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undreds of millions of young, tech-savvy internet users in the Indo-Pacific region

engage with cloud computing appli- cations on a daily basis, most likely from their phones. They stand at the heart of an internet economy that is growing at double-, if not triple-digit annual rates in the region. Now global tech companies are

vying for supremacy across a geogra- phy whose long-known economic

potential has beenaugmented by the pandemic, which has sparked a global digitisation drive. “It is an important growth story and [big

tech companies] do not want to miss out on the opportunity,” says Luc Grimond, partner and managing director at BostonConsulting Group. With research firm IDC expecting public

spending on public cloud services in the Asia- Pacific region to triple through 2023, US and Asian cloud providers are squaring up. The likes of Alibaba, Tencent and Baidu are going head-to-head with Google, Microsoft and Amazon Web Services in the battle for market leadership in the world’s fastest-growing cloud region.

Increasingdemand With a highly connected and internet-enabled community, the Indo-Pacific region has digi- tally transformed over the last decade. The south-east Asian internet economy is growing particularly fast, having more than tripled since 2016 to reach $100bn for the first time in 2019, according to research from Google, Bain &Company, and Temasek. “The two pacesetters in the region are

IndonesiaandVietnam,which leadthepackwith growth rates over 40% a year,” says the report. It also highlights that the internet economy in Malaysia,Thailand,SingaporeandthePhilippines is growing by between20%and30%annually. With cloud computing infrastructure form-

ing the backbone of today’s internet economy, this increasing demand should translate into booming spending on cloud computing ser- vices, which are expected to increase almost three times to $76.1bn in 2023, from $26bn in 2019, IDC forecasts. “The public cloud is a launchpad for virtu-

ally all IT innovations in enterprises,” says William Lee, research director for cloud ser- vices at global market intelligence firm International Data Corporation (IDC). “If you look at the Covid-19 pandemic, cloud technol- ogy and services are at the centre of govern- ment and industry efforts to manage the crisis. We believe that the pandemic has further cata- lysed the cloud’s position at the centre of enter- prise and public sector digitisation.”


Laying groundwork As soon as the Covid-19 emergency started regressing, big tech cloud providers rushed to announce multibillion-dollar investment cam- paigns in Asia to deepen the footprint of their cloudinfrastructure in the regionandmaximise connectivity between themselves and their cus- tomers, enabling a stronger connection and improved latency. Chinese company Alibaba announced a

$28bninvestmentintoits cloud division in April, which will be used mainly to expand its operat- ing systemand data centre servers.National peer Tencent raised the stakes further right after, announcing a major $70bn investment strategy to buildhyperscale data centres,supercomputers and 5G networks, as part of plans to advance cloud computing, artificial intelligence (AI), blockchain, Internet ofThings(IoT)andquantum computing over the next five years. Additionally,Baiduannounced plans in June

2020 to deploy 5m AI cloud servers by 2030, the company told fDi. US big tech companies have also been busy.

In July 2020, Google CEO Sundar Pichai announced a $10bn investment in Indian busi- nesses and infrastructure projects over the next five to seven years, enabling access to informa- tion in different languages and helping the digital transformation of businesses. Google meanwhile launched its Jakarta

Google Cloud Platformin June 2020 to provide a better connection for its Indonesia customers who were previously using services fromneigh- bouring cloud regions such as Singapore and Sydney. Amazon Web services (AWS) – the global market leader in the cloud – will also build its first data centre in Indonesia by 2022. The AWS Jakarta region will enable technolo- gies such as analytics, AI, IoT,machine learning andmobile services. “Information and communication technol-

ogies and cloud investments are pouring into Asia due to their young populations and contin- ued growth. You have a tech-savvy consumer base that embraces innovation faster than the older populations of Europe and the US,” says Mr Grimond of Boston Consulting Group. “For the big cloud providers, it’s a no-brainer.”

Rise of thehyperscalers Amid rising concerns about data leakage or hacking, countries such as Vietnam and Indonesia have regulations that restrict access to data to local data centres. This means that cloud providers can only host data if they have a local presence. “If you want to capture Indonesia, where the regulation is as strict as anywhere, there is no other way to do business but to build in Indonesia,” says Boston Consulting Group’s Mr Grimond. August/September 2020

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