Rising Horizons: The Race for Cloud Supremacy in Asia-Pacific

It is no secret that Asia-Pacific has been a hotbed for technological investment, with digital transformation continuing to drive the demand for cutting-edge technologies such as data fabric management, Artificial Intelligence (AI)/Machine Learning (ML) solutions, and a smart Internet of Things (IoT). These cutting-edge technologies are supported by cloud platforms, and cloud deployments are fundamental to any successful digital transformation initiatives.

Cloud hyperscalers are aware of Asia-Pacific's enormous potential. This region is seeing rapid development and investment by cloud providers, including Google Cloud, Microsoft Azure, and Amazon Web Services (AWS). AWS declared that it will add an extra S$12 billion between 2024 and 2028 to the current cloud infrastructure in Singapore. Additionally, it plans to launch in two other regions in early 2025: Thailand and Taiwan. As part of the Indonesian government's Golden Indonesia 2045 Vision, Microsoft announced an investment of US$1.7 billion to build new cloud and AI infrastructure in Indonesia, while also announcing a US$2.9 billion cloud and AI infrastructure investment in Japan.

AWS cloud services are being used by the FWD Group, a pan-Asian life insurance group, to accelerate software development and deployment, and expand its generative AI capabilities. One of the biggest banks in Thailand, Kasikornbank (KBank), uses Google Cloud to automate and manage microservices for its mobile banking app. As a result, the application has grown to an average of 500,000 users per month and development cycles have been shortened from months to weeks. The Japanese agricultural machinery manufacturer Kubota Corporation uses Microsoft Azure in its Engine Engineering Department. The company uses cloud-based High-Performance Computing (HPC) for engine simulation and specification evaluation.

The large investments from the major cloud hyperscalers in building and strengthening their cloud infrastructure in the Asia-Pacific region will have a significant impact on not just the trajectory of technology adoption, but also a boost to a country’s ability to better serve its citizens. For example, Microsoft Azure is working with Thailand’s National Health Security Office to offer personalized healthcare to the citizens of Thailand, using the Azure OpenAI Service and Azure Machine Learning to simplify healthcare policy data. This Public-Private Partnership (PPP) is crucial in ensuring Thai enterprises have access to cutting-edge new technologies and remain competitive in an increasingly digital world.

The presence of large cloud hyperscalers building data center infrastructure across Asia-Pacific will also have a significant impact on data residency and sovereignty challenges. Previously, the main concern for enterprises, especially in heavily regulated industries such as finance and the public sector, was in terms of the transfer of sensitive data outside of the county or where data will be residing. With in-country data centers, cloud hyperscalers can work with local country regulators to ensure compliance with local data risk and governance. This has also helped cloud hyperscaler ecosystem partners that build solutions on top of cloud services to be able to better serve their customers, without worrying about data residency challenges.

The large investments made by AWS, Microsoft Azure, and Google Cloud in this region, and Alibaba Cloud in Southeast Asia can also be seen as a response to a shift in global technology dynamics. The Asia-Pacific region is fast becoming an important region in technology innovation. The increasing concentration of cloud data center infrastructure in Asia-Pacific will be a hotbed for regional technology Research and Development (R&D), enabling researchers to test and deploy new technologies faster and more efficiently. The startup ecosystem is also expected to benefit from this as local startups will have better access and support to cloud services, leveraging cloud solutions that are available in other regions, tailored to Asia-Pacific nuances.

The strengthened presence of cloud hyperscalers in Asia-Pacific will have a trickle-down effect on the technology ecosystem, especially for independent software vendors with cloud-dependent solutions. Software-as-a-Service (SaaS) solution providers should take advantage of the regional presence of these cloud hyperscalers and work together to provide robust and innovative SaaS solutions to enterprises in the Asia-Pacific region. However, it will be important for these SaaS vendors to have solutions that are complementary to the core cloud services. For example, an Indonesian local cybersecurity SaaS provider can utilize marketplaces from cloud hyperscalers and offer data security solutions that comply with local data residency frameworks. This will help create a win-win situation for both cloud hyperscalers and the cloud ecosystem partners.

From a cloud hyperscaler perspective, while large investments signify a strengthening of presence in a particular country, that in itself will not be enough. Cloud hyperscalers will have to provide more localized services and solutions that are specific to a particular country. These include local language and customer service support, partnering and nurturing local system integrators and managed services providers, investing in cloud talent programs, and skilled knowledge transfers to ensure a collaborative and competitive local technology ecosystem. Cloud hyperscalers should also build industry-specific tools and services based on key industries for specific countries (manufacturing in South Korea and Taiwan, finance for Singapore and Hong Kong, etc.).

The shift in cloud infrastructure development from the West to the Eastern side of the world is expected to continue. ABI Research forecasts that Asia-Pacific will eventually be the center for technology innovation, especially in industries such as manufacturing, where a large chunk of the world’s largest manufacturers are based. Cloud computing will be the engine that powers this innovation, and as enterprises in Asia-Pacific continue to embark on a digital transformation strategy, cloud hyperscalers in Asia-Pacific will play a major role in ensuring the success of these enterprises.