Indonesia’s data centre industry threatened by price war

• Many users do not understand complexities of classification
• Not a matter of higher or lower quality, but suiting business needs

 
ACCORDING to DataCenterDynamic’s research division DCD Intelligence (DCDi), data centre investment in Indonesia will hit US$850 million in 2020, a 70% surge from the US$480 million expected to be invested in 2016.
 
But this promising industry is faced with a slew of challenges, including growing demand for power and rackable space.
 
And that promise is also in danger of being scuttled by a price war among industry players.
 
According to Telkomsigma president director Judi Achmadi, this is also because of a lack of understanding amongst users about data centre specifications, technology, certification, and the Tier classification system.
 
“Many players are taking advantage of users who do not understand these issues, and they are offering different prices where users cannot make apple-to-apple comparisons,” he accused.
 
The most recognised data centre certification comes from the Uptime Institute, whose Tier classification system from I-IV takes into account infrastructure, uptime, and various other factors.
 
However, a higher classification is not necessarily better than a lower one because it all depends on the client’s needs and business.
 
“If all players have the same classification, they have the same standard – you can’t offer prices 20% cheaper than our US$22,000 per rack per year,” said Judi (pic below).
 

 
In early June, Telkomsigma officially received Tier III certification from the Uptime Institute for its 23,000 sq metre data centre in Serpong.
 
Uptime Institute’s certification has three stages: Tier Certification of Design Documents (TCDD), Tier Certification of Construction Facilities (TCFF), and Tier Certification of Operational Sustainability (TCOS).
 
Telkomsigma claims to be the only provider in Indonesia to receive TCFF certification; others have TCDD certification.
 
The subsidiary of telco giant Telkom claims its revenue reached Rp1.1 trillion (US$81.45 million) for its 2015 fiscal year ended April 2016, a 95% increase from the year before.
 
With its TCFF certification, it is projecting its revenue would reach Rp3.2 trillion (US$236.95 million) for fiscal 2016.
 
The industry in Indonesia is also being fueled by Regulation No 82, a law which sets out requirements for electronic systems, transactions, signatures and domain names, and which also requires operators to place their data centres in-country.
 
Telkomsigma enterprise and wholesales data centre sales vice president Alexander Chandra said that 50% its users are banks and financial institutes.
 
“Companies today spend about 70-80% of their IT budgets to ensure their systems are up and running,” he said, citing IDC research.
 
“Companies realise that their IT infrastructure has now become an enabler for the business,” he added.
 
An ecosystem that’s not ready
 
Indonesia Data Center Provider Organisation (IDPRO) chairman Kalamullah ‘Muli’ Ramli) said his organisation is trying to bridge that gap of understanding between industry players and users, so that users would not compare prices but the types of services being offered.
 
But another problem is that certification is a costly endeavour.
 
IDPRO intends to learn from countries such as Japan and Singapore, which have created local accreditation that is recognised outside their countries, Muli said.
 
“The different providers only need specific certifications based on what their customer needs,” he said, adding that he hoped that this would take the sting out of the price war and strengthen the country’s data centre ecosystem.
 
There are three aspects to strengthening this ecosystem, according to Richard Kartawijaya (pic), chief executive officer of PT Graha Teknologi Nusantara (GTN), a subsidiary of Lippo Group.
 
“First, users must be able to differentiate based on their needs,” he told Digital News Asia (DNA).
 
The second is the need for a more robust fibre-optic infrastructure to support the industry, while the third is the need to educate both the market and the data centre providers.
 
“Without those aspects, the price war will heat up,” he added.
 
Frost & Sullivan Indonesia country manager Spike Choo concurred, saying that price is only one component of what users need to consider when choosing the data centre service best suited to their needs.
 
“There is also technology, the competence of the provider’s human resources, power supply, and more.
 
“Usually players which rely on low prices to compete are not strong in the other components,” he told DNA via text message.
 
Related Stories:
 
Indonesia’s data centre space has great growth potential: DCDi
 
Galasys in partnership with Indonesia’s Telkomsigma
 
US$2.7bil SMB cloud services industry in Indonesia by 2018: Odin report
 
 
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