Investors rush to cash in on data centres

Leading IT firms and a bank have announced investments running into billions to benefit from the growing information sub-sector, writes FREDRICK OBURA

Data storage is set to be a multi-billion shilling industry. This follows the increasing need among local firms to back up their data.

Leading IT firms, a bank and the State have announced investments running into billions to cash in from the growing information sub-sector.

As early as 2009, Kenya was mulling over the idea of constructing a data centre to serve East and Central Africa.

The centre was expected to help ease the region’s reliance on Europe and America for data backup services.

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The construction of data centres by African governments, mobile service providers and foreign companies comes in the wake of continued take-up of IT by many companies in the region, which has caused an increase in demand for safer data storage facilities.

The data centre, undertaken by Kenya Data Networks, is expected to provide multiple services including disaster recovery, housing of national and international exchange, and teleport facilities.

Rwanda was the first African government to approve and construct a data centre in 2009.

"In the past three years, the market has seen use and adoption of IT soar," says Davidson Thaba MTN Business Technical Operations Manager.

"Entrepreneurs are increasingly taking their businesses to the web for visibility as well as seeking to reach the virtual markets."

He says the success of the culture of invention and application development — already taking root in health, management, and agriculture sectors — requires tamper-proof data centres to host them.

The ongoing digitisation of processes and records in government has increased the demand for data centres.

Several ministries, including the State Law Office, Parliament, Lands and Kenya Revenue Authority have moved some of their operations and records online.

It is also anticipated that the directive by Central Bank of Kenya (CBK) to banks to have disaster recovery outside physical premise would help prop up the data centre business.

secure storage

CBK’s prudential guideline on business continuity management (BCM) requires banks to have data centres or server room recovery secured at a location other than the normal business site.

Kenya Data Networks (KDN) Product Manager Dan Kwach says all these digital records and processes will now need to be secured on local servers.

Echoing Kwach’s sentiments, Thaba says the data storage sub-sector remains largely untapped.

"The dash by firms to find space on digital platforms now present fresh investment opportunities," he says.

"To meet the growing demand for data storage, IT firms will now have to invest in the state-of the-art data centres."

AccessKenya, Equity Bank, and Kenya Data Networks, are among companies with interest in data centres business.

Equity Bank, the only non-technology company among the three, early in the year announced an Sh8 million investment into its data centre.

The bank, which is expected to use 10 per cent, will outsource the management of its data centre and lease remaining 90 per cent to small businesses.

The bank’s chief executive James Mwangi says the bank has the only level 4 data centre — hosting the highest level of system — in the region, built at a cost of Sh8 billion over the last three years.

Equity Bank is a major consumer of technology and expects the centre to serve its growing business in the region.

Equity’s data centre is also meant to conform to new CBK regulations that banks have disaster recovery centres outside their physical premises.

Francis Hook, the International Data Corporation (IDC) regional Manager says the bank’s leasing approach will be a big boost to Small and Medium Enterprises (SMEs) who will enjoy high profile storage without enduring hustle to acquire their own centres.

"Leasing space to small businesses would ease the burden of having to generate capital to establish own data centre," Hook told Tech.Insight.

"The outcome are really broad for such clients, they do not have to hire some IT staff to maintain the data centres, load applications, and monitor systems."

Other players like Access Kenya, KDN, and MTN will use the centres to deliver storage services on cloud computing — a pay-per-use model.

Telecoms can too work with a vendor who provides Enterprise Resource Planning solutions to avail services on a pay-per-use basis to various end users.

This saves the end users the burden of acquiring licences and the necessary hardware.

"This model allows end users to increase or decrease their requirements as needed and be free from big capital expenses," Hook says.

AccessKenya has injected Sh5 million in upping the capacity of its data centre with expectations that increased uptake of ICT in the country will see growth in its IT business.

The money is a re-investment into the storage facility that was initially set up at a cost of Sh15 million.

The company, initially an Internet Service Provider (ISPs), has been diversifying its product portfolio to beat competition — especially from mobile telephony operators that have taken to Internet service provision and have significantly eaten into the profit margins of traditional ISPs.

AccessKenya has embarked on refurbishing a recently acquired IT division as well as setting up a content arm as part of its diversification drive.

The firm’s chief technical officer, Raymond Macharia, says the data centre will be key in revenue generation for the listed firm.

"We are looking at earning from the growing number of firms that have taken up ICT and demand for safer data storage facilities," Macharia says.

"Data storage segment of the ICT sector is poised for further growth as more firms opt to outsource management of their IT infrastructure."

Also driving growth of data centres are small companies, which find the shared resource affordable as opposed to setting up their own data centres.

"SMEs are taking up ICT fast and in due course, setting up a back-up facility will be necessary," he adds.