than 50 years, it has been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community.
CONTACT?
For media queries or more information please contact This email address is being protected from spambots. You need JavaScript enabled to view it.