Southeast Asia emerging as the new battleground for cloud service providers

  • Global cloud providers are ramping up investment in SEA as the region’s digital economy skyrockets

  • AWS’ recent investment of an additional $9 billion Singapore is the latest in the long list of investments by cloud providers in the region

  • Providers are working around a geopolitical battle between the U.S. and China.

In the wake of the growing demand for cloud services, Amazon Web Services (AWS) recently announced that it will invest another $9 billion (SGD 12 billion) over the next five years to boost its cloud infrastructure in Singapore. AWS started its Singapore operations in 2010 and has invested over SGD 11 billion since then.

“AWS has invested S[GD] 11.5 billion in the AWS Asia Pacific (Singapore) Region through 2023 and with the new investment, AWS’s total planned investment into its existing cloud infrastructure is set to double to more than S[GD] 23 billion by 2028,” the press release stated.

This investment comes at a time when cloud computing services are booming as artificial intelligence (AI) adoption gains momentum. Apart from AI, the growing popularity of fintech and e-commerce services in the Southeast Asia (SEA) region is fueling the demand for cloud services.

The region is also characterized by a young and digitally savvy population, which is driving the digital economy. As per Google’s latest report, the region’s digital economy is likely to hit $100 billion in revenue. The cloud computing market in Southeast Asia was previously forecast to reach $40.32 billion by 2025, according to India's Adroit Market Research.

Southeast Asia in focus

Over the last few years, AWS has increased its investment in SEA. It announced plans to open a new cloud region in Thailand with an investment of $5 billion over 15 years.

But AWS is not the only global cloud service provider to pump up its investments in SEA.

Earlier this month, Microsoft announced that it will invest $2.2 billion over the next four years in Malaysia to boost its cloud and AI-led digital transformation efforts there. It said that this is its largest investment in the last 32 years in Malaysia.

Microsoft’s CEO Satya Nadella visited Indonesia, Thailand, and Malaysia recently and, during his visit, announced that the company would be investing $1.7 billion in Indonesia over the next four years to build new cloud and AI infrastructure and to train 840,000 Indonesians on the new technologies.

All of this points to the growing focus of global cloud providers on the SEA region. Initially, cloud providers were largely focused on Singapore but this is changing now.

“Within Southeast Asia, Singapore has long been a hotspot for data center investments. That's due to its historic role as a regional hub of communications traffic and the presence of multinationals with heavy communications requirements within the market,” Matt Walker, Chief Analyst at MTN Consulting, explained.

“It is only in the last few years that the global cloud players have turned to other big Southeast Asian markets, in particular Thailand and Indonesia," Walker added. "These markets are important regionally but play a much smaller role within global communications networks and are harder to navigate in terms of permitting, reliable and cheap power, etc., and the cloud services market was slower to take off in these markets. Now, though, both markets are seeing enormous investments from the big three cloud providers."

Several Government initiatives launched to boost the digital economy are further driving cloud investments in the region. For instance, India has launched Digital India to transform the country into a “digitally empowered society and knowledge economy.” Similarly, Indonesia launched the Indonesia Digital Roadmap to boost the digital transformation of enterprises.

Most investments by cloud service providers involve training of tech professionals in the region. For instance, close to its investment in Malaysia, Microsoft announced a commitment to train 2.5 million people in ASEAN with AI skills by 2025. Similarly, along with investment in Singapore, AWS launched the AWS AI Spring program to enhance the adoption of AI and to train 5,000 individuals on AI skills annually from 2024 to 2026.

The Geopolitical equation

The SEA region is not only witnessing competition between global cloud providers, but the rivalry between the U.S. and China is also playing out in the cloud segment.

Chinese players like Tencent, Alibaba and Huawei are not only increasing their cloud investment in the region but also cutting rates. The growth of the U.S.-based cloud providers in the region, which is culturally and geographically close to China, is unlikely to go well with the Chinese Government.

“Most large enterprises across the region likely recognize that the big three U.S. cloud players can boast of a much larger global footprint, a more developed ecosystem of services, and more experienced sales and support teams to make it easy to actually buy and implement some of the more advanced services," Walker concluded. "The country of origin isn't necessarily the main factor influencing buying decisions."