Digital Edge punching above its weight in Asia datacentre market

How is Digital Edge positioning itself in the datacentre services market?

Samuel Lee: I’ll start with our strategy and business model first before I dive into our differentiation. Digital Edge was founded in early 2020. We are backed by Stonepeak, a US-based infrastructure investment firm, which has committed $1bn to help the company to expand into the region.

Our goal is to build a datacentre platform in Asia. You may have spoken to a lot of our friendly competitors in the region, and I believe you can appreciate the difference between providing a platform and a datacentre asset. In the market, a lot of companies are acquiring assets, but they are basically consolidating revenue, and not spending time and effort to revamp the backend, customer service, billing, IT support and product. Every single asset in their portfolio operates individually, so customers don’t get a consistent experience.

While there’s nothing wrong with that, we want to go beyond that and build a platform, so our customers get a consistent experience with lower administrative and management costs. Their IT managers will also be able to manage all their datacentre deployments in a very consistent way.

After four years of operations, we’ve grown from zero to 17 datacentres across six markets – 14 operational and three others coming online in the next 18 months. In total, we will 500MW of capacity once all our announced sites are fully developed. We started off with some acquisitions, but we have very focused strategy. Most of our acquisitions are either network- or cloud-rich datacentres, which are fundamental to our ecosystem. We’ve also started to build more greenfield and brownfield capacity.

We work with the best in the local markets, build a local team for execution, and bring our global technology expertise – that has been the secret sauce of our success

Right now, our focus is on cloud and AI workloads, which will be a game changer for the industry. We’re already seeing demand for more capacity from those workloads, so our strategy is to build datacentres in countries where cloud and AI hyperscalers are going to invest in.

The only thing that will change is scale. When we started the company, we were talking about 10-20MW which was already big. Now, we need to be offering at least 30-50MW – and more if power and land were not constraints. Our India project, for example, with its big plot for land, can support up to 300MW of capacity when completed.

The demand from AI workloads, in particular, requires datacentre providers to relook the way datacentres are built and configured, given the higher power and cooling requirements. How is Digital Edge addressing those challenges?

Lee: As a young company, we don’t have legacy datacentres in our portfolio. We have some assets from our acquisitions, which are very network focused and used by customers to connect to cloud or deploy their ERP (enterprise resource planning) applications. Those datacentres will still exist, but I think the long-term solution is to build new datacentres like what we’re doing in Indonesia, Korea and India where we can deploy the latest technology.

As you mentioned, we need to put in a lot of power, which is fairly concentrated. People are talking about 20kW per cabinet, going up to 40-60kW in extreme cases. That requires you to be able to build your datacentre to ensure there’s no loss of power to meet the high-density requirements.

As for cooling, it’s not only about how much cooling you can channel into a datacentre. We need to align with ESG (environment, social, and governance) practices as well. So, as we build density and capacity, we need to be responsible corporate citizens and think about efficiency.

Our datacentre in the Philippines is a good example. On the power side, we can support 20kW today and we can upgrade that to support 40kW on a per cabinet basis. In terms of cooling, we’ve deployed a new liquid-cooling technology from Nortek, enabling us to achieve a PUE (power usage effectiveness) of under 1.2.

Besides making technology investments, we’re also focused on operations. You can hire the most seasoned consultants and access the latest technology, but how you run the datacentre, utilise the technology, structure the layout and control the power of fan coils is all about operations and experience. We’re lucky to have Jay Park as our co-founder who has years of experience designing datacentres for Equinix and Facebook.

Also, if you look at our projects across the region, we are not doing those on our own. With different countries having different regulations and business practices, it’s very important to work with local partners who have done it before in terms of developing the property, procuring technology equipment and working with the government to get the necessary power, water and approvals.

In Korea, we have a partnership with SK Ecoplant, one of the biggest construction companies in Asia. In the Philippines, we are working with the Rufino family, a Filipino conglomerate, and in Indonesia, we started with an acquisition and worked with Pak Toto (Otto Toto Sugiri), a highly regarded individual who has spent his lifetime in the IT and datacentre industry. We work with the best in the local markets, build a local team for execution, and bring our global technology expertise – that has been the secret sauce of our success.

You made a good point about execution because with the company expanding in the region at a fairly rapid pace, you don’t want things to fall through the cracks and compromise service levels.

Lee: You really know this industry well because most people take operations for granted. When everything is going smooth, no one cares about operations. They don’t want to talk about it or know about it. But when something goes wrong, people start panicking.

You need to have a good team of people who are knowledgeable and not only know what to do on good days. They also need to do preventive maintenance, but more importantly, know how to fix things quickly if anything goes wrong, then learn from it and prevent it from happening in future.

If we open a datacentre, it can be consumed very quickly, so we need to find options and beat the timeline because when the customer wants the space, they want it yesterday

And it’s all about track record. If you look at our operations team, it’s not only Jay but everyone in our country teams has years of experience with datacentre operations. All our people have done it before, and they know what is going to happen and how to fix things, and that should give our customers comfort.

Can you give us a better sense of what you are supporting through your platform when it comes to enterprise workloads or capabilities like multi-cloud networking, for example?

Lee: As a young company, we can’t target the whole ecosystem. We have a very specific strategy to go after customers with our network, help them on-ramp to cloud and then focus on the hyperscalers which can deploy their cloud, AI and CDN [content delivery network] services on our platform.

For enterprise workloads, we are very focused on partnerships with existing customers that go after the enterprise. We can target their network deployments, which we are very good at, but if we are talking about tackling the finance and ERP workloads and combine those with an in-house application, then we don’t have enough expertise in our organisation and we don’t have the scale to do so.

Instead, we partner with channel partners like China Mobile and China Unicom that are targeting enterprises with a full solution, especially connectivity. They’d partner with datacentres like us to use our infrastructure in the region. That’s how we go after the enterprise segment.

As you scale up across the region, how are you meeting your sustainability goals with the markets you’re in varying in terms of sustainability practices and access to clean energy sources?

Lee: You’re absolutely right that this is challenging in Asia. Some countries have good availability of green energy while others have just started the journey. Our goal is to be 100% carbon neutral by 2030 and by 2025, 50% of our power must come from green or renewable energy. We always try to do our best in a few areas.

One, as I mentioned about technology, is that we strive for a PUE that’s as low as possible. We are also working with the power companies in each country to identify options. We will go for green or renewable energy if it’s available but if not, we’ll use carbon credits. It’s a mixture of things and it depends on each country, but we are committed to our ESG strategy. It’s also a mandate from our customers.

Can you give me a sense of what’s next from a business and technology perspective?

Lee: There are a couple of things. We’ll continue to build datacentres in existing markets. In Korea, we are going to open our third datacentre later this year, and we’ve already secured land to build a fourth facility there. We are not going to stop building because with the AI phenomenon, the size of deployments can jump significantly. Having a few megawatts in the past was a big deal, but people start with 10-20 MW today. If we open a datacentre, it can be consumed very quickly, so we need to find options and beat the timeline because when the customer wants the space, they want it yesterday.

While we cannot beat the law of physics – building a datacentre takes 18 to over 20 months, depending on what you need – we will continue to follow our customers wherever they want to go and where we don’t have operations yet.

A few new locations are interesting for us, such as Johor in Malaysia where large AI deployments are being planned. There’s also unfulfilled demand in markets like Thailand and Vietnam, which we think will have high growth. Customers are also demanding lower latency, and, because of data privacy laws, are required to keep data in their countries. Those are opportunities and it’s only a matter of time before Asia’s datacentre market becomes bigger than what it is today.

I’m not sure if this is something you can talk about – can you give me a sense of your growth from a revenue perspective?

Lee: It’s hard for me to give you the numbers, and in any case, they don’t reflect the realities of our business. If you look at the first four years of our company, the first two years were very much focused on acquisitions, which means our growth can be pretty steep in terms of revenue. The next two years were the Covid-19 years when people were deploying digital platforms to support remote work, but we were in the process of building our datacentres.

When we look at our portfolio today, we have a good revenue size, but we’ve just started to open our greenfield datacentres across the region. Also, our base is small as a young company, so our percentage growth will be huge, but that doesn’t give people context about how the company is doing. The next two years will be more meaningful because from this year, we will have a significant amount of capacity.