Kenya’s financial sector data center future

Posted on February 4, 2016 12:43 am

Kenya, the largest economy in East and Central Africa is currently experiencing exponential growth in data volume as more individuals and businesses access the Internet and use online services. Kenya has one of the fastest-growing mobile subscriber bases among its counterparts in Sub Saharan Africa. More and more Kenyans go online and the need for data centers has become more apparent in a country with a high Internet penetration rate.According to the sector’s recently conducted survey of Kenyan banks on the subject of data centers, there future growth and opportunities are enormous. The survey indicated that on average, most Kenyan banks expect a 25-34% 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. Three of the largest Kenyan banks says that their current data centers are no longer sufficient to meet their business needs and they will therefore invest more than US$4 million in its data centers in the next 12 to 24 months. In addition to the need for data centers, the Kenyan government issued Government Regulation, which has a significant effect on Kenyan banks as this law requires that Kenyan bank customers’ data must be stored on Kenyan soil. Thus, Kenyan banks that previously operated overseas data centers must repatriate the information. A very large Kenyan bank, for example, recently moved data from a German data center to a new disaster recovery data center in Mombasa in order to comply with the regulation. Similarly, a British-owned bank also cited the regulation as a major reason to upgrade its data center capacity.

Nairobi, Kenya's capital where more than half the country's Data Centers are located
Nairobi, Kenya’s capital where more than half the country’s Data Centers are located

In fact, this bank has specifically prioritized on-shoring which means moving its overseas data center to Kenya on top of its to do IT list in 2016. To illustrate the use of data centers by banks in Kenya, each Kenyan bank currently operates an average of 1.5 data centers that are physically located in Kenya. A bank with total assets of $500m in 2014, for instance, operates two data centers, while the top five Kenyan banks by assets in the survey currently operate three data centers.The need for data centers also goes hand in hand with the high propensity of Kenyan banks to spend on data center-related investments. It is expected that most Kenyan banks will spend at least $500,000 on data center-related investments in the next 18 to 20 months. On average, Kenyan banks plan to increase their data center budget by 12 percent every year. Undoubtedly, some of those spending dollars will be allocated to fixing data center issues or problems currently encountered by Kenyan banks. Some of the concerns include information leakage and data confidentiality issues in the organization, the risk of operational error or failure happening in the data centers, and the poor quality of data center human resources that not only affect Kenya, but all countries in Africa.However, the private sector cannot fix all of these data center issues alone. The Kenyan government has a role to play in improving the current infrastructure. Kenya has very poor bandwidth availability for the volume of users it needs to support.Some of 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 Africa’s data center index ranks Kenya in the top three countries for data center building in Sub Saharan Africa, Kenyans hope for the current administration to make some infrastructure improvements to greatly help the industry.

Contador Harrison