Russia’s Data Center Market Is Ready To Take Off

According to iKS-Consulting, a market research agency, Russia’s data center market value will grow by almost 27% YoY in 2019, reaching US$ 561 million. At the same time, the number of racks is expected to increase by 11% to 43.5K.

Russia’s market for data centers and cloud services is demonstrating good performance, with the growth rate of about 10% for colocation services and almost 25% for cloud services. In the global context, however, the Russian industry of data centers and cloud services still looks rather modest: Russia accounts for just 0.9% of the global data center market value and 1.1% of the total commercial storage.

Russia’s colocation services market (2015-2019), RUB billion

Fig. The number of data center rack units in Russia (2013-1H2019), 000

In the Digital Economy program, Russia’s government aims at increasing the country’s share to 5% of the total global market for data storage and cloud services. To achieve this ambitious goal, a six-fold increase in the market volume is needed. Such a strategy can be realistic only under the condition of unprecedented support from the government.

Russia has all the prerequisites to become one of the most favourable countries for developing data centers, featuring such characteristics as suitable climate, rare natural disasters, stable energy generation, abundance of water, developed telecommunication infrastructure, qualified human resources and cheap electricity. Yet Russia is still not considered as a top destination for data centers, whereas the domestic market lags behind the leading markets in terms of major development indicators.

In its effort to increase productivity and speed up digitalization, the Russian government considers the development of data storage and processing services as a top priority. Import substitution and information security policies make the domestic data center strategy even more important.  The government has already approved a number of national and industry programs to boost digital transformation, stimulate the domestic consumption of cloud services, and ensure the growth in data processing capacities.

According to iKS-Consulting estimates, Russia’s government will allocate at least US$ 300 million annually for the implementation of various Digital Economy projects in the public sector in the next five years. This spending should become the major driver for Russia’s market of commercial data centers and cloud services. The launch of new information systems for federal and regional government authorities will generate additional public investment of US$ 20 million annually in developing data centers and cloud infrastructure.

On the other hand, the government is developing a set of fiscal and financial incentives to support data center construction projects and ensure private investment in the sector. If these incentives reduce an average payback period by 1-2 years, a more significant amount of private investment can be expected.

Stimulation of investment activity is especially required in regions outside of the country’s two major cities. There is still a significant gap in data center infrastructure between Moscow and St Petersburg on one side and the rest of the country on the other.  According to iKS-Consulting, the latter accounts for only 27% of the total number of commercial racks in the country. To mitigate these discrepancies, the government backs the rollout of the federal data center network. According to preliminary estimates, to ensure that 90% of Russia’s users have a minimum delay (5 ms.), new data centers should be constructed in 17 cities across Russia.

Rostelecom and Megafon, Russia’s largest telcos, and Rosenergoatom, the operator of Russia’s nuclear plants, have already announced the development of their regional data centers.

Apart from that, several regions have already announced their intentions to build data centers to meet local demand for data storage and processing. For example, one of them is in the Khanty-Mansi Autonomous Okrug – Yugra, the biggest oil and gas producing region in the country. The project is implemented with the active participation and support of the Government of Yugra. The new region’s data center infrastructure will meet the growing demand for data processing and storage infrastructure in Yugra, support the local development by digitalizing the oil and gas industry, a pillar of the local economy and stimulate investment activity in the region. – Tech Times