Rising to the cloud

The Philippines as a cloud and data center market

By Bjorn Biel M. Beltran, Special Features Writer

Long has the country held the reputation for its young, skilled, and technology-enabled population. In fact, the annual We Are Social’s digital report regularly ranks the country as among the most active internet and social media users on the planet.

This bespeaks of strong economic fundamentals that could carry the country’s economic narrative to further heights post-pandemic. Given that the current pandemic situation is controlled, the World Bank sees the Philippine economy expanding at 4.7% in 2021, before accelerating to 5.9% in 2022 and 6.0% in 2023, contributing to renewed progress in poverty reduction.

The potential for future progress is also apparent in how the country’s openness to adopt digital innovation such as cloud and data center technology.

“The Philippines is no stranger to global technologies like cloud and data center solutions. Because of Pinoy’s exposure to social media and business process outsourcing (BPOs) servicing global clients, there is a very high awareness to these types of solutions,” Ace Yutuc, vice-president for Product Management and Marketing at Bee Information Technology Philippines, Inc., said in an interview.

Furthermore, the environment created by the pandemic has accelerated digital transformation across the country to a point where it has pushed both private enterprises and the public sector to adopt both cloud and datacenter solutions for their digital infrastructures.

Jovy Hernandez, president & chief executive officer of ePLDT and senior vice-president & head for PLDT and Smart Enterprise Business Groups, told BusinessWorld that the global pandemic has been a catalyst for digital transformation, and that enterprises and public sector were required to take leaps to address their growing customers’ need in terms of online presence. Consumer applications from social media to video streaming, gaming, e-commerce and telehealth grew exponentially as people were forced to stay at home, and this has attracted the attention of global digital companies.

“The digital profile of the Philippines has motivated hyperscalers to build their infrastructure within the archipelago. As these tech providers strive for subscriber eyeballs, the population and digital economy of a country are critical considerations in terms of their data center road map,” Mr. Hernandez said.

“Globalization has erased boundaries, especially IT boundaries, and it is just a matter of time before businesses adopt these latest trends where the benefits outweigh the apprehension,” Mr. Yutuc added.

Allen Guo, country manager for the Philippines at Alibaba Cloud Intelligence pointed out that the Philippines has invested a lot of effort to encourage new industries to participate in the digital economy, especially with the introduction of initiatives like the Cloud First policy.

The Philippine Government’s Cloud First Policy promotes cloud computing as the preferred technology for government administration and the delivery of government services. Shifting to cloud computing is expected to foster flexibility, security, and cost-efficiency among users. Cloud computing also offers key advantages such as access to global systems of solutions, innovations, and services, as well as up-to-date cybersecurity.

“Thanks to its rapid economic growth in recent years, the Philippines has now progressed from having cloud discussions to experiencing cloud adoption. More businesses in the country are realizing how the cloud can provide transformative solutions and help them save money, while ensuring greater efficiency and flexibility to meet the ever-changing demands of customers,” Mr. Guo said.

“The Philippines is a large booming market with a big group of young while digital savvy population. The Philippine digital economy growth potential is enormous and local SMEs and enterprises are well-positioned to take advantage of these growth opportunities. There is a strong demand on digital transformation from local businesses in accordance with the Philippine government’s Cloud First Policy,” he added.

Seizing the opportunity
The Philippines’ prospects of becoming a digital leader in cloud and data center solutions are further improved by quite a number of factors. Mr. Yutuc pointed out that as “Pearl of the Orient”, the country is fortunate to have a strategic, valuable geographic location that places it at the crossroads of data traffic coming from the West and the Asia Pacific.

“Since undersea cables are the veins where all traffic come and go, the Philippines is the perfect landing area for Asia and worldwide traffic routes. Also, because Singapore and the surrounding regions have pretty much blanketed their areas with multiple data centers, the natural growth is towards nearby locations such as the Philippines. Plus, since the country is in a separate landmass, it serves as a natural redundancy site for all existing data center sites,” he said.

Furthermore, recent research show that due to the rapid pace of digitalization and a surge of demand, the country’s data center market is projected to grow faster than Southeast Asia, which is recognized as the fastest-growing region for co-location data centers.

Major data center hubs in Southeast Asia such as Hong Kong and Singapore paved the way for other countries such as the Philippines to market to cloud and data tech providers. Hong Kong is currently facing geopolitical risks out of the imposition of China’s National Security Law, while Singapore has issued a moratorium to freeze data center construction amidst high demand in response to sustainability concerns.

Further research by Global Data showed that from a Cloud Service Revenue perspective, the Philippines is anticipating a steep rise in cloud service revenues up to USD2.4 billion by 2024. This is due to the increase in cloud spending in the Enterprise segment and the government’s Cloud First Policy.

Mr. Guo backed this with more data from Alibaba Cloud’s survey titled “The Role of Cloud in Asia and Confidence in Asian Innovation”. Results showed 88% of Philippine businesses are now more supportive of using cloud-based IT solutions to grow their businesses as compared to before coronavirus disease 2019 (COVID-19). In addition, a majority (94%) of Philippine businesses now also view cloud-based IT solutions as a crucial component in mitigating the impact of the pandemic.

Mr. Hernandez added that the Philippines, as it possesses a burgeoning digital economy, robust domestic and international infrastructure, progressive renewable power mix, and data centers at par with the technologically developed countries, is an ideal destination to support the hyperscale data center requirements of the cloud and content providers.

The country is, thus, well-positioned to take advantage of opportunities in a new, growing cloud and data center market, and its pivot towards digital and cloud infrastructures sets it on the right path to future-proofing the economy.

“The COVID-19 pandemic has served as the impetus for the acceleration of digitalization in the Philippines,” Mr. Guo said. “Digital transformation will buttress recovery and growth in the post-pandemic era and help local businesses to get back on its track toward long-term aspirations. As remote working and online learning becomes the new normal, and most Filipinos turning to online platforms from shopping to entertainment, there is a surge in the need for cloud-based services to provide robust, resilient, secure and flexible support.”