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Data centre and cloud players share aligned views at PIKOM panel discussion

Estimated reading time: 8 minutes

Last week, MDCA and OM, a chapter of PIKOM (National Tech Association of Malaysia) put together a simple programme to encourage data centre and cloud industry dialogue.

PIKOM and OM invited industry players like Microsoft, Hitachi Sunway, HeiTech Padu and IP ServerOne, so that they may share their views and opinions about the topic of licensing the data centre and cloud services provider industry.

Cheah Kok Hoong, Outsourcing Malaysia (OM) chairman kicked things off by higlighting the many issues that seem to plague the data centre and cloud industry – there is the revocation of cabotage which many in the industry is calling for because of perceived impact upon foreign direct investment (FDI).

But the main topic of the programme is the looming potential of being regulated by MCMC. PIKOM Secretary Ong Chin Seong took lead to address this topic by engaging in dialogue with DC and cloud players that were in attendance.

Moderator CS Ong on the far top left corner, and his line up of panellists.

Cheah brought attention to the MyDigital blueprint launched this year which targets to attract RM70 billion in digitalisation, increase the digital economy’s GDP contribution to 22.6% and provide 500,000 job opportunities by 2025.

“It is also interesting to note that cloud services are earmarked under the blueprint; for example to nurture and enable local data centres to provide high-end cloud computing services.”

The digital economy is expected to continue expanding and this inevitably leads to more demand for IT, infrastructure, high availability. DCs have been helping businesses not just store data, but also to provide backup, disaster recovery, data management, networking and more.

As such, the local DC industry is expected to generate RM3.6 billion in revenue by 2025.

A rich ecosystem

MDEC director, Wan Murdani Wan Mohamad, pointed out during his presentation, that for Malaysia to position itself as a data centre hub, “…we need to make sure that we have enough connectivity, so that Malaysia can be connected to the rest of the world.”

Wan Murdani also observed MyDigital’s ambitious objective to achieve 80-percent cloud usage across the government, in the next two years.

“So, in order for us to meet these we have to ensure we have a global CSP footprint in Malaysia, and ensure that our local players can grow in tandem with the growth of the cloud and data services in the region.”

When you talk about data centre and cloud services, there are different level of players in this space. So, it shows that big players, global players, local players, smaller players – all of them have a role in contributing to the richness of the ecosystem.

Wan Murdani wanted to demonstrate how rich the local ecosystem is and explained, “When you talk about data centre and cloud services, there are different level of players in this space. So, it shows that big players, global players, local players, smaller players – all of them have a role in contributing to the richness of the ecosystem.”

He shared that new policies introduced will impact the value chain of this ecosystem. For example, if a certain policy affects data centre providers, that means there will be impact to lower level services in terms of cost or regulatory barriers and so on.

“So when we address the ecosystem, the policies must be progressive and must take into account all of the barriers for not only big players, but small players.

“We must put in every effort to ensure no one is left behind if certain policies are put into place,” he said.

He also opined that that the presence of global CSPs, and their collaboration with local players can benefit the ecosystem. “We want to grow our local industry to RM3.6 billion. That means we need to develop that capacity and that may come from global platforms in the form of opportunities and capabilities.”

Wan Murdani sees local players being able to reach new customers via focus on niche areas.

So when we address the ecosystem, the policies must be progressive and must take into account all of the barriers for not only big players, but small players.

Data centre investments – long term commitment

Due to the long-term nature of data centre investments, not to mention the billions of ringgit involved, potential investors look towards policies that are stable in nature and that offer assurance.

Wan Murdani said, “If you are talking about 10 to 15 years of operations, that means there should not be any major policy shift in terms of governance, in terms of infrastructure, so that global players can operate in a predictable manner that assures their new and existing customers as well.”

MDEC observed some other key areas that data centre investors take note of include:

  1. data centre investments have to be coupled with connectivity or we may be isolated from the rest of the world. Hence, the cabotage issue causes so much industry furore because of its potential impact upon sustainable investments of submarine cables that carry internet traffic around the world. Wan Murdani opined that the growth (in number) of submarine cable landings have to be in tandem with our aspiration to be a data centre hub for the region.
  2. introductions of new policies must not distort current growth and opportunities that we have in this sector
  3. a relook at potential data disclosure regulation – ensuring global best practice when it comes to data acquisition

Relevancy of licensing for DC and CSP players was another key question that was brought up. There are existing licenses in Malaysia for activities like Internet and telco connectivity. But do all data centre players have scope of work (SOW) that include these licensable activities?

In terms of data centre investments, there are strong indications and pipelines and opportunities that are coming to Malaysia…. but there must be firm decision from the government about putting in place progressive policies to capture data centre opportunities!

Also, should ensuring data protection be a reason to regulate the local DC and CSP industry  when many countries including Malaysia, already have personal data protection laws to adhere to?

Views about potential Regulation and licensing

Cheah highlighted previous efforts to engage and consult with MCMC regarding the latter’s announcement to regulate the local DC and cloud industry. The intention of MDCA, OM, PIKOM and MDEC is to gather more input especially from affected local and MNC players, for MCMC’s due consideration.

PIKOM Secretary CS Ong went straight to the crux of the matter by asking: What would be the impact to the country’s digital economy if MCMC’s proposed licensing and regulation for the DC and CSP industry, goes ahead?

Microsoft

Microsoft’s Jasmine Begum pointed out lack clarity of the proposed licensing draft and ensuing multiple engagements, as the biggest challenge. “We struggled with the clarity of what was the end goal.”

“We felt that the licensing model would not in any way support the goals that were set out in all of these policy documents (MyDigital and 12th Malaysia Plan).

 She opined that putting in more regulations and adding to the cost of doing business in Malaysia would impede the growth of the innovation ecosystem and add cost for consumers.

“If we increase new regulations or new barriers to entry, it will not bode well for Malaysia,” she said.

HeiTech Padu

According to HeiTech Padu’s Abdul Halim Md Lassim the role of regulations is regulate and ensure quality of service. “But it is also a double-edge sword because of the overheads from a business perspective. There may be negative impact upon our competitiveness.

“The challenge is to find the right balance between licensing to regulate, to ensure customers are protected, and to ensure the industry is competitive enough so that entrepreneurs and multinationals can do business in Malaysia and contribute back to the economy,” Halim said.

IP ServerOne

IP ServerOne Solutions, is a local provider that offers premium hosting solutions including cloud hosting, dedicated hosting, managed services, data centre co-location, and more. Its director Lee Cheung Loong, wanted to highlight the licensing fee is a fee that varies according to revenue.

“I have to absorb this cost out of my own pocket. The cost could be passed to customer, but it will result in consequences ie. customer reviewing our contract, customer looking for another provider, or worse, customer looking for provider in a neighbouring country.”

Hitachi Sunway

Eric Foo, VP of joint-venture Hitachi Sunway Information Systems (HSIS), opined that the proposed licensing regulation will definitely impact the country’s digital transformation aspirations.

“Cost of doing business will definitely increase, (especially because of) a USP fund contribution that may be imposed (upon licensees).

Eric also highlighted, “With potential change to our shareholding requirements, there will also be impact upon our future investments.”.

The panel discussion moderated by CS Ong was over an hour long.

But the general consensus among the majority, could be reflected by conclusion that MDEC’s Wan Murdani came to at end of his presentation: “In terms of data centre investments, there are strong indications and pipelines and opportunities that are coming to Malaysia…. but there must be firm decision from the government about putting in place progressive policies to capture data centre opportunities!