Hong Kong to keep crown as Asia-Pac's top data center hub

Despite high real estate prices.

In a release, Frost & Sullivan says Hong Kong is likely to remain as a key data center market in Asia Pacific in the near future despite limited availability of suitable land and high real estate prices.

Ms. Danni Xu, Research Analyst, ICT Practice, Asia Pacific at Frost & Sullivan said that the Hong Kong Government’s continuous support for the sector will see Hong Kong remain as a key market in the data center sector.

She added that Hong Kong’s strong political connection to Mainland China allows it to act as a gateway for global companies that seek to tap into opportunities in China’s market.

“Moreover, Hong Kong’s business-friendly and free-trade environment has drawn a number of multinational corporations (MNCs) to set up their regional headquarters in the country. This has brought in numerous investments and job opportunities, and created demand for data center services,” she said.

Ms. Xu also said that the Hong Kong data center market is expected to grow at a CAGR of 15.3 per cent to reach US$ 802.6 million in 2019.

However, she added that service providers may choose to locate a part of their facilities outside of Hong Kong to reduce their capital and operating expenditure and tap into the increasingly demand of business continuity planning and disaster recovery service.

Ms. Xu said that cloud computing emerged as the fastest-growing segment of the data center market over the last three years and helped to add value to service providers’ traditional portfolios. This created new revenue streams and led to strong growth in revenue.

Frost & Sullivan estimates that each dollar spent on cloud services drives an additional spending of 20–25 cents on other services, such as connectivity services, hosting services, and information security services.

Ms. Xu said that the popularization of cloud computing has led to the emergence of cloud-centric data centers, such as CITIC Telecom CPC’s cloud centers and Pacnet’s HKCloudSpace2 data center, which are built with multi-tenancy and pay-per-use models as a key theme.

“In future, this multi-delivery model environment is expected to give rise to IT-as-a-Service, where IT budgets would cease to exist at an organization level and instead, become embedded into business units’ budgets,” she added.

She also said that consequently, IT departments would shrink and Chief Information Officers (CIOs) are likely to evolve into internal service providers, whose roles revolve around business innovation, rather than technology innovation.

Ms. Xu noted that a majority of multinational companies headquartered in Hong Kong foresee growing demand in most parts of the Asia-Pacific region. Hence, they are actively expanding their footprint and shifting their business focus beyond the country.

As a consequence, besides strengthening the local business, data center and cloud computing service providers are also looking to set up overseas facilities, to tap regional businesses—not only to develop new customers, but also to facilitate their current customers’ expansion pace, she added.