What is a data center hub and why is Egypt such a great candidate?
As published in our January - February 2021 issue
As more and more companies become data-driven and dependent on digital services, the importance of reliable and fast data transference and distribution has steadily increased, further exacerbated by the rapid digitalization of services due to the effects of the Covid-19 pandemic.
However, for data exchanges to be protected, data has to be stored somewhere, which is where data centers and hubs become a vital part of the internet and digitalization.
Providing 80 percent of data traffic moving between Europe and Asia, Egypt is a great candidate to become an international data center hub, due to its geographical positioning. Egypt is also an internet submarine cable hub, with 17 cables transiting through the country.
“Egypt has the greatest potential of being the data center hub for the whole MEA (Middle East & Africa) region,” says Ayman Elgohary, managing director of Cisco Egypt, North Africa & Levant (NAL), due to “the uniqueness of the geographical location that puts Egypt as the center for Africa, Asia and Europe – that goes for physical traffic as well as virtual traffic represented in Data.”
A data hub is a centralized service that enables data sharing by connecting producers of data with consumers of data, connects IT systems such as IoT devices and SaaS solutions, and orchestrates the data flow between systems.
Regional data centers offer a platform to organizations to process, store and transport their services and data. Data centers influence many business functions, including website hosting, e-mail management and security, data backup and recovery, networking, e-commerce transactions and cloud storage support.
Organizations big and small in all sectors are producing and using massive amounts of data which require data centers to maintain operations. Moreover, the high demand for digital services and innovations and sharp increase in remote workers due to the pandemic has made sure that demand for data and data centers remains strong.
The data center industry has been known to positively contribute to local economies and communities through employment rates and foreign investment opportunities.
In 2016, Google data centers generated $1.3 billion in economic activity, $750 million in labor income, and 11,000 jobs throughout the United States alone. Google data centers are considered hyper scale or enterprise data centers, which are facilities owned and operated by the company, aka the data producer.
According to Synergy Research, there are 541 hyper scale data centers around the world, with 26 new centers opened between January and July 2020.
A majority of global hyper scale centers are operated by around 24 companies, mainly Amazon, Google, IBM and Microsoft; and each has at least 45 data centers around the world.
Other types of data centers are managed services data centers, where organizations lease equipment and infrastructure from a third party, and colocation data centers which house data for multiple data-producing organizations by providing power, cooling and security to host hardware and servers.
Major organizations that handle sensitive information and banks prefer colocation data centers due to being cautious of cloud storage in terms of privacy protection.
There are also cloud data centers that host data and applications using cloud service providers like Amazon Web Services (AWS), Microsoft (Azure) or IBM Cloud.
These, and managed service data centers, are preferred by smaller companies who have less capacity demands. Due to a high usage of big data analytics and cloud-based service adoptions, Egypt is one of the main countries driving Africa’s data center growth, alongside South Africa, Kenya, Morocco and Nigeria, according to an Artizon report.
The latter expects the region’s data center market revenue to grow at a compound annual rate (CAGR) of over 12 percent between 2019 and 2025, crossing $3 billion.
Egypt’s information and communication technology sector grew by 15.2 percent in 2020, recording the highest growth rate across all sectors despite Covid-19 repercussions, the cabinet revealed in a report issued in December 2020.
The ICT sector contributed with 4.4 percent of the country’s GDP this year, with the pandemic accelerating organizations and government services’ digital transformations to meet with safety and consumer demands.
Development in data centers is part of the ministry’s ICT 2030 strategy, under which the Egyptian government has continued undertaking a series of investments, capacity building and training programs, digital government services reforms and infrastructure upgrades to maximize the ICT sector’s contribution to Egypt’s economic growth.
“With more than 100 million people, Egypt has one of the largest populations in MEA, making it one of the most attractive markets for data Center and technology providers to cater for such a big population and to be closer to servicing their customers,” says Elgohary adding that this comes with a huge number of cost-efficient highly-skilled graduates from engineering and Technology Universities, making things easier in provisioning and operating.
He further highlights the government’s efforts, stating that it is “highly investing in technology and has a great vision towards digital transformation” Amid growing investments in digitalizing public service offerings and improving the country’s digital infrastructure alongside other government initiatives during the pandemic, Egypt has been one of the few countries to see positive economic growth in 2020.
According to the Ministry of Information and Communication Technology (MCIT) in a June 2020 report, the number of ADSL subscriptions climbed to 7.99 million in the April/June 2020 period compare to 6.88 million in the same period in 2019, while the mobile internet subscriptions was calculated at 41.79 million in the same period in 2020 compared to 36.46 million in 2019.
Egypt’s peak hours for internet usage increased to 15 hours per day, up from seven hours, according to the US International Trade Association, which also noted a 35 percent increase in mobile internet usage, while Ecommerce platform Jumia saw a jump of 80 percent between the beginning of the outbreak and June 2020. Egypt currently maintains 13 colocation data centers, according to Data Center Map.
These are mainly owned or operated by Telecom Egypt, Egypt for Information Dissemination (EGID), ECC Solutions, Link, Egypt Network, Raya, Life, GPX, CityNet, and Etisalat.
Africa has 69 colocation data centers in 13 countries with 135 centers in 16 countries in the Middle East, compared to 1257 centers in 23 countries in Western Europe and 1974 centers in North America.
Telecom Egypt announced in 2020 the construction of the largest international data center in Egypt, which will house 2000 racks for server storage.
This comes as part of the service provider’s 2019 plans to build four to five data centers, which will further support Egypt’s efforts to boost the country’s ICT infrastructure and digital service abilities and position it as a digital hub.
On average, hyper scale data centers have 1,000 racks, housing around 5,000 servers or more. Telecom Egypt currently owns and operates six commercial data center facilities located within Greater Cairo and Alexandria.
Earlier in 2018, the company said it aimed to make data centers account for 25 percent of its revenues within five years’ time.
Moreover, the same year, then-Information and Communication Technology (ICT) Minister Yasser El Kady presented to President Abdel Fattah Al-Sisi the ministry’s strategy to position Egypt as a data center hub, focusing on developing the country’s attractiveness for investors and global data centers.
Orange Egypt is also preparing to build and operate the New Administrative Capital’s major data center and cloud computing platform, after signing with the Administrative Capital for Urban Development in January 2020.
And according to Bloomberg, Africa’s largest high-speed internet provider, Liquid Telecom, plans to expand their data center unit in a number of African countries including Egypt.
The company had previously announced an LE 8 million investment in Egypt in partnership with Telecom Egypt that would include network infrastructure and data centers in 2018. Egypt’s growing attractiveness to the global and regional data center industry will be dependent on several objectives.
According to Artizon’s report, other factors likely to contribute to the growth of the Africa data center market include the country’s availability of renewable energy, smart city initiatives to fuel data center development, and government support in boosting digital economy.
