KT ups ante with $1.5 billion spending on public sector cloud service

KT Cloud Corp., a unit of South Korea’s telecom giant KT Corp., plans to spend up to 2 trillion won ($1.5 billion) over the next three years to enhance its presence in the domestic public cloud service sector, a growing niche market.

During a recent meeting with institutional investors, KT Cloud also said it will aggressively expand its internet data center (IDC) capacity with funds it plans to raise through an initial public offering and other fund-raising efforts.

Earlier this month, the company said it has begun construction of a 26-megawatt data center in Geumcheon, southern Seoul, with an aim to secure a total of 100 MW data center capacity by 2025 to handle fast-growing data traffic.

The latest investment plan is much larger than its announcement in June that it will invest 1.7 trillion won in IDC, the core part of cloud infrastructure, over the next five years.

KT Cloud, spun off from its parent KT Corp. in April, currently operates four IDCs in Korea and one in the US state of California.

CLOUD SOLUTIONS FOR PUBLIC INSTITUTIONS

KT’s decision to expand its IDC capacity comes as its local rivals are joining forces with other cloud service providers to develop customized cloud solutions for state-run organizations.

Last week, five local firms – SK Broadband Inc., Naver Cloud Corp., AhnLab Inc., TmaxOS Co. and Hancom Inc. – forged a strategic partnership to roll out cloud PC services for smart work in Korea’s public institutions.

Korea is pushing for public institutions and administrative agencies' cloud transformation as part of a government-led digital innovation project.

Naver Cloud, a unit of online portal giant Naver Corp., is the country’s largest homegrown cloud service provider.

It is currently hiring dozens of developers and engineers to expand its cloud service business.

NHN Cloud, spun off from its parent NHN Corp. in March, is also hiring cloud talent to compete with its domestic and foreign competitors.

A cloud service is any service available to users on demand via the internet from a cloud computing provider’s server as opposed to the company’s own on-premises server.

Cloud services are designed to provide easy, scalable access to applications, resources and services, and are fully managed by cloud service providers. Cloud computing is generally used to describe Internet data centers or IDCs.

TOUGH COMPETITION

According to tech research and consulting firm Gartner, Korea’s cloud market is expected to grow to 10.2 trillion won by 2025 from 6.5 trillion won this year.

Korean cloud service providers’ aggressive business expansion comes as bigger foreign rivals are joining the local market amid intensifying competition.

Last November, Snowflake Inc., a US big data cloud provider, announced its entry into the Korean market to offer cloud-based data warehousing and analytics service, generally termed “data warehouse-as-a-service.”

Snowflake’s Data Cloud runs on all three major cloud platforms – Amazon’s AWS, Microsoft Azure, and Google Cloud Platform – and can accommodate massive, near-endless data repositories.

Foreign companies are already dominant players in Korea, with the big three accounting for over 90% of the Korean service market.

Analysts, however, say that Korean players have the edge over their foreign rivals in the public sector cloud service market as most foreign companies don’t meet the Korean government’s security requirements such as network separation to prevent data leaks and customer information theft.

“The public sector is a land of opportunity for Korean cloud companies, a bridgehead with which they can better compete with bigger foreign rivals,” said an industry official.

Write to Jeong-Soo Hwang at hjs@hankyung.com
In-Soo Nam edited this article.