Kakao Service Outage Crisis, Will IDC Reshape... "Expecting Expansion in Data Center Demand"

[Image source=Yonhap News]

[Asia Economy Reporter Myunghwan Lee] Due to the unprecedented service outage experienced by Kakao, telecommunications services and data center-related stocks are gaining attention. This comes as criticism arises that the incident occurred due to insufficient measures such as server distribution. Securities firms predict that domestic companies' demand for data centers, including Internet Data Centers (IDC), will increase.

On the 17th, in the KOSDAQ market, Data Solution closed at 5,400 KRW, hitting the upper price limit. Network solution provider Openbase also ended trading at 2,630 KRW, up 10.50% (250 KRW) from the previous trading day. In the KOSPI market, network and data center-related stocks also rose collectively. Comtec System, a network integration solution specialist, closed at 685 KRW, up 15.91% (94 KRW) from the previous day, followed by NHN (5.58%) and Douzone Bizon (3.47%) also closing higher.

This is presumed to be influenced by the Kakao service outage incident. On the 15th, a fire broke out at the SK C&C data center where Kakao's servers are housed, causing server operations to halt and major Kakao services, including KakaoTalk and KakaoT, to be suspended for nearly a day. Even as of the afternoon of the 17th, two days after the incident, the aftermath continues, disrupting services such as search and mail on Kakao's portal site ‘Daum’.

Kakao explained the cause of the incident by stating, "There was an anticipated risk response scenario, but since the fire was an unforeseen scenario, we believe the countermeasures were insufficient." As Kakao is presumed to have failed to properly establish data center redundancy, resulting in a prolonged service outage, demand for data distribution is expected to grow. Consequently, investors anticipating a ripple effect are flocking to data center-related stocks.

The government has also emphasized the importance of measures such as data center redundancy. President Yoon Suk-yeol stressed yesterday regarding Kakao's service outage, "Not only must the exact cause be identified, but accident prevention measures including the installation of twin data centers (redundancy), as well as thorough establishment of reporting and response systems in case of accidents, must be implemented."

Securities firms also released analyses expecting an expansion in data center demand due to this incident. KB Securities researcher Junseop Kim said, "Demand for redundancy and distribution by using multiple data centers is expected to accelerate the expansion of domestic data center demand," adding, "To operate data centers redundantly, it is inevitable to install additional servers as the same servers must be operated in two or more locations."

In addition to building data centers, there is also a forecast that the transition to cloud services utilizing multiple IDCs simultaneously will accelerate. Researcher Kim noted, "Operators who find it difficult to use data centers redundantly are expected to consider transitioning to the cloud," pointing out, "As companies pursue digital transformation and cloud transition, the cloud transition, which has strengths in distributed data processing, is a factor accelerating this trend."