What is a data centre?
Data centres are commonly the facilities where:
- a Japanese customer can co-locate their in-house IT systems, servers and ancillary network functions, with a third party acting as a data storage host (such examples may include large Japanese corporations and government departments); or
- alternatively providers will use their own infrastructure to provide a full third party outsourced cloud service to customers, through the supply of platform, internet, support, storage, applications and other such services.
The second option is particularly beneficial to Japanese customers who can access fast, reliable and effective systems (and helpdesk facilities) at a much lower cost than if they were providing such IT services in-house.
The increasing growth of data centres in Asia
Internet use is growing more rapidly in Asia than any other continent in the world, with huge amounts of Big Data being produced every day, across all industry sectors. The International Data Corporation (IDC) has forecast that the data centre market in Japan will experience significant growth in 2013, with the market expected to expand at a compound annual growth rate of 6.5% between 2010 and 2015, reaching near 70,000 million yen by the end of 2015.
To address these increasing data volumes, over the last year we have seen that many of the key players in the Japanese data centre market (notably Japanese telecom operators, vendors, service providers, and systems integrators) have been aggressively investing in increasing capacity at both their existing data centres and new centres across Asia (often through joint venture arrangements).
The rapid growth in data centre investment is also a response to other current factors including:
- a rapid "take-up" in demand from Japanese customers to co-locate IT infrastructure to third-party providers to store and access facilities for their data and IT systems in the cloud;
- greater interest from Japanese providers in broadening and enhancing their range of cloud "as-a-service" products, in the market; and
- an increase in disaster recovery thinking and initiatives in the wake of the 2011 earthquake, with reliance on the cloud being seen by businesses as a way to mitigate such risk.
Legal and commercial issues with the growth of data centres
For Japanese providers looking to expand their data centre capability, and for Japanese customers using the services, the following three considerations are always important:
- Volume – huge amounts of data can be stored in a single data set, and how this is collected and stored depends on the required capacity for each customer (one data centre has the capacity to hold large datasets for many different companies);
- Velocity – various tools are in place to collect and analyse data flowing in and out of data centres at high speed (and each customer will require various levels of performance and reliability so service models may vary accordingly); and
- Variety – data can range from text, log files, audio, video and sensory data and the storage requirements for each of these will differ, along with the analytical data services required to process the data.
Specific customer concerns:
The concerns for Japanese customers relying on a third party to store their data are those concerns that will apply across the board for all types of cloud services, including:
- Data Loss: there may be a risk of a provider losing or corrupting data stored at their data centre, and protection around this needs to be built into the arrangements;
- Data Mixing: customers may wish to ensure a data centre has the appropriate analytical capability to process data effectively in accordance with the customer's requirements;
- Confidentiality: privacy is an increasingly important issue with huge amounts of Big Data, (such as marketing information, sensory data, health records and law enforcement files) being extremely sensitive;
- Ownership: customers will need to ensure they always have a clear right of access and ownership in any data they send to a data centre; and
- Attacks/natural disasters: there are risks of data centres being subject to both cyber and physical attacks, or natural disasters or fire which can put customer data at risk.
To ease concerns, customers should seek protections in their agreements with third party providers. However the ease at which Japanese customers can negotiate, for example on liability and indemnity protection, depends on the parties' respective size, relationship and negotiating power.
Specific provider concerns:
Japanese data centre service providers have their own concerns, for example:
- Winning customers: providers must balance the need to address customer concerns such as those listed above, without taking on unacceptable risk or breaching legal obligations (such as on data protection);
- Snowball effect: a multi-tenancy solution means one outage could affect multiple customers, meaning a provider could become liable to a number of parties at the same time;
- Liability: often providers will try to exclude their liability for lost data, for example through malicious attack, power outage or natural disaster;
- Location: preferred areas for data centres include areas with good infrastructure which are at lower risk of natural disasters (including flooding and earthquakes), but also have political stability and less risk of terrorism and crime;
- Reliable and cheap power: this is critically important as massive amounts of electricity are required to provide both power to run systems and cooling systems, with back-up functions necessary to cover power failure, overheating and cyber-attack;
- Environmental issues: research has suggested that 2% of the world's CO2 emissions are now given off from data centres alone, and it is possible new legislation may be introduced in the future by governments to address such concerns; and
- Adequate planning: providers may also go through their own evaluation process to assess how much mission critical information will be passed through the facility and the costs of downtime. Benchmarking can be used to ensure efficiency is maximised while power costs are kept down.
Hot-beds of data centre investment – Myanmar and Vietnam
With Asia becoming the "hot" internet expansion market, global data centre service providers (such as Amazon, Digital Realty, Google, IBM, Microsoft, Oracle and Rackspace), are competing alongside key Japanese players (including NTT Communications, Fujitsu and Hitachi) to fulfil the surging demand in Asia for cloud services. Notably, there are now an estimated several hundred colocation data centres across Asia.
Two specific jurisdictions where Japanese providers are expressing interest in investing in new data centres are Myanmar and Vietnam.
- In Myanmar for example, Daiwa Institute of Research Ltd, Fujitsu Limited, and KDDI Corporation recently collaborated at the back-end of 2012 to build Myanmar's first cloud computing environment for the Central Bank of Myanmar. In addition, other key Japanese IT companies are reported to be opening data centres in Myanmar in the coming months.
- In Vietnam there has been a huge increase in the use of the internet and the government is embedding this into its respective digital strategy in order to boost the economy. Japanese players have also been involved in investing in colocation data centres across Vietnam and government measures are encouraging internet and broadband roll-out.
- However in both countries, the main challenge remains access to reliable power (although this has been improving with infrastructure investment).
Elsewhere in Asia we have seen other countries also experiencing rapid growth, especially Singapore, Hong Kong and Taiwan (in these countries for example, press reports have stated that Google is currently constructing data centres at a huge cost of between $100-300 million per data centre) in order to provide its users in Asia with faster capability. India also remains a popular destination for data centre development, with access to cheaper power, land and labour.
The surge in demand for cloud services (such as in software, infrastructure and applications, along with data storage capability) has left Japanese providers scrambling to increase their service-offering capability and as a result, various jurisdictions across Asia are feeling the benefits of the investment in new data storage centres.
In turn, Japanese customers are benefiting from increased choice of providers, and a faster, more efficient and cost-effective service when they choose to pass responsibility for their IT services and data storage to third parties.