Rackspace’s second point of presence in Asia: Malaysia?

By Cat Yong

Having been in Asia for the past 6 years, Rackspace’s Director and General Manager, Adam McCarthy admitted it wasn’t only till the last two years that things started to really kick off for the US-based managed cloud computing company.

“In 2008, we had an exploratory emphasis and an ‘outpost’ in Hong Kong, from which to explore the market in Asia. This was to see if there was anything and try to connect with customers in the region.

“We had a small footprint of about five people,” he described.

Since 2012 though, this number has grown to about 65, as Rackspace found the Asian market growing. With greater emphasis on Asia right now, the company is looking at very specific demographics, and McCarthy admitted that focus is basically on India and Greater China.

That said, business does come from other parts of Asia, although there is a certain profile of customers Rackspace has, which McCarthy said fits their current strategy focus.

These are basically three use cases, the first being the Western companies that want to get into Asia, and need a middle ground to connect to some of the biggest markets here, for example China.

The second are Pan-Asian companies that have a market within the Asia region itself.

And then, there are the companies based here, that want to go to the West.

“We see a lot more of that now. We see it in Malaysia, Indonesia, China, India… their end customer is either a Western customer, or their operations are expanding, and they want to go global and in doing so, work in the Western markets,” McCarthy observed.

Language – bridging the gap first
With customers coming from the West, and growing pent up demand from Asia for cloud services, Rackspace recognises the significance of localisation.

McCarthy said, “For 2015, it’s about localisation.  I think if you are a Western company, you have to accept that English isn’t the magic key to get everything done.”

For example, Rackspace had been focused this year, on getting their portals and tools translated into Simplified Chinese.

“We are going to use that as a proof-of-concept that localising works, and that the value proposition is strong. We picked Chinese because it has the widest possible usage across countries like China, Singapore, Malaysia… that works for us,” McCarthy explained.

The idea also is that Rackspace would start to look at which other markets they could go to, in terms of providing support and tools for it in its local language.

That second physical presence in Asia
Besides a data centre in Hong Kong that serves the needs of Western companies coming into Asia, Rackspace is also looking at options in the region for their second data centre location.

Like the customers that they serve, Rackspace recognises the need for a second point of presence, for redundancy, disaster recovery and spread around the region.

Sharing that Rackspace prefers to own their own data centre location, McCarthy also opined that Malaysia offers a lot of conducive elements – geographic stability, location and government support, that makes it cost effective to set up shop here.

“For me, it’s going to be about if this location makes sense, does it do the right thing for the customer, is it a good place for Rackspace… I can guarantee you that as and when Rackspace’s second data centre location opens, it is going to be Singapore or Malaysia. Without question,” McCarthy pointed out.

The Johor factor
Rackspace would likely be entering either of these markets with a yet unnamed data centre provider, and with a view to eventually own their own data centre location, as the market matures.

Somehow all this brings to mind that Rackspace could have the best of both worlds, by locating their presence in Johor, Malaysia.

With Singapore as the next door neighbour that houses some 6000 MNCs; a good number of them with regional HQ roles; Iskandar in Johor is shaping up to be a very viable alternative business hub, and without any of the real-estate woes that Singapore faces.

Despite observations from industry experts that Malaysia’s cable connectivity rates could reduce a further 70-percent to match Singapore’s, there are already all kinds of rumours of big data centre building activities going on in Johor.

One belongs to Microsoft, and a late October chit chat with Microsoft’s VP of sales, marketing, IT & Operations Group, Alvaro Celis, neither confirms nor refutes this.

Another, is a 100 acres data centre belonging to the Hitachi and Sunway JV, that is to be completed in two phases.

Both are claimed to be on the cusp of being built out (if not already) in Sedenak, Iskandar Malaysia. Iskandar Malaysia has been earmarked for establishment of a data centre park under Malaysia’s Economic Transformation Programme, so chances are that news of other companies locating there are going to flow in next year.

Market entry
Wherever their data centre may be, Rackspace’s six years in Asia, yields a well thought out market entry strategy.

McCarthy said, “I think Western companies aren’t always very good at it. You have to understand the cultural drivers, the business trends, and what works in it, and also how is your company good for that region, not just from the services you provide, but as a responsible company.”

He also added that to enter a market, localisation would be a key priority. In other words ensuring that there would be local leadership who owned relationships with customers and know how things work in-country.

Mc Carthy concluded by commenting about his role, “I’d rather be someone who facilitates and connects the local market to the company, and doing it right. I think there are too many companies here where they stick an expat guy out here and then they wonder why the relationships don’t work.”