The Japanese economy is a data-intensive ecosystem. From the top layers of government to the end-user, the demand and drive for data has become intertwined in policy, economic strategy, social change and even extending to disaster relief.
To support the growing needs of the market Equinix will open its fourth global IBX data center, TY4, in Tokyo in a $43 million investment. The new TY4 data center will be launched from Q3 in two phases, in order to meet this insatiable and often unpredictable market demand. Once operational the TY4 will provide capacity of 750 cabinet equivalents and have direct fiber connectivity to Equinix’s three other IBX data centers in the city.
Strong market influencers have led to the growth in data center demand in Japan which, according to IDC, will reach a size of US$20 billion by 2015. Japan has enjoyed the position of being one of the fastest moving markets in cloud adoption for government services, thanks to its progressive government policies initiated around five years ago.
As a result, the Japanese data center sector has reaped the benefits of this government-led push to the cloud, in addition to gaining government support for Green IT initiatives. Japan’s global leadership in energy efficiency has influenced the operations and evolution of the data center ecosystem. Advanced concepts instigated in the Japanese data market have been picked up globally such as free air cooling and aisle capping.
Centrality essential for business
While the Japanese data center market shares many similarities with other competitive data hubs like the U.S. in terms of growth being fuelled by the expanding digital economy, surges in internet traffic and outsourcing demand from high growth sectors like the financial services industries, one key area of differentiation is that it is highly centralized.
Tokyo is the undisputed data capital of Japan with Osaka shadowing its dominance. Part of the uniqueness of the market is that Tokyo represents about 35% of national GDP and about 70% of the national data center market.
The TY4 data center in Tokyo is significant in that it is located in prime CBD real estate in Ōtemachi. Known as the tech heart of Tokyo, Ōtemachi, is the where the life blood of Japan’s internet and data traffic and players converge.
The demand for capacity in the tech district is huge, firstly due to location and proximity to the country’s biggest carrier’s and data providers and secondly the financial services firms and content providers are also edging to get closer to the heart of the action. Ōtemachi is also an international financial center and the Internet Exchange hub in Japan, with 90% of Internet traffic being exchanged in the area.
The prime real estate position will provide financial companies with a key link to the major financial exchanges in the Japanese capital and enable Internet Service Providers (ISPs) and content providers to reduce IP transit costs and improve end user experience.
Drivers in the new data economy
The driving forces behind the data center market and data growth is emerging from the use of smartphones and tablet PCs. While Japan is a technology trailblazer, smartphone adoption has had a late bloom effect caused by the ‘Galapagos’ phenomenon. Japan’s feature phone market earned that tag because it evolved in isolation from the rest of the world, based on its own standards, but as of late 2011 Japan caught up with to the smart phone trend with zest.
Consequently, mobile gaming is one of the fastest growing markets with social gaming driving impressive growth. One SMS based communications tool, LINE, has attracted 80-90 million subscribers in just 18 months.
Japan also tends to transcend predictions on global trend adoption like the surge to social media. Japanese consumers tend to move to their own beat. Facebook and Twitter took a long time to be embraced in Japan. The trigger for their popularity was the earthquake of 2011.
In 1995, the devastating Kobe earthquake positioned mobility as the hero – where in the absence of all other communications mobiles actually saved lives. But during the 2011 catastrophe it was social media that proved the invaluable communications tool. Due to the amount of congestion on the mobile networks, social media was the easiest conduit, particularly Twitter. Twitter then opened the door to Facebook usage, now numbers and traffic are climbing.
Social media consumption is now changing the complexion of data consumption from this point on.
Spreading out gradually
The geographic vulnerabilities of Japan will have an influence on its data centrality in the future. Following the earthquake and tsunami in 2011, in the Eastern part of Japan, the notion that we may need a more distributed architecture started to emerge.
Initially there was a big demand in Osaka and initiatives to reconsider network architecture in a more distributed way, but after considering alternative approaches in the subsequent 3-6 months, the pressure and urgency has gone. However, the experience and idea of a possible threat and the need for national redundancy has sparked more IT projects being developed outside of Tokyo.
While the evolution may be slow, with the help of government incentives, budget and commercial investment, within 2-5 years the Tokyo-centricity of Japan’s data and IT landscape will be more evenly and widely distributed.