Which service providers are in Indonesia's cloud market?

Indonesia’s data centre market is flourishing as global cloud solutions providers race to take advantage of the country’s booming digital economy. Financial benefits from using public cloud services could add as much as $36bn to Indonesia’s economy between 2019 and 2023.

According to market research firm Frost & Sullivan, Indonesia’s cloud market could be valued at up to $1.2bn by 2022, driven by demand from Indonesia’s base of more than 60m small and medium-sized enterprises. In April 2019 Amazon Web Services announced that it would locate its first cloud region – comprising three data centres – in Jakarta, with the first to open in late 2021. Amazon’s decision follows that of Google, which is scheduled to open its own cloud region in the capital in 2020. Google is seeking to expand a client list that includes local decacorn Gojek, valued over $10bn; unicorns Tokopedia and Traveloka, whose valuations exceed the $1bn threshold; and Indonesia’s new ride-hailing app Blue Bird, in which Gojek purchased a $30m stake in February 2020.

Dealing in Data

In March 2020 Microsoft announced a strategic partnership with Telkomsel, which is jointly owned by Singapore’s Singtel and Telkom Indonesia, aiming to leverage Telkomsel’s LTE network to bring Microsoft’s cloud, artificial intelligence and internet of things expertise to enterprises in Indonesia’s outlying regions. The company is also reported to be mulling an approximately $2.5bn investment in Indonesian data centres.

Japan’s NTT Communications plans to open the first of its NTT Global Data Centres in Jakarta, promising a 45-MW IT load. The company expects the market for data centre services to grow at an annualised 21% due to Indonesia’s thriving start-up ecosystem and commitments to developing Industry 4.0.

These global tech giants join China’s Alibaba Cloud – which has partnered with IndoInternet, Indonesia’s oldest private internet provider – to distribute cloud services. Alibaba Cloud has already opened two data centres in the country, with the second offering disaster recovery services. Dynamics behind the investment influx include competitive power tariffs for industry and the availability of affordable land, especially when compared with data centre powerhouses Singapore and Hong Kong – although land acquisition and permit delays can cause issues. Companies are also shifting away from Singapore, resulting from a moratorium on data centre investment, implemented because of concern over data centres’ carbon footprint, and in light of plans to open a number of hyperscale facilities of between 30 MW and 60 MW in 2019 and 2020.

Local players are also stepping up investment in data centres. In October 2019 Telkom Indonesia announced that its investment in new data centres would likely reach Rp1trn ($70.5m) in 2020, with its subsidiary Sigma Cipta Caraka earmarked to provide services to an existing base of 283 clients, mostly in banking and financial services. Meanwhile, DCI Indonesia will build a third data centre with a total IT load of 12 MW, and had originally planned to begin operations in early 2020. As of May 2020 these plans were temporarily put on hold because of the Covid-19 pandemic.

Data Policy

This influx followed a tide of considerable growth in domestic private data centre investment, with Indonesian banks investing an average of $250,000 annually from 2014, spurred by Presidential Regulation No. 82, which required electronic systems providers dealing with public data to host their data and disaster recovery centres on home soil by 2017.

In October 2019 the government ostensibly relaxed rules that had bound private companies to store and process data onshore; restricting the rule to government data. The switch was welcomed by foreign tech companies; however, domestic players cautioned it could restrict the ability of law enforcement to obtain data, and could possibly sideline domestic cloud computing and data centre operators, who lack the capital to compete with their larger overseas counterparts.