Data Centres as a Growing Investment Opportunity

Posted on 2018-04-25
Data Centres as a Growing Investment Opportunity

With the rise of online services and cloud-based computing, data centres are considered to be sound alternative assets, offering secure income streams that can help diversify a portfolio.

That being said, there are a number of considerations that need to be taken into account, while making investment decisions in the data centre services market.

Some of them are discussed below:

Regulatory Requirements

Data centre regulations are a critical factor that will affect your investment decision. A comparison between two competitive economies – Singapore and China will make this amply clear. In pro-business territories such as in Singapore, the government has been proactive in its efforts to offer tax incentives to attract multinational corporations (MNCs) and service providers to expand their data centre capabilities in the country. On the other hand, stringent censorship regulations continue to be the biggest hurdle for foreign investors entering the Chinese market.

Value Chain Positioning

The idea of value chain analysis is to understand how ones business compares with competitors at a detailed level. The modular data center space has a wide array of competitors coming from a variety of backgrounds. Technology product management leaders in this space must focus their offerings to align with the three predominant use cases namely, BYOD & Mobile Users, Software-Defined Networking & Big Data if they hope to prosper in this niche market.

Market Analysis

Understanding the market statistics is crucial to succeeding in the business. Some of the aspects that have to be factored in include the level of maturity of the market and the current status of supply. Take for example data centre projects in Singapore, which is already high, and therefore we observe some overcapacity in the short term. In the meantime, looking at the growth opportunities within Asia Pacific, where data centres are a relatively new asset class, we remain positive that regional demand for data storage will continue to rise exponentially.

As the need for data storage continues to expand, so does the space needed to house the technology required for the expansion. There exists a real opportunity for investors to benefit from the strong growth story currently unfolding in this segment.

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