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ndonesia is currently experiencing exponential growth in data volume as more individuals and businesses access the Internet and use online services. Indonesia has one of the fastest-growing mobile subscriber bases among its counterparts in Southeast Asia. More and more Indonesians go online and the need for data centers has become more apparent in a country with a high Internet penetration rate.

IDC Financial Insights recently conducted a survey of Indonesian banks on the subject of data centers. The survey indicated that on average, most Indonesian banks expect a 10 to 20 percent data volume growth rate per year. Therefore, the rapid growth makes it necessary for banks to expand their data-center capacity in order to handle incoming data. One of the largest Indonesian banks says that its current data centers are no longer sufficient to meet its business needs and it will therefore invest more than US$1 million in its data centers in the next 12 to 24 months.

In addition to the need for data centers, the Indonesian government issued Government Regulation No. 82/2012, which has a significant effect on Indonesian banks as this law requires that Indonesian bank customers'€™ data must be stored on Indonesian soil. Thus, Indonesian banks that previously operated overseas data centers must repatriate the information. A very large Indonesian bank, for example, recently moved data from its Singapore data center to a new disaster recovery data center (DRC) in Surabaya in order to comply with the regulation. Similarly, a foreign-owned bank also cited the regulation as a major reason to upgrade its data center capacity. In fact, this bank has specifically prioritized on-shoring (moving its overseas data center to Indonesia) on top of its to-do IT list.

To illustrate the use of data centers by banks in Indonesia, each Indonesian bank currently operates an average of 2.27 data centers that are physically located in Indonesia. A bank with total assets of Rp 1.4 trillion in 2013, for instance, operates two data centers, while the top five Indonesian banks by assets in our survey currently operate three data centers.

The need for data centers also goes hand in hand with the high propensity of Indonesian banks to spend on data center-related investments. It is expected that most Indonesian banks will spend at least $250,000 on data center-related investments in the next 12 to 24 months. On average, Indonesian banks plan to increase their data center budget by 5-10 percent every year.

Undoubtedly, some of those spending dollars will be allocated to fixing data center issues or problems currently encountered by Indonesian banks. Some of the concerns include information leakage and data confidentiality issues in the organization, the risk of operational error or failure (such as a Severity One incident) happening in the data centers, and the poor quality of data center human resources.

However, the private sector cannot fix all of these data center issues alone. The government has a role to play in improving the current infrastructure. Indonesia has very poor bandwidth availability for the volume of users it needs to support. Its outdated infrastructure has caused connectivity costs to balloon, thus restricting its availability to only those who can afford it. Even though the most recent IDC data center index ranks Indonesia in the bottom three countries for data center building in Asia Pacific (excluding Japan), only better than the Philippines and India, we can still hope for the new administration to make some infrastructure improvements to greatly help the industry.