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The Rise of The Data Center Industry in Pakistan

Our Thinking

IT operations are becoming a crucial aspect of most Enterprise and Medium sized organizations in our country. As the automation of processes increases through implementation of world class ERPs, one of the main concerns that companies are facing is business continuity – what if a system becomes unavailable thus impairing or completely stopping the business process. Thus it is becoming necessary to provide a reliable infrastructure for IT operations, in order to minimize any chance of disruption. Thus Data Center Services are becoming a booming business in our country.

A Data Center (the cold room) is a facility used to house and maintain dedicated servers on behalf of an organization. It’s a concept that found life during the dot-com bubble in the US and has since then grown into a discipline unto itself globally. In Pakistan it started with the Basel II accords which separated operational risk from credit risk (meaning banks were now responsible for defaults and any operational problems that arise in banking) implemented by the SBP. Now with Basel III implementations and more and more medium sized companies aiming for enterprise level automation, IT becoming the core backbone on which business operates especially for industries such as Telecom, Banks and shipping, m-commerce and e-commerce growing in Pakistan and increasingly competitive landscape from a global community is driving the companies towards focusing on core competencies and outsourcing everything else.

The biggest reason for this change in mindset is cost. The overall IT spending shows that the lion’s share of IT expenses goes towards overhead and maintenance – as high as 70% of the budgets of IT departments are spent in maintaining IT infrastructures at the expense of adding new capabilities. This underutilization of equipment leads to high cost per transaction. Most servers in typical business data centers are utilized at only 5 to 10 percent of their maximum capacity and cooling and power distribution systems are also used to much less than their full potential.  Clearly that’s wasted capital and it makes the cost per computing transaction much higher than it needs to be. A secondary effect is that the fixed energy costs for running servers at low utilization makes the cost per transaction much higher than it needs to be.

The second factor is that outsourcing ensures access to operational expertise, much of which is unavailable internally due to economic or other restraints thus also freeing up internal resources for other purposes. These services also allow enterprises to leave the upkeep of network infrastructure and applications to the data center personnel allowing the company to focus on their core competencies. Not only does this increase efficiency, but also reduces the cost of running the network in terms of resources and manpower. Besides this, it also offers increased security, whether from environmental threats such as over-heating and dust or from viruses and infiltration via firewall maintained by the data center thus providing a high level of risk management.

The future for this industry is bright. It cannot be denied that traditional retail formats have been saturated and the present consumer environment is moving from bricks and mortar to online due to the increased convenience and a more satisfying retail experience. Many new ventures are now focusing on e-tail and need the expertise in networking and database while being focused on translating the retail experience onto the new medium. The biggest driver however remains the consumer themselves who as they become involved with the digital world more and more, will increase demands for storage, connectivity and more and as corporate turn to serve them, they too will drive the demand for reliable mission critical facilities.