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Data center providers continue to expand in emerging markets, despite risks

Cloud solution providers (CSPs) and colocation data center companies are actively looking for mature emerging markets with large numbers of users and a shortage of data center capacity.

“There is no doubt that this has been and continues to be an accelerating trend,” said Omdia analyst Alan Howard. “India is a good example of a market that is maturing rapidly, so what we are seeing are global companies entering the market to seize this opportunity.”

India’s Ministry of Information Technology plans to offer incentives of up to nearly $2 million under a nationwide data center policy, and some Indian state local governments – including Maharashtra , Telangana, Karnataka and Uttar Pradesh – offer special incentives that include land grants and other concessions to spur investment in data centers, according to ICRA. In May, ratings agency ICRA announced that India’s data center industry is expected to see its capacity increase fivefold over the next five years.

India is one of the fastest growing data center markets in Asia, and the size of the Asia-Pacific data center market is expected to reach almost twice the size of the North American market. here 2025.

China is another hot market, according to Vladimir Galabov, head of cloud and data center research practice at Omdia.

The biggest data center projects expected to be completed this year and the first half of next year are in the Beijing area, he said.

“Another big area for expansion continues to be Shanghai and the Yangtze River Delta,” he added.

He expects smaller towns around major metropolitan areas to benefit from new trends in data center site selection.

“Proximity to the metropolitan area allows for low-latency connectivity for businesses located in the city, while real estate prices generate better returns for the data center operator,” he said.

The main reason for data center providers to expand beyond their traditional core markets is to satisfy existing demand in areas with limited real estate.

For example, he expects data center projects to ramp up in Malaysia and Indonesia due to land constraints in Singapore and Hong Kong, where many undersea cables land.

The same goes for Europe.

“We expect cloud and data center capacity in Italy, Poland and Slovakia to increase several times in 2022 and 2023, as large-scale cloud service providers build huge data centers” , did he declare. “The three new EU hotspots will become net exporters of cloud services to Germany, France and other EU countries.”

So it’s no surprise that major global data center companies are eyeing these territories.

However, opportunities in emerging markets do not come without their challenges.

For example, the war in Ukraine has resulted in fallout for Western companies operating in Russia and Belarus. But the geopolitical fallout has created divisions elsewhere in the world, increasing the risks.

Fortunately, data center companies have been aware of these particular risks and have not made substantial investments in Russia or Belarus.

According to Omdia’s Data Center Construction Tracker, of the 38 largest global cloud and colocation service providers, none own and operate data centers in Russia, Belarus or Ukraine.

In fact, large data center builders often ignore many countries that would normally be considered good locations for data centers, due to the potential for geopolitical risks.

Other service providers use local partners or buy out existing companies.

Last month, Digital Realty completed the acquisition of South Africa’s Teraco for $3.5 billion.

And, last spring, Equinix completed a $320 million acquisition of West African data center provider MainOne. This announcement was quickly followed by the acquisition for 735 million dollars of five data centers in Chile and Peru.

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