Cloud & Datacenters Magazine vol. #1 | In The Driving Seat

Editor’s Foreword

Welcome to the inaugural issue of W.Media’s cloud & datacenters magazine - Southeast Asian edition. I am excited to be joined by my co-editor, Hazel Moises, whose contributions have shaped the creation of this magazine.

Within the pages of this magazine, you will discover a rich collection of articles that delve into the multifaceted realm of Southeast Asian data centers. We are delighted to feature the esteemed Otto Toto Sugiri, an icon of the region’s data center industry, as he shares insightful highlights from his remarkable journey, his idol, and his future plan.

Moreover, you can expect in-depth insights on trending topics in the industry that cover sustainability, connectivity, and automation, providing you with a unique perspective shared by top industry leaders in this ever-evolving landscape.

Our aspiration is for this magazine to ignite discussions and keep you abreast of the latest developments in the industry, and foster innovation within the vibrant data center community in Southeast Asia.

We are truly excited to present this inaugural issue of the W.Media’s cloud & datacenters Magazine - Southeast Asian Edition, and we sincerely hope that it serves as a valuable resource for you.

Head of Media

Senior Tech Journalist

Shenton Gomez

Hazel Moises

Hendra Suryakusuma

Andreuw Thaf

Kavin Wong

Fredrik Johansson

Matthew Benic

Cover Story

Automation

Otto Toto Sugiri

Geoffrey Brown

Sukoco Halim

Rendy Maulana

Greening The Digital Frontier:

When we think of carbon footprint and greenhouse gasses, we often associate it to sectors like agriculture, fossil fuels, and transportation. However, the IT industry, especially data centers, has emerged as a major contributor due to extremely high energy usage.

In today’s digital world, data centers consume approximately 200 terawatt-hours (TWh) of electricity, or nearly 1% of global electricity demand, contributing to 0.3% of all global CO2 emissions (Kamiya, 2022).

Consequently, data center operator’s innovative approaches are required to ensure sustainability and mitigate environmental impact.

Data Center Operators’ Drive Towards Greener Operations

The data center industry is continuously evolving and striving to make operations more sustainable. Hence, operators recognize the importance of reducing their environmental footprint.

In Southeast Asia, the data center market size is expected to reach USD 12.34 billion by 2027, growing at a CAGR of 5.97% during 2022-2027 (Arizton Advisory & Intelligence, n.d.).

Despite Indonesia’s energy potential from solar, hydropower, geothermal, wind and other sources, an estimated 12% of these energy sources are tapped, according to the International Renewable Energy Agency.

Southeast Asia has particular countries with high particulate matter and is considered more polluted than others. Vehicles, biomass burning, industrial plants, and coal power plants  are the sources of intense seasonal air pollution for much of the region. Fossil fuels have long underpinned Southeast Asia’s power generation. An ample regional supply of coal, especially in Indonesia, and relatively low costs have led to coal having a prominent role in Southeast Asia’s power generation sector (Chen et al., 2021).

Nearly all energy demand is met by fossil fuels, with 60% coming from highly-polluting coal  (Milko et al., 2023).

According to Hendra Suryakusuma, Chairman of Indonesia Data Center Provider Organization (IDPRO), it is crucial to run data centers with sustainability as a priority as almost all of the data centers are being run by coal power plants.

“We are already implementing the basic foundation of IoT, to have more visibility on the operation level. IoT combined with machine learning, they can now have predicted analysis, automated by this technology and it will actually lower the PUE number which increases efficiency.

However, Hendra stated that the data center industry stakeholders and regulators are also crucial in establishing supportive policies and incentives that facilitate the transition towards sustainable data center practices.

Government Regulations as Catalysts for Eco-friendly Practices in Data Centers

Climate change initiatives and policies are progressively turning their focus to data centers, such as the Climate Neutral Data Center Pact, the EU Code of Conduct on Data Center Energy Efficiency, and China’s ThreeYear Action Plan for the Development of New Data Centers.

Moreover, governments across the world have recognized the urgency of transitioning to more sustainable practices in the IT industry, leading them to introduce stringent laws and regulations. These measures act as catalysts, encouraging data center operators to adopt to eco-friendly technologies and practices.

Hendra said, “In North America, especifically in California State, there are tax incentives provided to data center facilities adopting renewable energy. These incentives serve as a motivating factor for companies to invest in sustainable practices and technologies.”

In Japan, the government has developed a USD 7.3bn initiative to innovate the industry and cut carbon emissions, including subsidies worth 50% of the building costs towards new zero carbon emissions data centers (England, 2020).

The Political Hurdle in Supporting Sustainable Data Center Operations

In contrast to other national governments actively working towards transitioning to renewable energy for more sustainable data center operations, the government of Indonesia diverges by prioritizing the return on investments from coal power plants rather than promoting and supporting the adoption of renewable energy across sectors, including data centers, according to Hendra.

The government lacks incentives, such as tax benefits or subsidies for data centers that invest in renewable energy solutions which can discourage the adoption of sustainable practices.

“The regulators are the ones that really play a very key role in this sustainability issue.” - Hendra

Moreover, in Indonesia’s neighboring country, Singapore, an Investment Allowance Scheme was employed by the Infocomm Development Authority of Singapore (IMDA) to assist data center operators in making their current data centers more energy efficient. Qualifying candidates will receive a 30 - 50 % discount on their fixed capital expenditures for upgrading their data centers.

Hendra also pointed out that progress can be observed in neighboring regions, specifically in Johor and Kuala Lumpur. This suggests that countries like Malaysia are making strides in terms of implementing sustainable practices in their data center operations through tax incentives for green initiatives. According to Hendra,  Indonesia could benefit from studying and adopting similar approaches to promote sustainability in its own data center industry. However, lack of government support and proper regulation have been preventing data centers from transitioning to renewable energy sources (Gomez, 2023).

Trends, Policies, Frameworks

Macroeconomic Factors Fueling Data Center Growth in Southeast Asia

The global spotlight consistently focuses on China, the dominant force in emerging markets, as even the slightest change in its GDP attracts worldwide attention (Wisevoter, 2021). However, investors and multinational corporations are now redirecting their attention towards the ten vibrant markets comprising the Association of Southeast Asian Nations (ASEAN). Established in 1967, ASEAN presently comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. These economies are at varying levels of development, yet they all possess significant growth prospects.

The rapid adoption of digital technology in ASEAN is set to persist, driven by tech-savvy consumers, substantial investor funding in technological advancements, and government initiatives promoting digital transformation (World Economic Forum, 2020). By 2030, the region is projected to have approximately 575 million internet users, with digital technology becoming an integral part of everyday consumer experiences.

Currently, Southeast Asia is a vibrant emerging market with over 400 million internet users and a booming digital economy (Kameke, 2023). In line with the number of internet users in the region, according to Matthew Benic, Head of Commercial at Keppel Data Centres,

“There’s so much opportunity in the data center industry in Southeast Asia at this moment as we witness companies move their capacity closer to the region particularly in ASEAN countries.”

According to Cushman & Wakefield, Southeast Asia’s data center market is witnessing strong growth, driven by both domestic demand and the expansion of international companies into the region. Additionally, data center capacity in Southeast Asia is expected to more than double by 2024, reaching over 1,000 megawatts (MW).

Furthermore, Singapore is the leading data center hub in the region. Singapore has the largest data center market in Southeast Asia, attracting investments from global technology companies due to its strategic location, robust connectivity, and favorable business environment.

In addition to Singapore, other ASEAN countries are also experiencing increased data center investments. Countries such as Indonesia, Malaysia, Thailand, Philippines, and Vietnam are emerging as key players in the region’s data center industry. These countries offer favorable conditions, including growing internet penetration rates, expanding digital economies, and government initiatives to attract data center investments.

The expansion of the ASEAN economy is propelled by multiple factors, such as the influx of foreign investments, the expansion of manufacturing, the rising strategic significance in global supply chains, and the increasing investments in infrastructure, includingthe digital economy (Allurentis, 2023).

The Interplay Between Macroeconomic Factors and

Local Regulations

The data center industry is poised for sustained growth due to various factors. According to Benic, those factors include economic expansion, technological advancements, and the need for localized and efficient data processing capabilities.

Additionally, the interplay between macroeconomic factors and local regulations can also shape the future development of the industry.

“Economic fundamentals, you know you’re looking at growth in GDP if the  populations are becoming wealthier and more sophisticated, as well as the continuous proliferation of technology,” said Benic

Economic fundamentals and GDP growth

The growth of Gross Domestic Product (GDP) indicates a healthy economy. As economies expand, populations tend to become wealthier, leading to increased consumption and demand for various goods and services, including technology. This economic growth contributes to the overall expansion of the data center industry.

Moreover, as populations become wealthier, they have more disposable income to spend on technology products and services. This drives the demand for data centers, which form the backbone of digital infrastructure and enable the storage, processing, and delivery of data for various purposes.

“People are moving to the cloud. We live on our phones. These days if we lose our phone, our life is kind of over for a few weeks until we’re able to replace everything and place it on your cards.” -

Matthew Benic

Impact of local regulations

Regulations like the moratorium in Singapore highlights the influence of local regulations on the data center industry. Government policies, including restrictions or incentives related to data center construction and operation, can shape the market dynamics and affect the strategies of cloud companies and other data center

Localization of data centers

Delivering data center capacity closer to end users is driven by the increasing demand for low-latency services, such as real-time data processing and streaming. By establishing data centers in proximity to users, companies can reduce network latency and improve the overall user experience.

Proliferation of Technology

“People are moving to the cloud. We live on our phones. These days if we lose our phone, our life is kind of over for a few weeks until we’re able to replace everything and place it on your cards,”

Advancements in technology have revolutionized the way people live and work. The cloud has become a popular means of storing and accessing data, while smartphones have become integral to our daily lives. These trends necessitate robust data centers to handle the increasing volume of data and support the services and applications we rely on.

Aside from what has been mentioned, Benic believes that there are broader macroeconomic factors that are going to support the data center industry for a number of years to come. The data center industry is influenced by broader macroeconomic factors, such as economic policies, regulatory frameworks, and global market trends. These factors can impact investment decisions, market competition, and the overall growth trajectory of the industry.

Trade-off Between Cost and Sophistication Balancing Sustainability and Cost-Efficiency

In terms of the economics of operating data centers in ASEAN differ from other regions, according to Benic, the decision of which market to operate in depends on various factors such as budget, business requirements, and the ability to navigate the challenges posed by the chosen market.

Land Prices: ”In terms of land prices, in Singapore, the costs of acquiring land in some of these markets, or even other tier 1 markets like Tokyo , Hong Kong, or Sydney, it’s extremely expensive. So you can get a little bit more value for money from a land acquisition standpoint in some of these tier 2 or tier 3 markets.”

Acquiring land in tier one markets can be quite costly. On the other hand, in tier two or tier three markets, the cost of acquiring land may be comparatively lower. Thus, one can potentially get more value for money in terms of land acquisition in these markets.

Supply Chains: “Some of the supply chains are absolutely a little bit less sophisticated.  Some of the delivery can be a little bit less sophisticated so that creates challenges from an execution standpoint and stops huge problems for everybody in the industry.”

The infrastructure and processes involved in the movement and distribution of goods may not be as advanced or efficient. Consequently, this can create challenges when it comes to executing business operations and can cause problems for the entire industry.

Sustainability is becoming a huge issue and cloud companies are all very focused on their ESG commitments, according to Benic.

Data centers, which are vital for cloud computing and storage, have a substantial impact on ESG reporting and investor perception. As a result, data center operators are increasingly focused on addressing their environmental impact. This includes collaborating with solar and energy companies to incorporate renewable energy sources into their operations.

“From a cost standpoint, renewable energy is becoming less and less expensive. We’re starting to see some areas where parity and perhaps even a little bit lower than grid power and I think the DC industry can act as a real driver of change because of the level of Consumption that we have, the power consumption that we require to run down the facilities,” said Benic.

The integration of renewable energy is gaining momentum due to several factors, including the declining cost of renewable energy options. In certain regions, renewable energy costs are becoming comparable or even lower than traditional grid power.

This trend presents an opportunity for data centers to play a pivotal role in driving the adoption of renewable energy. With their high power consumption requirements, data centers can act as catalysts for change by partnering with renewable energy developers to initiate and support projects.

“We can really start to act as a key off-type for a lot of renewable energy developers to be able to get projects off the ground and to start to be able to drive a little bit of change and be a real positive force to change in the development of renewable assets,”

By actively engaging in the transition to renewable energy, data centers can contribute to positive change and be viewed as a force for sustainable development. This shift not only aligns with the increasing focus on ESG commitments but also demonstrates the potential for the data center industry to drive broader adoption of renewable energy sources and foster a more sustainable future.

“More locally, things like the moratorium in Singapore, where you’re starting to see customers and the cloud companies start to push back. Capacity is being delivered closer to the end user.”

Rural Revolution: Can Southeast Asia’s Rural Regions Keep Pace with 5G Expansion?

With unprecedented speeds, incredibly low latency, and the ability to connect billions of devices simultaneously, 5G is set to redefine our understanding of what is possible in the realm of wireless communication.

The global 5G Services Market size is expected to grow progressively over the anticipated frame, recording a CAGR of 25.3% during 2022 to 2027. The 5G services industry spending value will increase from USD 107 billion in 2022 to reach USD 331.1 billion by the end of 2027 (Markets and Markets, 2023).

5G technology is not only revolutionizing the way we communicate and access information on our smartphones; it is also poised to redefine the capabilities and potential of data centers.

Data Centers Leveraging 5G Technology

Data Centers Leveraging 5G Technology

With 5G’s unparalleled speed, ultra-low latency, and exceptional bandwidth, 5G is set to unlock a new era of innovation and efficiency, transforming data centers into highly responsive, agile, and interconnected ecosystems.

According to Andreuw Thaf, Chief Executive Officer of NeutraDC, “when discussing 5G, the focus primarily revolves around latency, which refers to the delay or lag experienced when transmitting data over a network. The advent of 5G technology has prompted data centers to anticipate and adapt to its potential impact,”

Thaf said, previously, some data centers were situated away from major markets, likely due to various factors such as cost, space availability, or infrastructure considerations. However, with the emergence of 5G, data centers are now relocating closer to the market they serve.

“Now coming closer because of the latency and I believe whatever application now in the market definitely needs lower latency,” said Thaf.

The reason for this shift according to him is the need to minimize latency. 5G offers significantly reduced latency compared to previous generations of wireless networks. This low-latency characteristic is highly desirable for various applications and services that rely on real-time or near-real-time data transmission.

By moving data centers closer to the market, they can effectively reduce the latency between the data center and end users or devices. This proximity allows for faster and more responsive communication, as data can travel shorter distances and encounter fewer network hops. Consequently, the overall user experience improves, and applications that depend on low latency can function optimally.

As a result, Thaf said that the growth of data centers is expected to be exponential due to the increasing demand for low-latency services, with 5G acting as a significant catalyst for this expansion.

4G Networks Remain Significant

When analyzing the recent advancements in 5G technology and its impact on data centers, Thaf said that it is important to consider that while 5G is evolving, 4G networks still play a significant role in data transmission.

While 5G offers improved capabilities in terms of speed, latency, and capacity, a substantial amount of data is still being handled by 4G networks.

The adoption and deployment of 5G networks are gradually increasing, but it takes time for the infrastructure to be widely available and for devices to support 5G connectivity. In the meantime, 4G networks continue to serve as the primary means of data transfer for a vast number of users and applications.

Even with 4G networks, the amount of data being generated and consumed is growing exponentially. The COVID-19 pandemic has further accelerated the digital transformation and increased the reliance on online services, remote work, e-commerce, streaming, telemedicine, and other data-intensive activities. The post-pandemic situation has led to a surge in data consumption and the need for robust data center infrastructure to support these growing demands.

Challenges for Full Connectivity

In Indonesia, although the country’s digital economy is continuously growing, there are some challenges in the country for full connectivity or 5G latency. There are still people unable to access the Internet on a mobile device and even fewer people have access to fixed broadband internet.

Nearly 80 percent of those not connected reside in non-metro rural areas of Sumatera, Java and Bali islands, which are the country’s three most populous islands (Setiawan et al., 2022).

On top of that, 60 to 70 percent of Indonesians living in the country’s eastern region are inadequately connected due to variable quality of service.

Higher Purpose and Low Latency

5G technology is designed to address higher purposes beyond traditional mobile communication. These purposes include supporting emerging technologies like the Internet of Things (IoT), autonomous vehicles, augmented reality (AR), and virtual reality (VR). Additionally, 5G offers low latency, enabling real-time communication an responsiveness, which is crucial for various applications.

According to Thaf, “5G technology addresses higher purposes and offers low latency. While proximity is important, 5G deployment can cover both urban and rural areas through a mix of frequency bands. However, the suitability of 5G in rural areas depends on the intended applications.“

Proximity and Rural Suitability

Being in close proximity is necessary for 5G connectivity. Although certain aspects of 5G, particularly the use of higher frequency bands, have shorter range limitations, it is important to note that 5G deployment includes a mix of frequency bands.

With this according to Thaf, this allows for a balance between coverage and capacity, making it possible to provide 5G services in both urban and rural areas. The suitability of 5G for rural areas depends on the specific applications intended to be implemented.

Application-specific Considerations

Thaf said, the suitability of 5G in rural areas depends on the types of applications being implemented. Different industries and sectors have distinct requirements, and 5G can bring benefits to areas such as agriculture, healthcare, education, and logistics.

Hybrid Application Focus

Thaf also mentioned that the current focus of 5G applications is a hybrid model, encompassing both enterprise and public use cases. Enterprises and industries with specialized needs, capabilities, and financial resources may be at the forefront of adopting and implementing 5G technology.

Cost Considerations

The cost of 5G can be a limiting factor according to Thaf, particularly for widespread public adoption. Implementing 5G infrastructure requires significant investments, and the associated costs of devices, data plans, and services may pose challenges for individuals, including those in rural areas.

According to Thaf, the suitability of 5G for rural areas is uncertain and depends on multiple factors such as specific applications, infrastructure availability, and cost considerations. Assessing the unique needs of rural areas and identifying viable business cases is crucial.

While the current focus of 5G applications may not be primarily on the public, ongoing advancements and initiatives are expected to address these challenges and make 5G more

“If you ask me, if 5G will be suitable for rural areas. That is a big question mark. Depends on what kind of application that you want to implement. Nowadays, what we can see is that the 5g application is not running more towards the public because it’s a bit expensive.” - Andrew

Thaf

In today’s hyper-connected world, where information travels at lightning speed and distance is no longer a barrier, the importance of connectivity cannot be overstated. We live in a world where connections are not limited to geographical boundaries but extend across continents. From the way we communicate and collaborate to the way we access knowledge and conduct business, connectivity has become the lifeblood of our society, revolutionizing the way we work, learn, and interact.

Additionally, in this fast-paced, technology-driven era, connectivity also plays a vital role in enabling data centers to function effectively, connect with other systems and networks, and deliver services to their users.

According to Kavin Wong, Co-founder of Data Center First “Connectivity is the lifeblood of data center business.” It is the fundamental aspect that drives the data center business, ensuring seamless communication and data transfer between various entities.

“Traditionally, connectivity can be divided into two layers: internet connectivity and other physical network elements.” said Wong.

The Landscape of Data Center Interconnectivity in Southeast Asia: Emergence 5G Connectivity

“The new network that is happening and evolving very quickly is the leveraging of 5g. Now everyone talks about 5g and we see 5g as a new dimension that enables us to take new types of services to the enterprise world and how 5g provides the ability for edge computing to be implemented across customer locations. Aggregating into data centers and cross connecting to other people.”

Internet connectivity allows data centers to be interconnected among themselves inside the city and to be able to interconnect themselves to other cities, near or far. Data centers leverage the internet infrastructure to establish robust connections among themselves, allowing efficient data exchange. This interconnectedness is vital for data centers to operate effectively and cater to their customers’ needs.

“Other connectivity such as subsea fiber is just one of the elements of a physical network that provide data centers the ability to interconnect with one another well and that’s very much essential to the business and customers,” said Kavin.

Subsea fiber involves laying fiber optic cables beneath the ocean to establish high-speed connections across continents. These physical network elements facilitate interconnection between data centers of all types, enabling them to exchange data seamlessly.

Internet Connectivity

Bridging the Gap

Physical Network Connectivity

Evolution of Data Centers in Southeast Asia

In contrast to other national governments actively working towards transitioning to renewable energy for more sustainable data center operations, the govern-

ment of Indonesia diverges by prioritizing the return on investments from coal power plants rather than promoting and supporting the adoption of renewable energy across sectors, including data centers, according to Hendra.

The government lacks incentives, such as tax benefits or subsidies for data centers that invest in renewable energy solutions which can discourage the adoption of sustainable practices.

“The regulators are the ones that really play a very key role in this sustainability issue.” - Hendra

Building DC Considering the Interconnectivity

Wong highlighted the connectivity and progressive telecommunication policies between Singapore, Batam, and Johor, which have been instrumental in facilitating data center growth.

“The telecommunication policy between these three countries have constantly been very progressive. So on that basis, we entered on a web progressive government policy in all three countries. So that’s good news about connectivity,”

Wong further mentioned that major telecom companies are investing in building fiber connectivity between Singapore and both Batam and Johor.

Furthermore, Wong also acknowledged that there are challenges, but these challenges are considered localized and specific to each data center operator or customer entering the region.

Data Center REITs Profit from Asia’s Growing Connectivity Needs

At the heart of Asia’s digital trends lies the explosive growth of data centers. These technological powerhouses are the lifeblood of the region’s digital transformation, fueling the increasing demand for digital services and serving as the backbone of progress.

In the recent report of Research and Markets, it stated that the Asia-Pacific Data Center Market will reach US$ 53.58 Billion in 2028 and expand at a CAGR of 12% from 2023 to 2028. This remarkable growth is fueled by the soaring demand for data center operations and a surge in investment, driving the region’s unstoppable ascent.

Data Center REIT Industry in Asia

The data center real estate investment trust (REIT) industry in Asia is experiencing rapid growth as the demand for digital services continues to rise in the region.

According to Fredrik Johansson, Founder and Managing Director of Balder Investment, “cloud adoption, increasing digitalization, and recent data onshoring regulations are key growth drivers for data center demand, these in turn are fueling the large-scale expansion by hyperscalers and enterprise users in the region.”

In Asia, Johansson said that “the data center assets under management (AUM) growth is primarily driven by the greenfield development of assets. REIT’s are an attractive exit vehicle for private investors once their development assets stabilize.”

“Public equity compliments managers’ private development vehicles and allows them to manage assets across their full lifecycle. Due to the lack of stabilized data center assets available for sale in the region, a strong development pipeline balanced across the mature, growth, and emerging markets is critical for success.”

Measuring the Success & Profitability of Data Center REIT Operations in Asia

Johansson said that a successful manager in the data center REIT industry focuses on growing the assets under management (AUM) by making accretive acquisitions that increase the dividend yield while maximizing the weighted average lease expiration (WALE).

Metrics Used to Track Progress

Dividend yield:

Dividend yield is a financial metric that measures the dividend income generated by the REIT in relation to its stock price. A successful manager aims to increase the dividend yield over time, indicating a higher return on investment for shareholders. This can be achieved through strategic acquisitions that enhance the income-generating capacity of the REIT’s portfolio.

Distribution per unit (DPU) growth:

DPU is a measure of the cash distribution made to each unit holder of the REIT. A successful manager strives for consistent DPU growth, which indicates increasing profitability and cash flow. This growth can be achieved through effective capital deployment, optimizing occupancy rates, and securing long-term lease agreements with reliable tenants.

Net Asset Value (NAV) per unit:

DPU is a measure of the cash distribution made to each unit holder of the REIT. A successful manager strives for consistent DPU growth, which indicates increasing profitability and cash flow. This growth can be achieved through effective capital deployment, optimizing occupancy rates, and securing long-term lease agreements with reliable tenants.

Capitalizing on the Digital Boom in Asia

The digital boom in Asia has transformed the region into a vibrant hub of digital innovation and technological advancement. With a large and increasingly connected population, Asia has witnessed remarkable growth in digital technologies, services, and industries.

To capitalize on this digital boom, businesses need to strategically position themselves to tap into the immense opportunities presented by the region’s growing digital landscape.

With a large and tech-savvy population, expanding e-commerce market, and increasing digital connectivity, Asia offers a fertile ground for digital innovation and business growth.

“We are in an exciting period of growth for the data center industry in Asia. As the market continues to mature in the coming years, we can expect more REIT listings in Asia which will allow investors to capitalize on the digital boom in the region.” - Johansson

Source: Google, Temasek, Bain & Company

Breaking Boundaries: Otto Toto Sugiri’s Journey of Innovation and Finding Untapped Opportunities

Otto Toto Sugiri stands as one of the trailblazers in the Asian data center industry. His remarkable success story has earned him the moniker of the “Bill Gates” of Indonesia. However, his path to success was far from linear, as he had to overcome significant challenges, including a major financial crisis in the late 90s and severe skills shortages in 2012.

Otto began his career as a programmer in 1981 after completing his education in Germany. He initially worked at a bank, where he spent six years establishing and managing the IT department while writing software. Reflecting on his entrepreneurial journey, he explain that he stumbled into it by accident, as Indonesia lacked proper software companies at the time. Alongside some friends, he founded Sigma Cipta Caraka (Sigma) and developed a banking software solution. His passion to establish the first software company in Indonesia drove them forward, as they aimed to end the reliance on foreign software solutions.

“I started becoming an entrepreneur by accident. Indonesia at that time did not have a proper software company set up. I established Sigma together with some friends. Our passion to establish the first software company in Indonesia was to show the next generation that we can do it. Indonesia used to purchase software solutions from abroad and that was the beginning as my passion drew me in to change it,” said Toto.

In 1988, Sigma started with just 12 employees, and Otto rented a garage to work on coding. Fortunately, their timing coincided with Indonesia’s banking deregulation, leading to an influx of new banks in the market. Sigma flourished, growing from 12 employees to approximately 700. Emboldened by this success, Otto expanded his ventures and established Indonet as the country’s ISP in 1994. Despite the challenging 1998 crisis that saw many banks shutting down, Otto persevered and ventured into the data center business, seeking to help banks reduce costs.

His strategy of offering banks a lower cost alternative for data centers became a stepping stone to his involvement in the data center industry. In 2007, Sigma entered into a deal with Telkom, which acquired 80% of the company. After assisting Telkom for three and a half years, Otto sold his remaining 20% share and resigned from the company.

“My model was effective. I went to the bank and asked them about the cost of running a data center. If it costs 100 for example, I would ask them to pay me 70 and I’ll take over their data center.”

His strategy of offering banks a lower cost alternative for data centers became a stepping stone to his involvement in the data center industry. In 2007, Sigma entered into a deal with Telkom, which acquired 80% of the company. After assisting Telkom for three and a half years, Otto sold his remaining 20% share and resigned from the company.

His second breakthrough came in 2011 when the Indonesian government contemplated new regulations on data localization. Multinational companies doubted the capabilities of Indonesian data centers to meet the requirements, presenting a challenge. It was during this period that Otto established DCI (Data Center Indonesia) with the goal of becoming the first Tier IV data center in Southeast Asia. In 2013, DCI commenced operations, and in 2014, it became the first data center in Southeast Asia to receive the Tier IV Design Certification. Six years later, DCI became the first company in the region to receive the Tier IV Certification of Constructed Facility from the Uptime Institute.

The journey for DCI was not without financial struggles. Otto recalls that they operated at a loss from its establishment until 2016. However, from 2017 onward, the company’s profits nearly doubled each year. Addressing the ongoing issue of skills shortage in the data center industry, Otto faced this challenge early on in 2011 when DCI was established.

To overcome this, he formed a partnership with Equinix, learning from their expertise and training his engineers in best practices. The partnership was announced in 2012, and Equinix ensured that DCI’s new data center met their stringent availability requirements and facility standards.

“It sped up the learning cycle of our young people as I recruited fresh graduates. We are aware from the beginning that running data centers is not about having the best infrastructure, but it is about operational excellence,” he admitted.

Otto’s innovative mindset and exceptional leadership qualities gained recognition, leading to his feature in Forbes Magazine’s 2021 list of the 50 richest people in Indonesia. However, he emphasizes that he doesn’t seek recognition for his wealth but rather for his innovative contributions to the data center and technology sectors in Indonesia. He admires Steve Jobs for his passion, persistence, and ability to deliver value and quality to the public.

“I admire Steve Jobs because of his passion and persistence in delivering value and quality products to the people. He succeeded to make a company where the public is excited to view the new product and innovative ideas.”

Turning 70 in 2023, Otto continues to lead DCI with an innovative mindset, prioritizing open communication and interaction within the company. He stays updated on technology by actively engaging with his team and emphasizes a flat organizational structure that promotes seamless communication.

“The physical separation of the data center and office spaces allows for an environment where intensive human interaction can occur.  We intentionally separated the data center building and office building with the concept of separating the space where humans and machines are operated. We want to create an environment where people can communicate intensively by putting them together in the same space,” he added.

Looking ahead, Otto believes that environmental-focused technologies such as renewable energy and sustainable practices will drive the data center industry. DCI has already begun researching and piloting renewable energy solutions in their data centers.

“Efficiency will also play a crucial role, with the deployment of thousands of IoT sensors and the implementation of AI to assist engineers in maintaining safety and reliability in our data centers. We have to also be green and there is a huge pressure in the market. Due to this, we have started researching and piloting with renewable energy in our data centers,” mentioned Toto.

Remaining in the tech industry, Otto intends to continue learning and believes he can contribute more to society through the technology sector.

“I will stay in the tech industry and keep learning and I believe I can contribute more to society by staying in the tech sector. Health and education are my main interests and my focus will be on how technology can help those two industries.”

Automation as a Critical Component of Modern Data Center Infrastructure

Automation plays an increasingly important role in today’s world. It refers to the use of machines, computers, and software to perform tasks that were previously done manually by humans.

With the rapid advancements in technology, automation has become more prevalent in different industries such as manufacturing, transportation, healthcare, finance, and even in data centers.

According to the report of Allied Market Research, the global data center automation market size was valued at $4.8 billion in 2020, and is projected to reach $32.5 billion by 2030, growing at a CAGR of 21.32% from 2021 to 2030.

Manual operations in a data center refer to the tasks that are performed manually by humans to maintain and operate the data center infrastructure. These tasks can include monitoring and managing the physical infrastructure, such as servers, networking equipment, storage systems, and power and cooling systems.

Manual DC Operations versus DC Automation

Major growth factors of the data center automation market size include application of data centers across various industry domains and the demand for energy efficiency and business growth.

While manual operations are necessary for maintaining the data center infrastructure, they can also be time-consuming and prone to human error. As such, many data centers are moving towards automation to reduce the reliance on manual operations and improve overall efficiency and reliability.

Safety Security Efficiency Scalability

Why Should Data Centers be Automated?

According to Geoffrey Brown, Construction Quality Lead for APAC data center projects at Google Singapore, there are a couple of different aspects to be considered why data centers should be automated.

The first one is safety - “automation helps safety and reduces some of human error which is present in all forms of automation” Automated systems can perform tasks without human intervention, reducing the likelihood of errors caused by human mistakes.”

Security should also be considered, “Automation can also improve the security of a data center by enabling faster response times to security incidents.” Automated systems can quickly identify and isolate potential security threats, and take appropriate action to prevent or mitigate damage.

Next is the efficiency - “Automation also improves efficiency especially in terms of PUE (Power Usage Effectiveness) and that’s what a lot of companies are striving for so it optimizes energy consumption.” Automated systems can monitor and adjust infrastructure settings and configurations, optimize resource utilization, and troubleshoot issues in real-time.

And lastly, the scalability - Automation can make it easier to scale a data center as demand grows. “As we start to move into the kind of hyperscale type of data center, that means it needs to get bigger and with that sort of being able to scale up you need to have the infrastructure to support that and your control systems are going to play a big part of that.”

Why is it a Critical Component of Modern DC Infrastructure?

Brown stated that automation has become a critical component of modern data center infrastructure.

“Without some form of automation, it’s extremely difficult to scale any kind of efficiency in terms of the cooling systems or HVAC systems, which are going to use tremendous sources of energy used within a data center, and you just can’t do that sort of calculation in real time with just human operators.” As data centers continue to grow in size and complexity, it is becoming increasingly difficult for human operators to manage all of the tasks required to keep them running smoothly.

“If we keep building more data centers and they get bigger, we just don’t have the ability to operate anymore at a reasonable level without any kind of automation at all.”

According to Brown, it’s not just within the data centers, this is even exploring areas outside of data centers since all of the high-tech industry nowadays is pushing towards some way of being more and more automated.

Harnessing the Power of AI and ML

The data center industry has been abuzz with discussions about automation, and according to a report by Fortune Business Insights, the global data center automation market is poised for significant growth. Projections indicate that the market will surge from $8.49 billion in 2022 to $27.35 billion by 2029, showcasing a compound annual growth rate (CAGR) of 18.2%. This growth can be attributed to several factors, including the increasing availability of 5G networks, the rise in cloud adoption, and the availability of Internet of Things (IoT) devices in enterprises.

The Revolution of Data Center Automation

One of the prominent trends in data center automation is the integration of Artificial Intelligence (AI) and Machine Learning (ML). By incorporating AI and ML algorithms, data center operations are undergoing a revolution, resulting in optimized processes, improved efficiency, and advanced predictive analytics capabilities. This transformative technology enables intelligent automation, facilitating streamlined workload management, precise capacity planning, detection of errors within data center environments and promoting efficient power management.

Reduction in Human Error

“MettaDC implements automation not only for the building and management system, but we also implemented it in our electrical power monitoring system. It allows us to obtain all the predictive information because our goal is not only to reduce human interface and prevent human error, but also for power efficiency. It will also reduce the carbon emission by implementing the system.”

According to Sukoco, Chief Executive Office of MettaDC, the key to the latest automation trends lies in predictive technology embedded within the system. The implementation of automation in data center buildings, management systems and electrical power monitoring systems will help reduce human interface and prevent errors while enhancing power efficiency.

Upskill Talent and Improved Precision

Sukoco believes that AI-backed automation tools are crucial for the future of data center operations as they assist in upskilling human talent. By implementing a cohesive and seamless system, data center facilities can empower their professionals to improve their knowledge and skills.

“It’s not just about system monitoring; automation can also drive improvements in human resources,” he said.

A report by Ernst and Young highlights that many repetitive and error-prone activities, such as server upgrades, scheduling, monitoring, maintenance, patching, updating, reporting, and application delivery capacity planning, constitute a significant portion of operational

procedures within conventional corporate data centers.

However, the outlook for the automation of these tasks in the next five years is promising, with the utilization of AI-driven robots that can provide precise outcomes.

Robots have the capability to expedite various responsibilities, including the disposal, decommissioning, and destruction of obsolete servers and infrastructure components. Moreover, robots designed for remote monitoring purposes can gather data through audio and visual means, enabling the detection of irregularities and security vulnerabilities.

Power Efficiency and Reliability

Sukoco emphasizes that automation plays a crucial role in power capacity management efficiency. For instance, leading Data Center Infrastructure Management (DCIM) software can automatically calculate and update accurate power budget numbers for each device model. These calculations are based on the actual measured load of each device running its applications in its specific environment. Efficient power management is considered a strong suit of data center providers.

“With an electrical power monitoring system, we’re able to address power management challenges and quickly resolve problems before they occur. Sometimes, we can even automate analytics to resolve issues related to parts and power quality. This is one of the key strengths,” Sukoco adds.

Automation has emerged as a transformative force in the data center industry, poised to drive significant growth and revolutionize operations. The integration of AI and ML algorithms is paving the way for optimized processes, efficiency improvements, and advanced predictive analytics capabilities.

As the industry embraces automation, it becomes evident that empowering human talent with AI-backed tools and cohesive systems will be instrumental in upskilling and driving innovation in data center operations. The future holds immense potential for automation, as it continues to shape the data center landscape and propel it towards enhanced performance and sustainability.

Cloud Computing, Artificial Intelligence and IoT in Indonesia’s Digital Landscape Growth and Challenges

Growth and Challenges

In the 2022 G20 presidency, Indonesia, which is the largest economy in Southeast Asia, was vocal about digital-based economic transformation. The value of its digital industry grew to US$77 billion in 2022. The figure is expected to increase to US$130 billion by 2025.

The government is also actively involved in driving the growth of data centers in the country (Moises, 2023). The Provincial Government of Central Java officially launched its data center in January in collaboration with the Indonesian National Cyber and Crypto Agency (BSSN) as part of its efforts to transform Central Java into a Smart Province. The growth of data centers and cloud service providers have been on an uptrend in the country.

Growth in Cloud Computing

To further improve the digital infrastructure in the country, companies are turning more towards smart cloud solutions to drive the profitability and efficiency of their business. FunP Innovation Group, a Taiwanese conglomerate specializing in digital advertising and technology, recently obtained finance from Ennoconn Corporation in the amount of US$3.12 million for its business unit, cacaFly, to create smart retail and cloud solutions for Indonesia and other countries in APAC.

According to a recent PwC report, the use of cloud computing may potentially boost Indonesia’s GDP by US$10.7 billion between 2021 and 2025. This shows the potential of digital technologies like AI, blockchain, cloud computing, and IoT for businesses and the government sector. By decreasing the need for travel, cloud computing adds economic value to a business. According to the report, 89% of SMEs now use cloud computing, which has contributed to a rise in income of over 20%. A third or so of large businesses claim that cloud computing has reduced costs by 40%.

Qwords was founded in 2005 where it started off as a shared hosting provider. Qwords built its first data center in Jakarta in 2011.

“The cloud market in Indonesia is growing organically and positively. There are many people creating digital content, websites, and putting servers online. New data centers are also being built, which is a positive sign for the cloud business.”

- Director of PR Qwords Company International Rendy Maulana Akbar

IoT, artificial intelligence and the growing role of automation are the trends of the future in South East Asia with an increased importance placed on data protection and sovereignty, according to Rendy, who has close to 20 years of experience in the cloud solutions business in Indonesia.

“Looking at the development of cloud computing and the speed of innovation happening in the space of artificial intelligence and machine learning and with the rollout of 5G infrastructure in the region, we will see a convergence of hosting and IoT. AI will be seen as a solution to reduce cost and improve customer service.”

- Rendy Maulana Akbar

NeutraDC and Cisco were reportedly in collaboration to build a data center for the Cisco Platform Mobile IoT (Control Centre) and enhance Telkom’s data center network infrastructure using software-defined networking (SDN) technology. This collaboration is in support of the Indonesian government’s move to speed up 5G adoption and digitalization in Indonesia and the broader ASEAN region, leveraging the advantages of IoT services and SDN for public applications. In March this year, NeutraDC, a subsidiary of PT Telkom Data Ekosistem (TDE), forged a Memorandum of Understanding with NAVER Cloud and Cisco. Their collaboration aims to expedite the digital evolution of businesses in Indonesia by delivering cutting-edge cloud solutions and services, empowering them with the tools to embrace transformation.

All the growth and partnerships taking place in Indonesia is a positive sign for further growth in the data center industry, according to Rendy. According to a report from the Bandung Institute of Technology, the implementation of the 5G network in Indonesia holds the capability to make a substantial contribution of over IDR 2,800 trillion, equivalent to approximately 9.5 percent of the total GDP by 2030.

Earlier this year, Telkomsel and ZTE entered into a formal agreement by signing a Memorandum of Understanding, aiming to enhance their business collaboration and jointly explore and develop 5G solutions specifically designed for the Enterprise (corporate) segment in Indonesia. Through their partnership, Telkomsel and ZTE aim to jointly create an innovative range of products utilizing Cloud PC technology, catering to the needs of corporate clients as well as the general public.

Data Sovereignty Price War or No War

With the current growth in data center and cloud, the competition among industry players is expected to become tighter, as realised by Rendy. To ensure that the growth remains positive and vibrant among the local players, Rendy admitted that there needs to be a planned strategy to avoid an implosion among the industry players.

“Qwords plans to focus on innovation and product quality to sustain its growth in the local and Southeast Asian markets. The company will not engage in a price war with its competitors, but instead focus on providing a superior customer experience. Qwords is also planning to expand its data center footprint in Indonesia,” said Rendy.

“To sustain the growth in the data center and cloud industry, we cannot have a price war but instead conduct a surface war. We need to have a non-price based strategy that can benefit the customer experience and drive innovation and product quality.”

The race for 5G rollout and cloud solutions is evident through the partnerships in Indonesia to provide for the infrastructure and services to support IoT, IPV6 and fiber optics. But the significant increase in data consumption when 5G is fully implemented will give rise to concerns regarding data sovereignty. This is an issue realised by the government as the Minister of Communication and Informatics, Johnny G. Plate last year emphasized the importance of preserving data sovereignty.

Rendy emphasised that data protection and sovereignty will become increasingly important because of the growing adoption of cloud computing solutions by organisations and  increased consumption of data as 5G becomes more widely adopted in the country. In reaction to the growing threats of data breaches and data sovereignty in the country, the Indonesian government has taken a positive step forward in the eyes of lawmakers when the data protection bill was passed into law that grants the president the authority to establish a regulatory body responsible for imposing fines on data handlers who violate regulations regarding the collection or dissemination of personal data (Widianto, 2022).