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Enterprise spending on data centers and hosting services in Malaysia to grow at 5% CAGR through 2025

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The total addressable market size for data centers and hosting services in Malaysia, in terms of enterprise spending opportunity, is forecast to increase at a CAGR of 5% over 2020-2025, with more and more businesses in the country adopting cloud-based services and accelerating their digital transformation efforts, according to GlobalData, a leading data and analytics company.

Saurabh Daga, Technology Analyst at GlobalData, comments: “The rapid pace of digitalization in the country with several enterprises accelerating the adoption of digital business models like e-commerce, net banking, OTT entertainment platforms and remote working/Work-from-Home (WFH) strategies will drive enterprise spending on data center services to reach $430m by 2025.”

Several companies across Malaysia are now expected to adopt a hybrid approach or go completely remote over the forecast period. For instance, United Overseas Bank Malaysia is giving its workforce an option to work remotely two days a week even after the removal of COVID-19 restrictions. This shift towards remote/hybrid working model increases the demand for data center services, as they provide a central point of access for data, collaborative tools like Zoom and other essential business applications.

Daga adds: “Favorable government policies, codified in the digital blueprint known as MyDIGITAL, which outlines various strategies and initiatives for strengthening digital adoption, are driving digital transformation and making Malaysia a regional hub for digital content. Against this backdrop, cybersecurity will also be crucial factor for growth of data center & hosting services market in the country.

One of such key initiatives is the Digital Investments Future5 Strategy (2021-2025) of Malaysia Digital Economy Corporation, which puts emphasis on five key technologies: artificial intelligence (ai), cloud computing, cybersecurity, data centers, and digital content tools.

Malaysia is witnessing many new data center establishments, with the latest being the partnership announced in January 2022 between Chinese technology company Huawei and Malaysian real estate developer Hatten Land for developing data center. In November 2021, Singapore-based Bridge Data Centres announced a new data center in Malaysia, to be operational by end of 2022. In 2021, Microsoft announced its plan to launch first data center region in Malaysia.

Application hosting and data center services segment is expected to account for the larger market share, as enterprises generally prefer management of their applications and data being outsourced through a managed hosting services provider compared to a colocation center mainly due to affordability.

Daga concludes: “While the large (1,001+ employees) enterprises will account for the largest share of the total data center and hosting spending in Malaysia through the forecast period, the spending from micro, small and medium enterprises (1-1,000 employees) will increase at a marginally faster CAGR of 5.0% over the forecast period. A major driver for data center spending by SME’s is the Malaysian government initiative, which provides financial grants for SMEs to adopt digital marketing, electronic point of sale (e-PoS), HR and CRM systems, procurement systems, e-commerce, remote working and ERP/accounting and tax platforms.”

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