Adrian De Luca

The rise of Asia as a Digital Hub

Blog Post created by Adrian De Luca Employee on Mar 16, 2014

In the 1980s, the phrase “Asian Century” was coined to describe the region’s anticipated economic prosperity in 21st century. Thirty years on, it would seem that the vision is quickly becoming a reality.


Japan, for one, has had a long history of challenging the West and building competitive international businesses in sectors such as automotive, industrial machinery and power generation. Over the past 20 years, South Korea has also emerged as an international innovator with brands such as LG and Samsung becoming household names in home appliances and consumer electronics throughout the world. The Southeast Asian Tiger countries have some of the fastest growing economies in the world, and China just surpassed the United States as the world's largest trading nation.


But can Asia also establish itself as a powerhouse in the digital arena? If so what are the key factors that will enable the region to create the digital equivalent of the Asian Century?


Perhaps we can borrow an insight from Herbert Hoover, the 31st President of the United States, who once said “Competition is not only the basis of protection to the consumer, but is the incentive to progress.”


The spirit of competition is a core ingredient if Asia is to succeed in the digital age. And the region certainly has that in plentiful supply.


Big aspirations


Asia’s big population is matched only by its big dreams. As the digital economy ripples across the globe, aspirations to succeed in this race are also going viral throughout this rapidly maturing continent.


In India, the rise of the IT sector has been simply astounding. In the past 15 years, its contribution to national Growth Domestic Product (GDP) grew from 1.2 percent to 7.5 percent. Companies such as InfoSys, Wipro, and Tata Consulting Services, who all started out providing low-cost IT operations outsourcing services to overseas companies, are now transforming themselves to deliver more lucrative and higher value services such as consulting and Business Process Optimisation (BPO).


China, too, is making its mark on the digital stage. Just as 2013 was coming to a close, e-commerce behemoth Alibaba is poised to challenge the likes of Amazon, Google and Microsoft in the cloud space, announcing plans to expand its cloud services outside of domestic borders, with rumored locations being U.S. and Southeast Asia.  They also recently achieved the world's first gold certification for cloud security from the British Standards Institute, cementing its desire to play on the world stage.


Show me the money!


Do these digital aspirations have people reaching for their wallets to invest? It would seem so.


We are seeing major dollars and rupiah's going into one of the core building blocks of the digital ecosystem – startups. Asia is fast becoming a hotbed of tech funding activity. According to Internet DealBook, Asia Pacific had the highest average deal value for technology investments and acquisitions compared to North America and Europe in Q3 2013. This demonstrates the value of innovation coming out of the region.


Of course it takes more than the confluence of visionaries and cash to ensure success in this brave new digital world; they need to be connected for the real magic to happen.


In places such as Silicon Valley and New England of the United States, there are well-established ecosystems that not only create a healthy competition for funds, but also provide collaboration opportunities between startups and VCs — and amongst the startups themselves — to accelerate innovation and move to the next stage of growth.


It has proven incredibly difficult to replicate the success of Silicon Valley, but signs show that things are moving in the right direction in Asia. Thanks to entrepreneurs offering mentorship and as well as seed money to accelerate the commercialization of their prototypes, tech startups in the region are finding it easier to survive beyond early-stage incubation.  Today, we see a host startup accelerators springing up around the region. Examples include Singapore’s JDFI.Asia, South Korea’s SparkLabs, Hong Kong’s AcceleratorHK and India’s TLabs.


Another citical area that Asia is investing heavily in is infrastructure. Take data centers for example. Digital ecosystems and economies generate vast amounts of data, which will have to be stored and crunched somewhere. This has led to a surge in the building of data centers across the region. According to a report by Data Center Dynamics, China and India saw the highest growth in data center investments in the past year, with rates of 19 and 12 percent respectively.


Connectivity is another important infrastructure component of the digital world, especially with cloud services becoming the preferred paradigm for IT consumption. As more data and workloads converge into mega data centers, fast, reliable and adaptable connectivity will become key. This is where we see new players like Megaport are changing the game by ditching the traditional fixed-contract models of telcos and offering instead flexible, demand-based, scalable-capacity provisioning. With plans to expand into the Asia Pacific region this year, Megaport is promising connectivity services of up to 100 Gbps across the region, injecting significant capacity as well as  healthy competition into the established telco environment.


But the most critical factor that underpins any successful pursuit in any arena – is people. To successfully create the digital equivalent of the Asian Century, the region needs to invest in the skillsets of the future. This can be a real showstopper for a rapidly growing region like Asia, in fact a recent survey revealed 95 per cent of respondents were concerned the skills shortage has the potential to hamper the effective operation of their business.  Thanksfully this is another area where technology companies are investing. Cisco recently announced an initiative to create as many as 400,000 network professionals over the next five years.  As a company with its roots in this region, Hitachi understands the importance of partnering with countries to develop the high-end skills needed for the digital economy. In 2011, we established an IT R&D centre in Bangalore, and last year opened another in Singapore, pledging to have a total of 400 researchers by 2015.


The road ahead


Investments in ecosystems that foster innovation, the building of infrastructure and proliferation of high-end skills are just table stakes. Serious action by governments to tackle privacy and copyright issues are also crucial factors that will help determine which countries take pole positions in Asia’s digital race.


There is now little doubt that the region as a whole will play a prominent role on the global digital stage. The foundations are being set and some amazing things are happening as we speak.


So what do all these developments have to do with business leaders who are busy running their enterprises and trying to find innovative new ways to grow their market share? What does the tussle between countries to be digital pioneers, and the region’s overall aspirations to be a digital powerhouse, have to do with you?


If you think about it, your business is a microcosm of what is happening out there on the international stage. The revolutionary impact of the digital wave, the opportunities that it engenders, and the race to seize these opportunities for competitive advantage are now apparent.


As a business leader, as it is for countries in the region, the imperative is to nurture innovation, strengthen infrastructure and invest in people in order to capitalize on the opportunities of the information age.


I would be interested to hear other stories around the region, as well as how you or your company is contributing to Asia's digital ascendency?