What Southeast Asia Must Consider in Laying the Right Digital Foundations

Amid Southeast Asia (SEA)’s expanding computing and data storage needs, the region is quickly emerging as the latest hunting ground for data center investments. As the adoption of particularly compute-intensive artificial intelligence (AI) technologies picks up pace, the demand for data centers across the region is expected to expand at 20% a year for the next five to seven years. 

More data centers will mean increased availability and scalability of cloud services, reduced latency, and improved performance for businesses operating in the region which spells good news for SEA as a still nascent digital region bearing immense potential. However, its long-term progress is not guaranteed and can be curtailed by poor planning, especially in setting up the early foundations for its newly emerging digital hubs.

A region rich in investment potential

Southeast Asia is experiencing a surge in technological advancement, making it a highly attractive market for investors. Massive investments are flowing into the region, and this trend shows no signs of slowing down. This rapid growth is fuelled by several key factors, including significant demographic shifts and a strong push towards digitalization.

A young and technology-savvy population, with 61% of the region under the age of 35, is driving a surge in internet and mobile usage. This demographic dividend, coupled with a rising middle class, is creating a massive and increasingly sophisticated market for digital products and services. This is further amplified by the region's rapidly growing population of internet users — with Singapore, Brunei, and Malaysia boasting some of the highest mobile penetration rates in the world.

This digital revolution is translating into significant economic potential. The value of SEA’s digital economy is projected to reach a staggering USD1 trillion by 2030, with the potential to double with the right policy support. Recognizing the immense opportunities, the world’s leading tech companies are actively vying for a dominant position in the SEA market.

The tech rush is undeniably here. While this influx of investment brings immense potential, it also presents significant challenges. Concerns are growing around AI’s ethical and environmental impact, including the need for robust regulations and a focus on sustainability in the face of increasing energy consumption.

Balancing compliance with performance

Today, the AI-driven data influx is simultaneously creating more urgent needs for data regulation in the region. An increasing number of SEA countries have enacted their own versions of data protection laws. For example, Indonesia brought together various related laws into the PDP Law in 2022. Malaysia recently updated its PDPA for data breaches. Singapore updated its own PDPA in 2020 while Thailand fully implemented its own version in 2022. Meanwhile, Vietnam rolled out its Personal Data Protection Decree in 2023. 

The increased regulatory scrutiny necessitating businesses to adopt localized approaches to data management to comply with regulations across multiple jurisdictions. While these laws uphold core data privacy principles, variations exist in specific regulations governing legal bases for processing and transferring personal information across borders, as well as timeframes for notifying authorities and individuals about data breaches or addressing individual rights requests. As such, businesses are left to confront an increasingly intricate regulatory landscape.

These complexities pose challenges for businesses navigating through diverse enforcement practices globally and can limit their ability to fully leverage cloud services. Businesses also need to evaluate if all-in-one hyperscaler solutions end up limiting the scope of their business operations due to interoperability issues. Not to add, the evolving regulatory landscape also necessitates full transparency on data storage and data flows that may not always be guaranteed.

Regulatory scrutiny is also growing in one other sector: businesses’ environmental impact. Singapore, as an example, has intensified its focus on sustainable growth and low carbon emissions, exemplified by the recent extension of the Energy Efficiency Grant (EEG) to include data centers. Ultimately, while relying on the cloud can enable businesses to stay flexible, agile, and compliant with local data regulations, the reality remains that data centers have a voracious appetite for energy — accounting for up to 5% of global carbon emissions. AI-purpose-built hyperscaler data centers will also further exacerbate carbon emissions, intensifying environmental concerns.

This makes it equally critical for businesses to ensure that expanding their cloud footprint does not come at the cost of minimizing their carbon footprint. Especially for SEA businesses just embarking on their cloud journeys, the price of backpedaling could be more than they reckon.

Safeguarding future success with cloud prudence

Pursuing a multi-cloud approach is now a matter of prudence for businesses to ensure that their cloud services are tailored to their specific operational demands and objectives. This will safeguard success in the long term by effectively hedging against potential disruptions and vulnerabilities inherent in a single-provider model. 

Businesses should prioritize choosing trusted cloud providers that operate in accordance with the General Data Protection Regulation (GDPR), ensuring data sovereignty and protection against extraterritorial regulations while providing compliance with local data regulations. By working with data centers strategically positioned in various parts of the region, businesses will have the flexibility to choose the storage location for their data, aligning with the regulatory frameworks of specific countries or regions — a crucial aspect for ensuring business stability and security.

Furthermore, as environmental concerns take precedence on business agendas, it becomes imperative for businesses to prioritize greener data centers that possess the necessary power and scalability while addressing the growing carbon footprint. Additionally, using carbon calculators as a quantifiable metric can also effectively manage, reduce, or offset carbon emissions. By coming together, these measures can promote a more responsible and resource-efficient digital economy. 

Ultimately, a proactive approach toward cloud strategy, grounded in careful consideration and foresight, is essential for SEA to fully realize its potential in the evolving digital landscape. While the allure of convenience offered by hyperscalers may be enticing, it is crucial to recognize that hasty decisions may lead to unforeseen challenges and limitations. It is imperative for SEA to prioritize the establishment of the right foundations to position itself for long-term success in harnessing the power of the cloud, ensuring that its digital ambitions are not curtailed by avoidable setbacks.

The views and opinions expressed in this article are those of the author and do not necessarily reflect those of CDOTrends. Image credit: iStockphoto/Thinkhubstudio