Why is Singapore a top ideal market for data centers across the globe?

With the pandemic catalyzing the norm of the digital, Singapore is emerging as one of the top ideal markets for data centers across the globe, attributed to the country’s ability to attract major investments from the technology industry thanks to a well-educated workforce and stable government.

In fact, according to a Bloomberg report, Cushman & Wakefield’s 2022 Market Ranking ranked Singapore top for having the fastest fiber connectivity in its global data market. Despite being fifth in market size, Singapore also has the lowest vacancy rate and best smarty city score.

Google already has three data centers in Singapore while Meta is planning to open a US$ 1 billion data center on the island later this year as well. Digital Realty, which is known globally for their data centers, have also invested about US$ 1 billion to run three data centers in Singapore.

As individuals and businesses consume more data in an increasingly interconnected world, reliable and fail-safe Internet connections with the lowest possible latency (time taken for data to be transferred) are becoming more crucial. Internet Exchanges thus play a significant role in the world’s rapid shift to the digital world, to guarantee a smooth, secure, and fast exchange of data packets between networks of any size.

To understand why Singapore is highly ranked in the industry and is the preferred destination for most organizations around the world, Tech Wire Asia speaks to Ivo Ivanov, Chief Operating Officer of DE-CIX Group AG and Chief Executive Officer of DE-CIX International.

Where does Singapore rank, in terms of internet speed and latency, when it comes to other nations in Asia?

Singapore currently ranks 1st in broadband speed globally at 230.22Mbps for a second year running, matched with very high network stability. The Republic’s internet services are also currently 30% better than the global average, putting it at 3rd overall in Asia on the Digital Quality of Life Index.

It was further observed that Singapore’s connectivity is similar to Silicon Valley, in that both have strong ecosystems, with excellent connectivity and lower latency. Beyond the technical aspects above, Singapore sees a consistent demand for data hosting offerings due to its reliable and advanced infrastructure – with major cloud services available, along with political stability and sustainability.

DE-CIX recently expanded its presence to Singapore to create an interconnection ecosystem in one of the densest metro markets in the region, especially with the strong demand for low latency and the huge traffic volumes driven by content consumption – video, payment, gaming, and other applications like on-demand and live streaming of sports. 80% of the relevant international content providers are doing business in the region and need robust and flexible interconnection services as a way to bring their content to users not only in Singapore itself but also in the wider region.

Can you share the important role of Internet Exchanges as a backbone of Singapore’s booming digital economy?

The total addressable market size of data center and hosting services in Singapore, in terms of spending opportunity, is still expected to increase at a compound annual growth rate (CAGR) of 6.1% between 2020 and 2025, with spending to reach US$2.1 billion [S$2.87 billion] by 2025.

This comes as Singapore is set to see further demand for data hosting services as cloud adoption and remote working trends continue in the foreseeable future, along with government-backed e-governance initiatives such as the ‘Digital Society’ project under the Smart Nation initiative.

As such, Internet Exchanges are crucial to provide efficient interconnectivity for ISPs, content providers, and enterprises in Singapore, providing, in the best case, a distributed and resilient data center and carrier-neutral point for traffic exchange. The presence of a neutral Internet Exchange has multiple benefits for a digital hub, including increasing the resilience and performance of Internet connectivity and increasing the attractiveness of a location. By exchanging traffic as close to the source as possible, networks can reduce the distance that data need to travel – and this has a huge impact on the performance of content and applications.

Be it for functions such as streaming video conferencing, accessing cloud resources and applications, or sharing data with partner companies along digital value chains, across sectors such as finance, e-Commerce and more, Internet Exchanges encourage providers to host their cloud services, applications, and content in Singapore, furthering the growth of data centers here and putting Singapore on the map as a hub for Internet traffic.

Coupled with Singapore’s world-class digital infrastructure, the nation is now an ideal place for some of the biggest technology companies to establish their presence to get nearer to their key markets in Asia such as China, India, and Indonesia – fast-growing economies with high internet consumption.

As such, it was only logical for DE-CIX to be in the heart of the region as the next step in the company’s international expansion.

Beyond just business expansion, DE-CIX aims to further create a robust and secure interconnection ecosystem within the region, as more content and cloud-computing players expand their footprint throughout Southeast Asia via their presence in Singapore. Networks can serve content to locations in Southeast Asia at much-reduced latencies, improving the performance of content and applications, and therefore improving the user experience.

What trends do you see contributing to Singapore’s data center industry the most?

Covid-19 has accelerated the demand for data centers as businesses need to leverage AI and modern automation technology to support their business needs as well as to keep their staff and users safe. This includes migrating to the cloud, virtualizing resources and processes, and more, as hybrid work arrangements will be set to stay in the coming years, and possibly become the norm moving forward.

As a hub to the region, businesses in Singapore will have to adapt in order to stay connected, not just locally but with its regional teams/markets. Beyond that, the Government’s digital initiatives have also been actively pushing the focus towards the need for data and greater connectivity/automation.

What we see worldwide as a fundamental upcoming trend is a need for data center operators to offer their customers more than just the physics of the site itself – the set-up and design, power, physical security, and uptime. Data center customers want a solution for the digital transformation of their business processes and models. Specifically, they need to be able to control their connectivity to partners and customers. This means that data center operators need to be developing a new set of KPIs that relate to the interconnection potential of their site – the density of networks that can be accessed virtually, and access to scalable and customizable interconnection services.

No operator of data centers can hope to offer all of this on their own. Therefore, to effectively meet the demands of customers for seamless and efficient interconnection and make their own facilities more attractive, data center operators need to be part of a healthy and vibrant interconnection ecosystem.

Experience shows that the most effective way to achieve this is through the presence of an Internet Exchange (IX). DE-CIX’s neutrality means that data center operators of all sizes and genres can become a part of a larger interconnection ecosystem and pass these benefits on to their customers.

Another global trend is the “glocalization” of the Internet and digital demands. Users and enterprises around the world have a growing demand for and rely more heavily on the same digital content, applications, and services.

At the same time, various technology applications such as cloud computing, virtual reality, cloud gaming, e-health, connected and autonomous cars, are creating ever higher demands for the lowest possible latencies.

So, we will see the hosting and processing of data move increasingly close to the end-user, otherwise known as the ‘edge’. With its strategic location and growing interconnection possibilities into the region, Singapore is the logical stepping stone for content providers and cloud companies to base their data centers when looking to improve user experience in Southeast Asia.

In the second part of the interview, Ivanov talks about the concerns of internet outages, the 5G revolution, and the potential use cases as well.

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