It is almost cliche by now to say that Southeast Asia is one of the leading cloud markets in the world. And with 202.6 million internet users — a 16% increase from 2020 to 2021 — and an internet penetration rate of 73.7% as of January, Indonesia sits right at the heart of this story of digital transformation. Going digital, says consulting firm McKinsey, could see Indonesia unlocking US$150 billion ($200.4 billion) in annual economic impact by 2025.
It is therefore no surprise that global tech giants are swarming around the island nation, fighting for a place in its lucrative tech market. In a show of intent, Chinese cloud computing firm Tencent Cloud announced on April 12 that it will open its first internet data centre in Jakarta. This is the latest addition to its growing infrastructure network. It currently spans 27 regions and 66 availability zones.
Commenting on the Southeast Asian cloud landscape, Poshu Yeung, senior vice-president, Tencent Cloud, says, “If you look at the overall cloud business, it’s basically everything.” In the wake of Covid-19, real-world functions are increasingly being brought onto cloud networks, resulting in a significant rise in demand for cloud services in Asia. Tencent is looking in particular at government-related projects, financial services, internet and e-commerce, entertainment, gaming and education.
Indonesia is one of the fastest-growing cloud markets in the Asia Pacific region. According to the Boston Consulting Group (BCG), the market is seen to have a CAGR of 25% and its market size is expected to increase to US$0.8 billion by 2023. So lucrative is Indonesia that Tencent intends to launch another data centre in Indonesia in 3Q2021 — the first time that it is announcing two data centres in the same country within a single year.
The initial data centre is located within Jakarta’s central business district and is now in full operation. Its building is one of the few internet data centre facilities in Indonesia with multiple certifications, including those for infrastructure and security. It can be powered for 72 hours at full load.
The new data centre completes “the backbone access and networking of all major Indonesian and global internet services providers, and combines Tencent Cloud’s own high-quality border gateway protocol to cover the entire country”. The facility could reduce access delays to data and applications by increasing proximity with customers and users in Indonesia. Clients come from industries as diverse as financial services, gaming and education.
Tencent has already won several flagship clients, including entertainment platform WeTV and digital bank Bank Neo Commerce. It partnered Tencent-owned music streaming platform Joox, one of the leading music apps in Indonesia, to develop entertainment offerings like concert live streaming, music streaming and karaoke singing. Alongside communication tech firm Aestron, it is now launching new audio and video solutions to serve the global market.
Besides public cloud, Tencent Cloud is also involved in other types of deployment such as private cloud and hybrid cloud. Drawing on synergies with parent firm Tencent, it also supports self-developed software-as-a-service (SaaS) solutions that it is bringing from China to overseas markets. The company is involved in gaming as well, launching games in Indonesia such as PUBG Mobile Karakin, which have seen significant traction in the Indonesian market.
Global ambitions
For the decade-old cloud arm of Chinese tech giant Tencent, its Indonesia foray is just one part of the global strategy it kickstarted three years ago in 2018. It had 20 availability zones across 13 regions around the world outside of China prior to June 3. Besides its Indonesia data centre launch, Tencent has announced the launch of its second data centre in South Korea and announced in March that its very first data centre in Bahrain will go live by end 2021.
Tencent has also set up new international data centres in Bangkok, Frankfurt, Hong Kong and Tokyo on June 3. Despite its relatively short history, Tencent Cloud has recorded the fastest growth among the top 5 public cloud players globally, leading big names such as IBM as of July 31, 2020.
Indonesia is not Tencent’s first market in Southeast Asia — it has data centres in Bangkok, Thailand and Singapore, where it has established regional hub. “We will be launching ... a cloud service data centre in Malaysia later this year,” shares Yeung in a phone interview with The Edge Singapore. With Southeast Asian markets increasingly issuing virtual banking licences, he anticipates the growth of cloud usage in the region becoming even faster in the coming years.
Covid-19 has further increased awareness about the importance of cloud computing among firms and governments. What is crucial now, says Yeung, is helping organisations find the right answer to newly identified challenges. Tencent intends to reach out to these firms, raising market awareness that it may have niche solutions or even the building blocks of a solution to these problems that it can provide them.
Still, even with all these favourable tailwinds, bringing an emerging technology to market is no easy task. One concern, for instance, is finding land to build a data centre, with the Singapore government already imposing an implicit moratorium on new data centres due to land scarcity. Moreover, as the process of building a data centre is often far from straightforward, finding the right partners and resources for the construction can also be a challenge. It takes six to nine months to launch one data centre.
Beating the competition
Tencent Cloud is likely to meet with stiff competition in its Indonesian foray. The firm is a little late to the game. Rivals Google Cloud Platform and Alibaba Cloud have already set up data centres in Indonesia in the past three years. And global cloud leaders Amazon Web Services and Microsoft Azure are not far behind, with the former set to launch its cloud centre in early 2022 and the latter promising US$1 billion in investment.
But Yeung is not too worried about Tencent’s ability to thrive as the competition heats up. Besides cost competitiveness, he says, the fact that Tencent uses many of the same SaaS services it offers to clients is a source of assurance to their high performance. It also allows the firm to draw on their own first-hand experience with these solutions to advise clients on how to get the most out of these solutions, aligning the interests of both buyer and seller.
Yeung tells The Edge Singapore that Tencent Cloud’s business in Asia experienced triple-digit growth in 2020. He expects to see this strong performance continuing into 2021, with the aim being to increase its number of data centres by 30%. Core operating profit for holding company Tencent Holdings came in at RMB149.4 billion ($30.5 billion) in FY2020 ending December 2020, marking a 30% increase y-o-y.
During its initial expansion, Tencent Cloud famously offered 10 terabytes of free storage to new B2C clients. But Yeung has ruled out using similar tactics in Tencent’s new markets. With its focus mainly being on B2B clients this time, Tencent Cloud intends to use startup and entrepreneurial programmes to encourage firms to make use of its cloud solutions. This includes a cloud startup programme with the National University of Singapore.
With the growing interest in “smart cities” in Southeast Asia, Yeung says that Tencent is committed to providing niche vertical solutions and products related to smart cities to the region. These include electronic know your customer (e-KYC), live broadcasting and facial recognition technology, all of which he says serve as the backbone of such smart city initiatives. Tencent has also teamed up with the Singapore Tourism Board to disseminate tourism-related media via WeChat to Chinese travellers.
“Our mission is to bring the best technology products to our clients,” Yeung explains, highlighting co-founder and CEO Pony Ma’s mission statement “tech for good”. As latecomers to the massive cloud business outside of China, he believes the firm has done well in making up for lost time in less than three years and that the key to success will be to continue this strategy one step at a time. Even amid relentless competition in the technology world, sometimes slow and steady wins the race.
Photo: Bloomberg
