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A data revolution is underway in Asia. Here are 5 telling signs.

For Asia-Pacific businesses that want to stay competitive in this evolving landscape, digital transformation is no longer optional

2021.10.26

From a data center construction boom to data privacy laws being increasingly codified across the region, not to mention various industries adopting cloud computing, artificial intelligence (AI), internet of things (IoT), and 5G, signs are rife that Southeast Asia is on the verge of a data revolution.

What does this mean for businesses, and why won’t you want to be left behind?

Male IT Specialist Stands Beside the Row of Operational Server Racks

It’s simple: data is now such a valuable business asset, and the power to analyse it can boost your competitive advantage. And with IoT and 5G, the internet is now in everything, seamlessly weaving data and analytics into everyday life. 

For businesses in Southeast Asia that want to remain competitive in this evolving landscape, digital transformation is no longer optional.

Here are a few developments that are already reshaping the region’s dynamic business landscape.

Singapore still dominates, but new data centre hubs are rising

The region is seeing an uptick in data centre construction, driven mainly by increasing demand for digital infrastructure and the adoption of technologies like cloud computing, AI, and 5G

Singapore holds the distinction of being the fifth-best place in the world to build a data centre, according to Cushman and Wakefield’s 2021 Global Market Comparison. T-Systems has a long track record of operating data centres in Singapore, having opened its Tai Seng data centre over 10 years ago, and its International Business Park location in February 2016. Both facilities exceed Tier 3 standards; are certified for ISAE 3402, ISO 9001:2015, ISO 27001:2017, and ISO 20000-1:2018; and offer a combined 10,042 square footage of data centre space.

Resource concerns have pushed the Singapore government to put a temporary pause on the building of new data centres. This move has helped spur growth elsewhere in the region, with countries like Indonesia, Malaysia, and the Philippines emerging as promising new sites.

In Indonesia, cloud platforms such as ST Telemedia, Alibaba, Google, and Microsoft are expanding their footprint and building more data centres. The capital city of Jakarta is still the epicentre of construction activity, but cities like Bekasi have become viable alternatives because there’s more undeveloped land, less frequent flooding, and a power supply that’s more reliable and less congested than the national grid serving Jakarta. 

This demand for data centres in Indonesia is driven by the country’s fertile startup ecosystem, which is home to several unicorns like Gojek, Tokopedia, and Bukalapak, as well as an anticipated acceleration of more traditional enterprises’ digital transformation.

The Malaysian capital of Kuala Lumpur is another promising secondary market that’s gaining increasing attention and is expected to help put Asia Pacific on the map as a key region for data centres. 

Even the Philippines is seeing some construction activity, with Alibaba announcing plans to build its first data centre in the county to enable local e-commerce, education, media, and fintech companies to adopt cloud technologies more efficiently.
 

Manufacturing is getting smarter

A factory worker controlling a machine using a touch screen tablet computer

Manufacturing companies will increasingly deploy technologies such as AI, IoT, 5G, and the cloud—a trend that is also known as “smart manufacturing” or “Industry 4.0.” Between 2021 and 2026, Asia Pacific’s smart manufacturing market is expected to grow at a compound annual growth rate of 7.57%.

With this industry being such a large component of Asia’s economy, it has the potential to drive massive productivity gains. Globally, Industry 4.0 could deliver between US$1.2 trillion to US$3.7 trillion in productivity gains, according to research by McKinsey. Of this, Southeast Asia could capture gains worth between US$216 billion to US$627 billion. 

The pandemic expedited a big part of this move to smart manufacturing. Companies more clearly recognised the importance of agility and risk mitigation and how Industry 4.0 can help. As a result, manufacturers in the region are expected to increasingly adopt Industry 4.0 operating procedures.

With smart manufacturing, companies can increase their productivity, reduce human errors, shift from a reactionary stance to a more proactive one through analytics, and try out new business models, such as mass customisation or product-as-a-service.

Companies unable or unwilling to leverage these innovations will lose out on productivity gains and new opportunities.

E-commerce and Asia’s booming internet economy

Young businesswoman's e-commerce business at work

As in other parts of the world, Southeast Asia experienced an e-commerce boom in 2020, triggered by mobility restrictions implemented during the pandemic    . Indonesia led this surge, followed by the Philippines and Malaysia. Indonesia also posted the highest e-commerce adoption globally, with 87% of internet users buying something online, outperforming the UK, Thailand, and Malaysia. E-commerce adoption in Vietnam, Singapore, and the Philippines also outpaced China’s.

In the same year, about 40 million people in the region came online for the first time. This upped the total number of internet users to 400 million in 2020 from just 250 million in 2015.

The rise of e-commerce in Southeast Asia will continue into the next couple of years, with more people choosing online stores as their primary purchase channel, according to Facebook and Bain & Company’s annual SYNC Southeast Asia report.

As more data centres are built across the region, e-commerce players will be able to more efficiently adopt cloud solutions.

To keep pace with the Southeast Asian digital boom and seize the opportunities it will continue to create, companies must bolster their digital capabilities.

Sustained cloud adoption, sprinting towards 5G

A man faces a digital cloud

In Asia Pacific, spending on public cloud services grew by over 38%, reaching US$36.4 billion in 2020. Asia-Pacific companies are even adopting cloud technologies at a faster rate than companies in the US or Western Europe, according to a study by Boston Consulting Group and Amazon Web Services (AWS).

Many businesses in Asia are also migrating mission-critical functions to the cloud. Even retailers are expected to keep leveraging this technology, given their positive experience with them in 2020: respondents to Google and IDC’s Digital Pulse of Asia Pacific Retail report say that, in 2020, digital technologies, such as the cloud, helped protect their revenues by increasing or sustaining earnings, as well as by mitigating revenue declines.

Another disruptive technology that’s on the rise is 5G, which ushers in a new era in digitalisation, enabling the deployment of technologies such as IoT, big data analytics, and AI at scale. Compared to 4G, 5G is significantly faster, can connect more devices, and can handle higher bandwidths

But as 5G initiatives roll out, data centres will need to rethink their infrastructure. Data centres are expected to be “...at the heart of enabling 5G in all applications for the foreseeable future,” says Chris Sharp of Digital Realty. To accommodate 5G, companies could move their IT systems to the edge of the network and closer to users, or make use of agile, secure, and flexible cloud data centres.

Cybersecurity resilience is now a top priority

A hand reaches out to a 3D illustration of a padlock, meant to represent cybersecurity

As businesses continue to digitalise, the evolving threat landscape in Southeast Asia could hamper their growth. In fact, the top 1,000 companies in the region could lose US$750 billion in market capitalisation due to cyber threats. 

Cybersecurity concerns will only escalate over time as the uptake of new technologies—including encryption, multi-cloud operations, and IoT—can make cyber environments more complex and threat monitoring and response more difficult. Cloud shadow IT and employees’ home WiFi networks also continue to expose companies to cyber risks.

As such, there has been a growing movement towards boosting the region’s cyber-resilience. T-Systems established a cyber defense center in Singapore in 2019, anticipating later cybersecurity efforts by other MNCs and transnational organisations.

Microsoft followed suit In May 2021, with its Asia Pacific Public Sector Cyber Security Executive Council, bringing together policymakers from Indonesia, the Philippines, Malaysia, Singapore, and Thailand. And in June the same year, the Association of Southeast Asian Nations (ASEAN) in June 2021 formalised a cyber center of excellence in Singapore. 

This increased sharing of threat intelligence will benefit businesses across the region and help protect digitalisation gains from being derailed by cyber threats. And these formalised cybersecurity responses indicate that governments and enterprises have come to take digitalisation—and its risks—more seriously. 

Be on the winning side of the revolution through digital transformation

These are just some of the signs that Southeast Asia is on the edge of a data revolution. Various industries will continue adopting digital technologies. Many businesses are already in the mature stages of this journey. Those who have yet to embark on their own transformation must start soon or risk getting left behind.

For more information on how to stay competitive and capture emergent opportunities through digital transformation, reach out to us at T-Systems.

We look forward to your project!

We are happy to provide you with the right experts and to answer your questions about planning, implementation, and maintenance for your digitization plans. Get in touch!

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