Across the globe, hyperscalers, cloud service providers, content companies, over the top (OTT) players and enterprises need local digital infrastructure that can deliver performance, optimised user experiences and data sovereignty. They need to be ready to serve exponential demand coming from local markets driven by rapid digital transformation, booming digital economies, and growing internet users.
Lockdowns and quarantines associated with COVID-19 demonstrated how fast markets can move and new demand for digital infrastructure can grow. Management consultancy firm McKinsey noted that COVID-19 caused a five year leap forward in consumer and business digital adoption in around eight weeks. As economic recovery accelerates, so will digital transformation, with data centre facilities playing a critical role in long-term digitalisation in mature and emerging hubs.
The total investment in data centres is expected to increase from $244.74 billion in 2019 to $432.14 billion in 2025 at a compound annual growth rate (CAGR) of 9.9%, according to ResearchAndMarkets.
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Overall market growth is matched with a set of unique conditions that is increasing the need for local and distributed digital hubs:
In 2020, 8 of the 10 world’s largest populations were in Africa and Asia, according to Pew Research. Over the next 80 years, African countries will have more than five countries in the top 10 including the Democratic Republic of Congo (DRC), Ethiopia, Tanzania and Egypt. Markets in Africa and Asia tend to have young populations with a growing number of internet users. These internet users increase demand for cloud-centric applications and services.
So far, hyperscalers like Alibaba Cloud, Amazon Web Services, Google Cloud Platform, IBM Cloud, Microsoft Azure and Oracle Cloud have developed hubs in major global markets. Many are focused on the US and Western Europe or home markets in Asia like Alibaba Cloud. As demand for cloud infrastructure in local markets increases, they will need to add presence in a growing number of markets globally. Their roadmaps have to include new local cloud regions around the world.
The global edge computing market is projected to reach $43.4 billion by 2027 with CAGR of 37.4% between 2020 to 2027, according to Million Insights. A growing number of applications and services are being hosted at the edge of the network to reduce latency while increasing performance. Edge computing requires hosting data and applications close to end users and often requires smaller data centre facilities in more geographic locations.
A growing number of countries are rolling out data sovereignty laws that require Software as a Service (SaaS) and cloud storage services to host data within a single country’s borders. This means data has to be hosted in-country and cannot be transferred across borders. These kinds of regulations limit international data transfer and in turn increase demand for local data centre space.
The result is growing demand for digital infrastructure investment in unique local markets, rather than the traditional global hubs. It’s the next hubs that will drive the next wave of digital innovation.
Ultimately, these factors combined are driving the next digital hubs that have been underserved, overlooked and now need digital infrastructure investment. There needs to be greater access to digital infrastructure in rapidly growing local markets with the same service and experience they receive in global destinations. That way service providers can deliver new levels of performance and user experience while keeping data in-country.
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