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Asia-Pacific firms pivot to the cloud
Pandemic makes 2020 watershed year for cloud computing, data centres
8 Jan 2021 | Darryl Yu

After close to a year of living with the Covid-19 pandemic, the world has changed in ways that couldn’t even be imagined several years ago, causing vast numbers of people to work at a distanced and interact remotely, and prompting rapid demand for online services, a re-examination of companies’ technology setups, and moves by them to increasing their data-centre capability or shift resources to cloud-based technologies.

As in most of the world, companies based in the Asia-Pacific region have experienced a sudden shift to such digital services. The cloud computing market in the region, according to data analytics firm GlobalData, is expected to grow 117% from US$133 billion to US$288 billion between 2019 and 2024.

“In a post-Covid world, technology investors need to become more selective,” according to a Citi Private Bank CIO research comment. “There is a high likelihood that hyper-connectivity enablers in the telecom equipment, cloud computing and digital services industries will fundamentally outgrow other sectors after Covid.”

Indeed, the focus on tools to enable connectivity and business-as-usual activity will be key going forward for any organization even in the post-pandemic world.

For cloud software or data-centre companies, in particular China-based ones, 2020 has been an ideal time to execute key capital-market transactions. Over the past 12 months, the likes of Kingsoft Cloud Holdings, Ming Yuan Cloud, and Chindata launched their initial public offerings, with Kingsoft Cloud and Chindata listing on NASDAQ despite the ongoing geopolitical tension between China and the United States. Kingsoft Cloud’s stock price, for instance, rose 40% on its debut trading day and is currently trading above water as of January 7 2021.

“Data-centre companies have always been better off going public in the US because the primary valuation metric for data-centre companies is EV/EBITDA [the enterprise value to earnings before interest, taxes, depreciation and amortization ratio]. The Hong Kong market is still getting their head around EV/EBITDA as a valuation metric, but it is a better place for data-centre companies to consider when compared with before,” comments an investment banker from an international bank.

In either case, expect opportunistic days ahead for both cloud computing and data-centre companies as other companies use the Covid-19 backdrop as a catalyst for change within their respective organizations.