Global and regional service providers have invested in data centers to support new advanced services in the region, which include cloud services.

This has created a domino effect for demand: in particular, operators and MNCs require facility design expertise, network and IT infrastructure, the right staff skill levels, and an understanding of the operational requirements of data centers.

The latest example is the announcement that Tata Communications is opening another enterprise-class data center for providing outsourced IT services for its customers in Asia-Pacific. This is part of Tata’s $180 million investment to provide data center infrastructure and managed services in Asia-Pacific between 2009 and 2011. Other global telcos with data centers in Singapore include AT&T, BT, Verizon Business, SingTel, and Orange.
Japan, Singapore, and Hong Kong contain most of the data centers in the Asia-Pacific region. While the facilities in Japan are mainly to support its domestic market, Singapore and Hong Kong are competing to be the preferred location for hosting data centers for service providers that serve MNCs in the region.

As the major global financial hub of Southeast Asia, Singapore has several strategic advantages. It has a stable government that has attracted many MNCs, and 60% of MNCs with more than 7,000 employees have their Asia-Pacific regional headquarters in Singapore. It is also where most large software application developers such as Google and Microsoft chose to establish their regional presence. Singapore is also one of the major network hubs in the region, which is attractive to both carriers and MNCs. It still suffers, however, from high real-estate costs and serious energy supply challenges.

Regionalization will play to Singapore’s strengths

Since cloud service providers will need to offer demanding SLAs covering realtime and critical business applications in the cloud, the geographical location of the data center is more important than ever. Having a few large global data centers may allow providers to reach a large scale and take the greatest advantage of their concentrated resources. On the other hand, placing data centers closer to customers allows providers to enforce security policies, improve access to content, and reduce network latency. Finding the optimum balance between both approaches is a dilemma that telcos are starting to face. Centralization on a regional level will be the answer, and Singapore is in an advantageous position as a result. Furthermore, the choice of network partners in Singapore increases its attractiveness.

As cloud-based offerings become more complex, Singapore may tighten its grip

Many of the early service offerings within data centers included basic co-location and network services, with very few complex managed services. Telcos are now starting to position themselves deeper in managed services, complex hosting, security, and IT services. In addition, the major global carriers are expanding this capability beyond their respective home regions to address global MNC requirements.
We think these developments will create a virtuous circle in Singapore. Most telcos in the region have built strong partner relationships and capabilities in these areas. We believe these will support service providers’ product evolution towards converged, hosted ICT, unified communications and collaboration (UC&C), application-based, and IT services. The data center has now become the same strategic hub for the global carrier as the wire center was for the legacy local telecoms carrier.

Telcos have also invested in professional services teams in Singapore, thereby recognizing the importance of professional services, especially at the early stages of CaaS deployment, to support MNCs with their virtualization transformation and early adoption of cloud computing services. Regional professional services capabilities or partnerships with local companies will be essential for coverage outside a carrier’s home region – and a critical mass of relevant expertise is on the verge of taking deep root in Singapore.

Claudio Castelli, Senior Analyst, Ovum - part of the Datamonitor Group.