Story : Ly Viet Thang

Thanks to data center services, the world’s five tech giants achieved a capitalization of over 1 trillion US Dollars. Investing in data centers is set to be the next Gold Rush.

Millions lost their lives, hundreds of thousands of businesses shut or went bankrupt, and tens of millions of people lost their jobs during the Covid-19 pandemic. The pandemic cast a bleak shadow over the globe. However, if we’re looking for silver linings in the gloom, digital transformation will surely be one of them.

As countries closed their borders and enforced social distancing across big cities and small regions, e-commerce grew exponentially compared to previous years. In order to survive, businesses had to retire conventional business methods and turn to digital platforms. Naturally, digital transformation entails a considerable amount of data. This makes data center services, already sought-after in developed countries in recent years, an open gold mine for investors.

Data has become the most valuable commodity in the market, a key driver in getting Facebook, Apple, Microsoft, Amazon, and Alphabet past the 1 trillion US Dollar market cap individually. Data has given them power on par with that of a nation, forcing global governments to find solutions to limit the influence of these giants.

Nonetheless, studies have shown that only a tiny fraction of that data is being utilized effectively, as the collection, processing, management, and protection of data blocks become increasingly complex.

The new Gold Rush

According to a survey by Domo in 2020, with every passing minute, 404,444 hours of video are streamed on Netflix, 42 million messages are sent on WhatsApp, 1 billion US Dollars are handled through online transactions, and about 208,333 people are connected on the Zoom app. Internet users generate about 2,5 exabytes of data every day.

To meet the explosive demand for data storage, management, and distribution, data centers are proliferating. The number of major global data centers has doubled from 259 to 541 in the past five years.

According to technology analyst John Dinsdale of the Synergy Research Group, tech corporations spent about USD 38 billion on data centers to facilitate their services in the first quarter of 2021, focusing on both the business and consumer markets. The biggest spender is undoubtedly Amazon with their own Amazon Web Services, followed by Microsoft, Google, Facebook, Apple, Alibaba, and Tencent.

Large enterprises are willing to allocate resources to these services, but small and medium ones typically cannot afford their own data storage centers, which are not cost-effective as they require high investment capital and expensive maintenance.

A well-functioning data center able to meet companies’ demands for digital transformation must follow strict standards in terms of power supply, core switch, and network systems, and feature round-the-clock security and a cooling system. It must also meet Uptime Institute standards for data center design, construction, and operations.

In addition to massive construction and operating expenses for planning, design, legal procedures, infrastructure, fire protection, transmission lines, and more, data centers demand high salaries for experts in systems, network administrators, electrical systems, and cooling, not to mention the cost of keeping their tech up-to-date.

Covid-19 substantially impacted global businesses, but it also incentivized big companies to invest more in “the new real estate” of cloud infrastructure.

In the United States, the underlying yield from data centers ranges from 4 to 12 percent. The figure is 4 to 5 percent in Japan, 5 to 7 percent in Europe, 6 to 7 percent in Singapore, 7 to 7.5 percent in Malaysia, and 8 to 12 percent in China. The return rate of data centers is much higher than that of traditional real estate investments like office leasing. The return on the office market is 5.5 percent in Shanghai and 3 percent in Singapore.

Vietnamese businesses are in the ring  

According to the Emerging Markets Cloud and Data Center 2021 to 2025 Report, Vietnam is one of 10 emerging markets for global data centers, with market value reaching USD 858 million in 2020, up USD 130 million compared to 2019. The data service (cloud) market in 2020 had a turnover of USD 105 million with an expected growth rate of 25% per year until 2025 according to a report by the Vietnam Internet Association.

In reality, foreign cloud providers still take up a larger portion of the market share in Vietnam. The domestic ecosystem for business services is still lacking in that Vietnamese PaaS and SaaS providers cannot yet compete with their foreign counterparts. In 2020, foreign vendors (AWS, Google, Azure) earned 79% of sales figures. However, businesses are starting to switch to data center services from Vietnam-based providers.

Domestic cloud computing platforms actually provide many competitive advantages. They offer cheaper transmission costs compared to an international connection, faster communications with customer support, less legal risks for data storage, and convenient payment procedures.

Vietnamese tech giants are also investing heavily in this service. FPT plans to bring into operation multiple data centers spanning 10,000m2 in total, with investment capitals of VND177 billion in Ho Chi Minh City and VND 213 billion in Hanoi. Meanwhile, Viettel IDC already established five data centers across the country covering 25,000m2 in total, with more to come in Hanoi (40,000m2) and Ho Chi Minh City (30,000m2).

Back in April 2021, Hanoi Telecom put their eco data center into operation in Hoa Lac Hi-Tech Park. It has a total investment of over VND 100 billion. CMC Telecom is also about to launch an office complex and data center project south of District 7, Ho Chi Minh City. It covers an area of 13,133m2 with a total investment of VND 1,500 billion including its future data center. Currently, CMC Telecom also owns three tier-III data centers.

Though they all claim to be the leader in this field, what all of the Vietnamese tech giants do agree on is the importance of data centers in digital transformation and that “multi-cloud” services are an inevitable market trend, enabling multi-point connections to various cloud service providers.

“Domestic suppliers can absolutely provide services that meet international standards with optimized costs and timely support. This will completely change businesses’ ‘xenophiliac’ mindset when choosing a cloud provider, paving the way for local cloud development,” stated Le Hong Viet, General Director of FPT Smart Cloud with confidence.

“CMC plans to continue to enhance an ecosystem that serves to digitize all businesses, from SME (small and medium) to large enterprises. This will be an open ecosystem that makes digital transformation fast, efficient, and secure,” said Dang Tung Son, Deputy General Director and Marketing Director of CMC Telecom, sharing his view on how to keep up with this potential market.

“In 2022, Viettel IDC aims to become a managed service provider (MSP) of information technology, tightening cooperation with all major suppliers in the world to provide quality supporting industry products for Vietnamese businesses and organizations’ digital transformation. Customers will be able to put aside worries about infrastructure, applications, and operations and focus on their production and business activities,” emphasized Hoang Van Ngoc, Director of Viettel IDC.

Vietnam’s digital economy reached USD 14 billion in 2019 and is expected to reach USD 43 billion in 2025. There is no doubt that data centers will become open-pit gold mines in the near future.