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Thematic ideas | Infrastructure: Cloud computing

Investment outlooks / Q2 2020

The digital economy continues to evolve with great speed, driven by the ability to collect, use and analyse enormous amounts of machine-readable information about practically anything. These digital data requirements arise from the digital footprints of personal, social and business activities taking place on various platforms. Global internet protocol traffic (IP), a proxy for data flows, grew from about 100 gigabytes (GB) per day in 1992 to more than 45,000 GB per second in 2017. And yet the world is only in the early days of the data-driven economy, as by 2022, global IP traffic is projected to reach 150,000 GB per second, fuelled by more people coming online for the first time and by the expansion of the Internet of Things (IoT).

Cloud computing is enabled by higher internet speeds, which has drastically reduced latency between users and far away data centres. Data storage costs have also plummeted. The cloud is transforming business models as it reduces the need for in-house IT expertise, offers flexibility for scaling and consistent application rollout and maintenance. Some free cloud services provide office-like application tools that are useful for micro, small and medium-sized enterprises. This is particularly useful for countries where the cost of licensed software can be an obstacle to creating applications and providing services. In many developing countries, higher costs of additional international bandwidth to access overseas servers and data centres still limits the uptake of cloud services.

Digital infrastructure, cloud computing and big data processing are at the forefront of 21st century infrastructure.

Most cloud traffic is generated in North America, followed by Asia Pacific and Western Europe, which together account for about 90 per cent of all cloud traffic. From 2016 to 2021, the fastest annual growth rate in cloud traffic will have occurred in the Middle East and Africa, at 35 per cent, followed by Central and Eastern Europe and Asia Pacific, each with a growth rate of 29 per cent. The cloud market is also highly concentrated. According to Synergy Research Group, the share of the top five providers − Amazon Web Services (AWS), Microsoft, Google, IBM and Alibaba − in the global cloud infrastructure services market exceeds 75 per cent, with AWS alone accounting for over a third of that market.

Currently, at least 1/3 of all data passes through the cloud.

Cloud providers will continue to drive demand for large data centres in low-cost locations, as well as for network-dense connectivity facilities. However, the rise of 5G and IoT will also push demand for smaller edge datacentre facilities that require different business models and automation. Datacentre providers will need to target their customers carefully and understand exactly what qualities and services customers seek.

Data analytics, cloud, prefabrication, multi-site resiliency and open-source architectures are being applied to datacentres. This is creating intelligent, connected and purpose-built critical infrastructure that is responding more rapidly to pressure from customers and technological change.

The rise in digitisation and cloud computing among organizations have necessitated the construction of data centre facilities across the globe.

Though cloud computing involves higher computational power it enables flexible, scalable, and efficient business operations, which has led several growing medium-sized enterprises to opt for efficient data centres. These enterprises run their operations through cloud service providers, colocations and web hosting cloud data centres due to benefits such as scalability, reliability, and cost reduction. The data industry continues to thrive, and that is expected to continue regardless of macroeconomic growth.

According to Recap research, there are over 7,500 data centres worldwide with over 2,600 in the top 20 global cities alone. Data centre construction will grow at a pace of over 15 per cent per annum in the coming years.

With corporations racing to innovate with new products, business models and marketing initiatives, they are demanding infrastructure that is flexible enough to keep up. International Data Corporation predicts most organisations will no longer manage their own infrastructures. Instead, they will use service provider data centres for dedicated and shared cloud offerings.

 

Sources:

2019 Trends in Datacenter Services & Infrastructure, 2018, 451 Research LLC

Digital Infrastructure Sector Analysis, 2020, Asian Infrastructure Investment Bank

2018 Global Datacenter Trends Report, 2018, CBRE

Digital Economy Report, 2019, United Nations

2020: Oracle’s Top 10 Cloud Predictions, 2019, Oracle

2020 Technology Industry Outlook, 2019, Deloitte

Data Centres, 2017, Recap

Digital transformation for 2020 and beyond, 2017, Ernst & Young

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Thematic ideas | Infrastructure: Satellites
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