IndonesiaMarket Insights

Thriving Cloud Business Drives Indonesia’s Spending on IT

By 4 March, 2022June 30th, 2023No Comments


IT worker using a laptop in a server room

Amazon Web Services to Invest 5 billion USD In Indonesia Cloud Business

In December 2021, Amazon Web Services (AWS), U.S. e-commerce giant Amazon’s cloud service, declared its plans to invest 5 billion USD in Indonesia over the next 15 years, as it launched its first cloud infrastructure in the country. Jakarta becomes the 10th location of AWS’s cloud service in the Asia-Pacific, and the 26th globally. Other AWS regions in the Asia Pacific include Singapore, Beijing, Sydney, and Mumbai.

AWS claimed that the investment would bring about 24,700 new jobs and contribute 10,9 billion USD to Indonesia’s GDP within the 15 years. The announcement also implies that existing AWS’ Indonesian customers – including local tech unicorns, startups, enterprises, and government institutions – can now leverage AWS technologies from the local data centres to serve end-users.

Indonesia – one of Asia’s hottest data battlegrounds

The cloud market of Indonesia is currently relatively competitive with a lot of actors entering the market. Since 2018, Alibaba Cloud – the subsidiary of Chinese conglomerate Alibaba Group – set early steps into the Indonesian market, in June 2021 it already launched its third data centre in the country. Google Cloud also entered Indonesia by setting up partnerships with local data operators in 2020. Tencent Holdings, another Chinese tech giant, had its first data centre operating in April 2021  and plans to have the second one up and running in short. In the same year, Microsoft also revealed its intention to establish a data centre in Indonesia.

Some other foreign cloud providers that are present in the country are Japan’s Nippon Telegraph & Telephone, Singapore’s Keppel DC, and Princeton Digital Group. Local players are also attracted to the thriving cloud business, such as Telekomunikasi Indonesia – the largest telecommunications company in the country, as well as Data Center Indonesia.

Indonesia to lead Asia Pacific in IT spending

The appeal of Indonesia’s cloud market can be explained by some major factors. Firstly, the nation is the fourth most populous country in the world, making it a huge market with multiple untouched areas to dive into. Secondly, Indonesia is experiencing a booming digital economy. The e-commerce and fintech industries in the country receive a lot of attention from investors. The country is also home to an impressive number of tech unicorns – startups valued at more than 1 billion USD. A notable name is the tech startup GoTo, which was born in May 2021 from the merge of ride-hailing and payments company Gojek, and Indonesian e-commerce company Tokopedia. It has successfully raised 1.3 billion USD in its last funding round right before its planned IPO in 2022. Thirdly, the government’s local data storage requirements and the surge in demand for digital services during the COVID-19 pandemic has fueled the digital transformation of the country. Local businesses have been prompted to digitalize their operations during lockdowns when most of the employees had to work remotely.

With the increasing competition for cloud services and data centres, Indonesia is expected to have the fastest-growing IT spending in the Asia Pacific region over the next few years. The country has already become the biggest spender for IT in Southeast Asia since 2013, and is now set to pass other large countries as well. The country’s IT spending is expected to have a CAGR of 13% 2020-2024, bringing the sector’s value to 6 billion USD by 2024. With this pace, Indonesia’s IT spending will rank eleventh in the Asia Pacific by 2024. Japan and China are expected to spend the most at 155 and 141 billion USD respectively. The whole region’s expenditure on IT is expected to grow at an 8% CAGR to 475 billion USD by 2024, mostly driven by a demand for public cloud services.

Regarding revenue from cloud services, Indonesia was the second-highest earner in Southeast Asia’s cloud business 2020. With 600 million USD in total cloud-based revenue, Indonesia ranked just behind Singapore’s 1.8 billion USD. Indonesia’s revenue is expected to more than triple by 2025.

Graph showing Cloud market revenue in indonesia

However, there are also some obstacles for Indonesia to reach its full potential. According to Economist Intelligence Unit chief economist, “The challenge Indonesia has is around data nationalism, that the government there puts restrictions on companies in terms of having to host everything and be subject to restrictions in moving data in and out of the country, across borders. That is going to limit the adoption of some technologies in the market.”

It’s undeniable that Indonesia is one of the fastest-growing cloud markets in the Asia Pacific. As a tech-startup hub and with a flourishing digital economy, the country shows ample opportunities for digital services, especially cloud services and data centres. Growing investment into the sector parallels the growth in IT spending in the country. Therefore, despite some regulatory challenges the market might encounter, Indonesia’s cloud market will continue to thrive in the upcoming years.

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