Singapore is set to retain its crown as ASEAN’s prime candidate for new data centres, despite the government’s moratorium on fresh developments, but Malaysia is likely to see faster growth in the server shipments that will fuel new data centre facilities over the coming few years.
This is according to analyst firm GlobalData, which anticipates that the total addressable market size for servers in Singapore, in terms of enterprise spending opportunity, is poised to increase at a compound annual growth rate (CAGR) of 6.4 per cent, to reach US$1.5 billion in 2025.
This growth is expected to be primarily driven by the ongoing digital transformation and IT modernisation efforts of enterprises in the region.
Broadly, the analyst firm reckons that enterprise server spending in Singapore over its forecast period, from 2020 to 2025, will be driven by the need for enterprises to invest in compute infrastructure that can power data intensive workloads, including artificial intelligence (AI) and data analytics implementations to improve services and efficiency.
This reflects the trend seen globally, according to GlobalData technology analyst Saurabh Daga.
“Enterprises across the globe, including Singapore, are increasingly adopting cloud-based IT infrastructure to support their ongoing digital implementations such as remote working enablement, and adoption of online/ecommerce services,” Daga said, “which will also help drive the demand for servers not just from public cloud services but also for private cloud and traditional IT deployments.”
Although the Singapore government has placed a temporary moratorium on new data centre permissions, the city-state is likely to remain the most sought-after location for new data centre buildouts, with companies like Equinix and Digital Reality, among others, expressing their interest in setting up new data centres once the moratorium is lifted.
If and when the moratorium is lifted and the flood gates open for new data centre applications, it is anticipated that the flurry of resulting developments will additionally help to boost data centre server spending in the country over the forecast period.
Server hardware is anticipated to account for the largest share of overall enterprise server spending opportunity through the forecast period, but enterprise spending on managed server services will grow at a healthy CAGR of 8.5 per cent over the forecast period, according to Daga.
“The need for enterprises to keep their IT spending in check as they emerge out of the COVID-19 slowdown will prompt them to consider third-party management of their server environment,” he said. “Additionally, growing complexity of deploying and managing advanced server infrastructure in-house is also likely to encourage enterprises to choose managed service providers.”
While the large enterprise segment will account for the largest share of the total enterprise server spending in Singapore through the forecast period, the combined spending from micro-, small- and medium-sized enterprises is expected to increase at a marginally faster CAGR of 6.5 per cent.
Analysing the market in Malaysia
Across the Johor Strait in Malaysia, the overall addressable market for enterprise servers is expected to increase at a markedly higher CAGR than that expected in Singapore, at 7.6 per cent, between 2020-2025.
This is set to be driven by the ongoing expansion of data centre capabilities by leading vendors coupled with high-speed computing by the enterprises, according to GlobalData’s analysis.
“Server infrastructure adoption will strongly be driven by the increase in data centre investments, owing to the rapid pace of digitalisation, focus on data locality and surge in high-speed computation requirements,” said Sunil Kumar Verma, lead ICT analyst at GlobalData.
Out of the two major components of the market as defined by GlobalData – hardware and managed server services – the overall spending on managed server services is set to grow at a CAGR of 9.9 per cent over 2020-2025.
However, server hardware will continue to account for more than four-fifths of the revenue opportunity throughout the forecast period, the analyst firm noted.
Low-end servers are expected to account for a majority share of the overall hardware segment, followed by mid-range and high-end servers respectively, owing to the increased adoption among startups and small- and medium-sized enterprises (SMEs).
“The large enterprise segment will account for nearly more than 50 per cent of the overall server spending during the forecast period,” Verma said. “The spending of the micro, small and medium enterprises will account for nearly 46 per cent of the overall enterprise server spending during the same period.
“With enterprises focusing on IT infrastructure updating to leverage high-performing computing servers owing to growth of IoT [internet of things], cloud computing, virtualisation, the demand for servers across all verticals is expected to grow as enterprises need to handle large data volumes, which requires high processing speeds,” he added.