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Pakistan is Behind Regional Peers in Setting Up Data Centers: Report

Despite pent-up demand, Pakistan has only 11 data centers, putting the country behind its regional peers in the data center market. Compare this to Malaysia which has a data center market worth $1 billion and Vietnam’s market is worth $454 million, according to the Digital Economy Report published by The Overseas Investors Chamber of Commerce and Industry (OICCI).

Within Pakistan, data centers can mainly be found in Karachi, Lahore, and Islamabad, being operated by companies and government departments, such as NADRA, PTCL, Jazz, Telenor, Zong, Ufone, and various universities.

The government has taken steps to leverage the benefits associated with data centers, with National Information Technology Board’s (NITB) first data center opening recently in Islamabad.

Pakistan can tap into the enormous potential of cloud and data center technology as the adoption of cloud services so far has been largely ad-hoc. The majority of data centers in Pakistan serve the needs of enterprises. Policymakers and the private sector need to incentivize investments to set up hyper-scale data centers, support local cloud service providers through tax benefits, and integrate government databases to scale this segment.

The development of data centers can help provide employment for citizens, as its creation requires a unique logistics chain incorporating internet exchanges, hosting, cloud, and fiber optic providers. The creation of data centers usually takes three to five years for multi-tenant centers and five to ten years for large single-tenant hyper-scale data centers. Globally, the data center market was valued at $215.8 billion in 2021, and is estimated to reach $288.3 billion by 2027,  said the report “Recommendations for Digital Transformation in Pakistan”.

Highlighting the challenges, the report mentioned that companies are disincentivized to invest in such centers due to the high costs associated with their maintenance, given the frequency of electrical shortages and blown-outs resulting from a poorly designed electrical infrastructure.

Data centers require access to extensive fiber optic cable networks which aren’t prevalent in Pakistan.  The political instability and the frequently changing nature of censorship provide a considerable challenge as it puts the operators of data centers at risk of losing their clients and revenue. Data centers are also at risk of cybercrime, with the example of the Federal Board of Revenue’s data center being hacked in 2021, thereby affecting the country’s shipments.

Recommendations

  1. The government should consider formulating a scheme to incentivize investments to set up hyper-scale data centers in the country and boost the capacity of the existing data center ecosystem. This can include tax credits and offering cheaper land to build data centers.
  2. Data Center Task Force needs to be formed to lead negotiations between government and private companies. The task force needs to consult market players to understand the requirements and preferences to be highlighted for the implementation partners. A cloud computing policy needs to be effectively implemented with its set target periodically monitored.

Data centers offer the possibilities of scalability, security, efficiency, and state-of-the-art technology – that are increasingly demanded by companies and organizations. Data is considered the new oil becoming strategically important for not just organizations but for governments to ensure the country’s safety and sovereignty.

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