Nearshore Data Centers in a State of ‘Radical Evolution’

There are few IT sectors growing as quickly as Latin America’s soon-to-be-worth $3 billion data center market. Last year alone, the rush to provide server space for the region’s burgeoning  IT requirements saw tech giants IBM and Google invest in multi-million dollar Latin American data centers, while more new centers sprung up everywhere from Zona Franca business parks in Panama to mountain-top terraces on Caribbean islands off the coast of Venezuela.

For those operating on the business end of Latin American data storage, data center service providers are going through a period of not only expansion but also radical evolution in their business. “The data center environment is undergoing a transformation,” said Agostinho Rocha, Managing Director and VP for Latin America of global IT company and data center specialists Unisys.

Triggered by trends such as the ever-growing reach and importance of mobile technologies and the exponential growth in the quantity of data produced (now 2.5 quintillion bytes every day by IBM’s count), two IT developments are dominating this transformation; Cloud services and Big Data.

One company eagerly capitalizing on these trends in the region is Latin America based data center service providers Synapsis, whose 17% growth in 2011-2012 was predominantly fuelled by expansion in Cloud and Big Data services.  The biggest change seen by the company in that period has been the growth of Cloud. “Two years ago, 90% of the infrastructure was dedicated and 10% virtual, Cloud. These days, 60-70% that we have in the data centers and what we offer, is Cloud,” said Jorge Orozco, Synapsis’ CMO and Innovation Officer. “It’s been enormous growth, exponential.”

Cloud & Big Data

The move towards Cloud and Big Data has offered Latin American companies the opportunity to attract new clients by offering solutions based on the same new technologies as service providers around the world, rather than worry about catching up with competitors in developed countries. However, the new technologies have also brought new challenges to the region.

“Latin America’s biggest challenge is in our ability to train ourselves in new technologies and new applications of technology,” said Rocha of Unisys. “The most difficult step there is in our capacity to get used to new innovations and to have people placed within the sector.”

While Unisys is a global company, with sites from Australia to Venezuela, most Latin American data center operators remain committed to working with clients within the region.

This is true of Synapsis, whose clients base is overwhelmingly Latin American and whose business strategy is focused on providing services to clients operating in different countries across the region. “We want to be the main multi-Latin provider for multi-Latin businesses,” said Orozco, who identified the growth opportunities offered by the region’s economic giants Brazil and Mexico as the company’s primary target markets.

Nevertheless, Orozco believes Latin America has the potential to expand beyond its frontiers. “In the region, there are those with a really good capacity to work in Nearshore and Offshore, and this will involve taking advantage of [low] costs and the abilities of professional Latinos.”

However, with experts pointing to deficiencies in areas such as management capabilities, speed, and bandwidth in the region, Rocha warned against companies looking to compete as a cut-price option instead of addressing these underlying issues. “If we look at the market where cost is the only motivating factor in defining who provides the service, then obviously we are not going to have the same quality and the services are going to stay more localized,” he said.

Power Cuts & Telecom Infrastrcuture

With lingering fears among foreign clients over issues such as telecommunications and power redundancy infrastructure, the public sector also has a critical role to play in attracting outside business, according to Orozco. “It is important to have a regulatory framework and a framework of trust for the industry, that lets businesses trust in outsourcing, in the providers,” he said, highlighting contingency plans as one crucial and often underdeveloped area.

For Orozco, the most important aspect of public sector backing is stability. “If the politicians are changing every four years then every four years it is one step forward and one step back,” he said. “Of course, this still allows businesses to grow but really it becomes opportunistic, tactical and not strategic.

In addition to the opportunities to be found in Brazil and Mexico, Orozco highlighted Chile and Colombia as the countries leading the way in ensuring IT infrastructure is in place for companies looking to expand in the data center sector, with Peru and Argentina snapping at their heels. Nevertheless, he believes Latin America still has a way to go to offer a similar level of service as companies with more developed sectors. “The region is growing, it is improving, but this gap that there is, a lot more has to be done to close it.”