Businesses are pursuing digital transformation at breakneck speed across Southeast Asia (SEA), and the cloud remains central to their mission. In fact, the SEA market is arguably emerging to be one of the biggest cloud spenders globally – regional spending hit US$2.18 billion in 2022, up by 25% from the previous year.
Critically, the spotlight is shifting away from more mature markets, like Australia and Singapore, given the massive potential that lies in the region’s more nascent digital adopters. Still in the early stages of digital transformation, as many as 92% of businesses in Thailand, for instance, plan to increase cloud spend in the coming years. Similarly, more than 80% of organisations in Malaysia and Indonesia plan to do the same.
It is unsurprising then that these countries have seen hyperscalers zone in to capture their slice of the cloud pie. Coupled with the strict regulations on new data centres set by Singapore with its 2019 moratorium, interest in emerging markets has only intensified. Malaysia, in particular, has already witnessed 113 MW take-up in 2022, with recent data centre investments sure to drive capacity availability further.
However, these hyperscaler investments could also potentially serve as a double-edged sword to SEA’s emerging digital markets. Local data centre availability promises low latency, but SEA will need more than just new data centres for its digitally advancing markets to unlock its next frontiers of innovation and growth. Rather than stimulate digital maturation, overreliance on hyperscalers could limit it.
Southeast Asia’s growing digital appetite
Today, rapid digital advancement is driving abundant opportunities for the region. 20 million new users from the region went online in 2022, raising the total number of digitally connected individuals to 460 million. Growing internet penetration rates are, in turn, expected to multiply Southeast Asia’s total data consumption by more than 3.5 times by 2025. Moreover, employees are demonstrating a continued inclination toward remote working conditions even in post-pandemic times. Together, from both a consumer and corporate standpoint, this mandates access to data as and when it’s needed, resulting in an even heavier reliance on the cloud for data access, as well as egress and ingress to facilitate efficient workflows.
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Furthermore, e-commerce, an industry with increasingly heavy adoption, has also emerged as a significant driver for cloud adoption. With more retailers pushing the envelope in their omnichannel strategies, they are increasingly leveraging the cloud to drive business growth – reporting some of the highest revenue gains from the cloud. In particular, the rapid data collection and processing capabilities built into cloud ecosystems enable greater personalisation that can be utilised to enhance customer and employee experiences.
On top of that, the region is also an up-and-coming digital banking hub, with a strong appetite for fintech services motivating cloud migration needs for incumbents while simultaneously expanding the cloud needs of digital banks.
These developments are creating a groundswell of data that will be critical for SEA to further the growth of its digital economy, thereby increasing reliance on the cloud. The problem? Businesses that are too quick to turn to hyperscalers for all their digital needs – especially storage in the cloud – may find themselves stilted in the long run.
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The double-edged hyperscaler sword
Undeniably, the dominance of hyperscalers in the cloud market can be attributed to the sheer amount of cloud services hyperscalers have to offer. It is then convenient for businesses to resort to hyperscalers for a bundle of cloud services as an all-in-one option for corporate data management and storage. This translates to covering the entire cloud needs of businesses so that IT professionals using these services do not necessarily need to think much about how and where to store company data.
Unfortunately, this convenience comes with a trade-off: convenience for quality and price. Even with a hyperscaler-sized budget, product quality often suffers due to resources being stretched over so many products and the cost competitiveness of each individual service sacrificed as more profitable services are used to cross-subsidise less profitable or successful services. The cost businesses then pay is potentially waiting hours – up to days – for data retrieval, ultimately reneging on the promise of low latency with local data centres.
Additionally, although the hyperscalers tend to be convenient on the surface, this convenience can lead to higher spending in the long run as businesses get locked into pricing models that get too expensive as their needs expand. Last year, the Asia Pacific region was most prone to overspending on cloud services – with 51% of them exceeding their cloud storage budget. The reality is that in choosing one exclusive provider for all the businesses’ cloud needs, organisations run the risk of losing out when it comes to cost predictability. After all, to maximise revenue, hyperscalers often operate in a walled garden. Therefore, interoperability between cloud services, while possible, ends up being cost-prohibitive, leaving customers locked in and with limited access to diversity to enable a multi-cloud, resilient environment.
Especially with the astronomical volumes of data that SEA can be expected to generate in pursuit of its US$1 trillion digital economy, this calls for the need for speciality cloud storage providers that are able to offer predictable, secure, scalable storage, alongside seamless and quick access to data.
Setting up for success
Working with multiple partners across the cloud will be an important way for emerging markets to de-risk data and can ensure the adoption of ‘best-of-breed' storage solutions that fit their own unique needs. As an example, reliance on a cloud vendor that specialises in storage could have businesses experience immense benefits from cost-free access to data within seconds. That, against the backdrop of generative AI gaining steam in the region, could unlock valuable real-time analysis and insight creation opportunities for businesses.
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Furthermore, in a data-driven digital era, any breach or unauthorised access to data could have serious consequences, such as financial losses and legal liabilities, on businesses. Specifically, given that APAC remains one of the most targeted regions (31%) by cyber attackers, security features, such as immutable backup availability with object-lock features for instance, would not just be an added bonus but a necessity.
There is no question that SEA’s maturing markets will cause ripples in the region’s cloud market. However, it will be crucial for businesses to exercise discretion as they jump on the cloud bandwagon. There is an opportunity for businesses to begin their cloud journeys on the right foot, but that must start with keeping overreliance in check and having a clear view of the hurdles that could lie ahead.
Sunny Chua is the Singapore General Manager of Wasabi Technologies
