Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Alibaba plans to build a data centre in Vietnam to store data locally in compliance with legal requirements, while it currently relies on government-owned facilities.
The Chinese tech group told Nikkei Asia that for now it rents space for computer servers from telecommunications companies Viettel and VNPT, providing one example of how companies have responded since a contentious law took effect in 2022.
Google, Amazon and others fought hard against Vietnam’s plan to force them to keep data in the country, but the policy ultimately went through towards the end of that year. As a result, businesses have been looking for cross-border options.
Dang Minh Tam, solutions architect lead at Alibaba Cloud, said the company used co-location — a term for renting out space from data centre operators — in partnership with the two state companies to park client data locally. But it also backs up data at clients’ request at its own server farms located across the region, from Indonesia to Singapore.
Alibaba plans to build a data centre in Vietnam to keep pace with demand in one of Asia’s fastest-growing economies, Tam said, adding that he did not yet know the cost and declined to give a timeline for the project, as the details had not been made public. The cost of building a data centre can exceed $1bn.
“Vietnam is a very [high] potential market,” Tam said. “There’s a lot of space to grow.”
One reason companies such as Alibaba might want to build their own servers, in addition to cost considerations, is to ensure greater security and control over their information.
Liability can be an issue when multiple companies are involved in managing the same data, said Leif Schneider at law firm Luther.
Contracts must be clear “so you always know who bears what risk and responsibility”, he said at a cloud and data centre conference in Ho Chi Minh City last month.
Local companies, meanwhile, share Alibaba’s bullish outlook on the market.
Viettel IDC, run by Vietnam’s military, told Nikkei Asia that its customers, from Alibaba to Microsoft, were demanding environmental, social and governance improvements.
It calls its approach “ESGT”, with the added use of technology. For example, tech can be used to track and optimise water use, which is used to keep computers cool and can rack up big costs. Viettel does not currently use much renewable energy but is aiming to make renewables count for 30 per cent of its power consumption by 2030, said technical department manager Nguyen Dinh Tuan.
“We need to prepare for the data centre boom,” he said. “We need to prepare for the sustainability trend.”
Viettel projects the south-east Asian country’s data centre market will expand 15 per cent a year for the foreseeable future, possibly more if a big cloud company such as Alibaba invests there, the company said.
The expansion is fuelled in part by the data localisation rules, which Hanoi admits violate its free trade agreements but which ease the one-party state’s ability to access data.
The rules have been a boon for cloud providers that already have server farms in Vietnam, including gaming unicorn VNG and IT company CMC, which said it would construct at least two data centres in the next few years, potentially doubling its capacity.
Vietnam should look to Malaysia and Thailand, whose markets took off after international companies entered the competition, said Evolution Data Centres chief Darren Webb.
“The countries that try to protect their domestic markets, that doesn’t work,” he said at the industry conference. “The pie doesn’t get bigger.”
A version of this article was first published by Nikkei Asia on May 1. ©2024 Nikkei Inc. All rights reserved.
Related stories
Read the full article here