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Why Indonesia Needs Data Centers For An AI-Powered Future

Data is a valuable asset in the digital transformation era. Indonesia, with its large population and increasing number of connected devices, is in a strategic position to generate vast amounts of data and lead its beneficial use. For instance, data can help identify patterns in research experiments and analyze new disease symptoms, leading to innovative solutions that create new economic value and address urgent everyday problems. This is where data centers play a crucial role; they help store, manage, and distribute digital data more securely and efficiently.

Given this potential, the domestic data center industry is very promising. According to a report by Mordor Intelligence, the Indonesian data center market is projected to grow at a compound annual growth rate (CAGR) of 14%, reaching $3.98 billion by 2028. The capacity is also expected to increase from the current demand of 2,000 MW. These figures indicate how the development of data centers will be vital in accelerating the digital economy. So, what exactly is a data center, and why is it so important?

What is a Data Center?

In simple terms, a data center is a physical facility designed to store, manage, and process large amounts of data. Think of a data center as a "digital brain" that enables applications, social media platforms, online banking services, and artificial intelligence (AI) systems to function. It contains servers, storage devices, and network infrastructure that operate to ensure data is always available, secure, and accessible at any time.

"With the rapid digital development in Indonesia, data centers are not just technology infrastructure; they are key to creating a new economy supported by AI and fostering inclusive digital transformation," said Dharma Simorangkir, President Director of Microsoft Indonesia.

Why Datacenters Are Important for the Future of AI in Indonesia

A report by Microsoft, Access Partnership, and ELSAM highlights that the growing adoption of generative AI in Indonesia is expected to have a significant economic impact, potentially adding USD 243.5 billion, or about 18% of Indonesia's GDP in 2022. The report emphasizes how AI can boost productivity, create new jobs, and accelerate growth across various sectors, leading to a new AI-driven economy.

To realize this potential, AI technology has specific requirements. It relies heavily on fast and efficient data processing capabilities. AI needs substantial computing power to run machine learning algorithms, perform complex data analysis, and make real-time data-driven decisions. Datacenters, especially large-capacity ones, are essential infrastructure that can meet these needs and unlock AI's full potential.

Unfortunately, the growth of datacenters in Indonesia has not kept pace with the demands and vast potential of its digital economy. Currently, the total capacity of "AI-ready" datacenters—those capable of supporting cloud computing as a foundation for future AI solutions—operates at around 200 megawatts, which is only 10% of the estimated total requirement.

However, with innovations in modern datacenter design, this capacity is expected to grow. For instance, Microsoft designs each of its latest datacenters specifically to support AI workloads. This approach allows the company to utilize every megawatt of power effectively while managing costs and energy consumption for AI. The design also incorporates advanced cooling techniques tailored to the heat generated by AI workloads and the environmental conditions at the datacenter's location.

Tag: Data Centers Digital Transformation