With or without managed service
From a technology perspective, improvements in technology mean that many IDCs are going to begin upgrading their infrastructure. Some are not properly equipped to handle mission-critical applications and are going to have to adapt quickly in response to demand for better performance. The market for IDCs is fairly new in Asia. As it matures, we should see a shakeout, with IDCs that have cut corners on design and technology losing out to providers that can offer greater security and reliability.
NetTasking's Sam Lin thinks that infrastructure management software will become an increasingly important element that the hosting industry will tap on. As the perimeter of control and coverage of IDCs expand with the increasing customer database, infrastructure management software will be hailed as the Holy Grail for helping IDCs manage their customer networks.
The more powerful the software, the more extensive the capabilities and services the IDC can in turn offer to its customers. Using global content routing software from NetTasking and Unitech Networks, IDCs can provide accurate Internet traffic management for multi-sites to serve requests, improving service availability as well as response time.
On the other hand, not all IDCs will be drawn into purchasing expensive management software, considering the implementation and costs requirements. Let alone, being able to charge end-users competitively, and IDCs will be hard-pressed to pass on these capital investments to their customers for fear of pricing themselves out of the market.
J. Josef Versl, Managing Director Triaton Asia concurs, but cautions that IDCs may soon find themselves crowded out of their niche market as hardware vendors are also entering the market. They often have a lower cost of hardware and, in most cases, already have established outsourcing data centres.
Mr Lau Soon Liang, Assistant Chief Executive at National Computer Systems anticipates the accelerated increase in the demand for managed storage services. With the liberalisation of the telecommunications market, charges will be very competitive and this will lead to more demand for hosting. The worldwide shortage of skilled IT workers will also be another factor to increase the demand for outsourced hosting services.
Overall, Lehman Bros believes that these challenges are creating increasing barriers to entry, which should accrue to the long-term benefit of incumbent providers. As soon as the industry revenue growth picture stabilises the hidden value of the industry's real estate position and the associated pricing power gained is likely to be increasingly appreciated by investors.
This would have the effect of limiting new entrants. A view supported by Raymond Choong of iSTT who cites the fact that Telco players are not coming into Asia in a big way due to the fragmentation of the market. Rather many of them like AT&T, have scaled back operations. Quest has no presence in the region and will not move, due to the current situation. Even companies like WorldCom are running their HQ out from Sydney and in Singapore thru their nodes here, supporting the Asia region.
