Data Center Dilemmas for Tech Companies in Indonesia

The question of whether it’s necessary for technology companies operating in Indonesia to create a data center in Indonesia has resurfaced.

The Ministry of Communications and Informatics has reminded that once the draft for the Government Regulation on Operation of Electronic System and Transaction has been enacted every electronic service provider in Indonesia will have to run a data center in Indonesia.

This was disclosed by Director of e-Business Directorate General of Telematics Application of Ministry of Communications and Information, Azhar Hasyim. In his written speech at the “Cloud Goes Mobile” in Jakarta last Wednesday, reported by Detik, Hasyim said that the policy regarding the regulation of data center is contained in the Draft of Government Regulation on Operation of Electronic System and Transaction Chapter II, Article 17, paragraph 2.

Hasyim considers the issue of data center placement as one of the most important issues in the implementation of cloud computing services. According to Hasyim, the data center is an important asset in the operation of public service and contains risks. Therefore, the government found it necessary to implement this policy in order to protect strategic national data and ensure data sovereignty.

This regulation will not only affect the operation of cloud computing services but also other Internet services like those run by Google, Yahoo! and Research in Motion (RIM). The government has made its intention known to these major companies for sometime now, and in RIM's case, was a point in an agreement between the company and the government back in January 2011

Reluctance Due to Various Reasons Many of these major tech companies however seem to have been evading the issue and reluctant to deal with the request to create data centers in the country. When asked regarding the issue last February, Oliver Pilgerstorfer, RIM's head of public relations for East Asia, responded by asking what was the benefit of having a data center in the country? According to Pilgerstorfer, RIM's service will remain optimal even without a local data center.

In November last year, Risman Adnan, Director Developer and Platform Group Microsoft Indonesia, revealed the reason for Microsoft’s reluctance in building a local data center. According to Adnan, there is no strong legal framework that deals with security in Indonesia. The implementation of law in Indonesia is weak, given the high tendency to accommodate certain interests yet this guarantee for a strong framework is what many foreign companies rely on when it comes to setting up their presence in the country.

Steven Law, NetApp’s Country Manager for Indonesia and Philippines, also agreed that the security guarantee is the key to international companies' willingness to build a data center in Indonesia. In addition, adequate infrastructure, consistency of bandwidth performance, as well as potential threat of natural disaster are among issues considered by a company to determine a location for its data center.

Fix Everything First So will the government be able to provide the legal and security guarantees to the data centers that these companies are supposed to build, including in the event of dispute or the cross-country cyber crime? Not to mention the problem with the Internet infrastructure and power grid in Indonesia.

If Indonesia is still the country with the slowest internet connection but the champion in Internet crime, it's not what major companies want to hear when they have to set up data centers in the country. While Indonesia is working on fixing the situation, building an innovation center like what RIM is doing or maybe building a factory may be more of a worthwhile investment for a developing country like Indonesia.

According to Steven Law, Indonesia indeed has the potential to be a location for data centers because the market is large and the location serves as a bridge between Asia and Australia. Therefore, this potential should be taken advantage of by eliminating the barriers in constructing these data centers. If Indonesia can achieve that, these tech companies may just be the ones requesting to set up their data centers in the country instead of the other way around.

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