This phenomenon, which involves bringing back to the country or region of origin the data storage and processing infrastructures previously hosted abroad, is redefining the technological and economic landscape of the region, since a strong investment will be needed to achieve the required latency reduction.
Amid growing global digitalization, a trend is emerging in Latin America: the repatriation of data centers.
"Repatriation is not industry-specific, but is more associated with scale, legal and technical aspects," explains José Miguel Guzmán, co-founder of Whitestack, a cloud infrastructure solutions company.
According to the study What is repatriation and how can you benefit from it, by the specialist magazine Cloud Weekly, although 50% of the IT world remains in the public cloud, this trend has begun to change in recent years. In the United Kingdom, for example, 25% of organizations have already repatriated more than half of their workloads to their own facilities.
This trend, which initially seemed limited to more developed economies, is rapidly gaining ground in Latin America.
In Latin America, this trend is reflected in the projected growth of the data center construction market. “The market is expected to grow from $5 billion today to nearly $8 billion by 2029,” Guzman says, citing a report by Mordor Intelligence.
FROM OPEX TO CAPEX
The main driver behind this trend is, without a doubt, the economic factor.
"Repatriating workloads allows us to move from a cloud leasing model (OPEX) to a cloud investment model (CAPEX)," explains Guzmán. This change can have a significant impact on companies' margins and, therefore, on their market valuation.
A study by Andreessen Horowitz, "The Cost of Cloud, a Trillion Dollar Paradox", analyzes the case of digital service providers such as Dropbox, which managed to positively impact their margins and stock value by repatriating their infrastructure.
The study estimates that the added value of repatriation in digital services companies globally could approach US$ 500 billion.
"The first industries to adopt this new model were digital services, as they allocate a huge budget of their sales to cover cloud costs," says Guzmán. "Companies in the online services, content, cloud services, software as-a-service (SaaS) and e-commerce sectors fall into this category."
DATA SOVEREIGNTY
Beyond the economic aspect, data sovereignty emerges as a crucial factor in the decision to repatriate.
"Governments in Latin America have begun to emulate the data sovereignty policies of the US and Europe, where citizens' information is required to be kept within their borders, to ensure the appropriate legal framework," says Guzmán.
This trend particularly affects sectors such as government, banking and healthcare, as well as any organization that handles sensitive personal information.
"In more developed markets, these industries have strong restrictions on deploying information outside their borders, and something like this is already beginning to happen in Latin America," adds the co-founder of Whitestack.
The technological aspect also weighs heavily in this trend.
"Workload repatriation enables a significant reduction in application latency by deploying applications closer to users," explains Guzman. This performance improvement is crucial for industries such as online gaming, multimedia and telecommunications, which require a near-instant response.
As has been the trend in data processing, which began on premises and then moved to data centers and public, private and hybrid clouds, this transition to a local data center model is not without its challenges.
"Latin America is facing the need to increase the speed of digitalization of its economies, and this will require a lot of computing over networks," says Guzmán. This need has positioned the region as a focus for investment in data center infrastructure.
As an additional factor, sustainability is emerging as a growing concern: "The information technology industry recognizes that energy efficiency is key to making it sustainable," warns Guzmán. "Digitizing a continent with the low levels of efficiency that still exist in certain sectors makes progress unviable, and therefore requires the adoption of greener software and hardware technologies, in what has been called green computing."
As Latin America continues its journey towards digitalisation, the repatriation of data centres is emerging as a key strategy to boost the region's competitiveness and technological sovereignty. "This trend not only has significant economic implications, but also positions Latin America as an increasingly relevant player on the global technological stage," adds Guzmán.
The challenge now lies in how the region can capitalize on this opportunity to create a robust and sustainable technology ecosystem.
In this context, the telecommunications industry plays a crucial role since, as one of the largest consumers of computing capacity, this industry is leading the adoption of software-based solutions that run on repatriated private clouds.
This will be one of the central aspects to be addressed at the Open Telco Cloud Summit, to be held in Mexico City on September 3. The event will bring together industry leaders to discuss the best ways to support the transformation of the sector and standardize its technological processes. With the confirmed participation of the main Latin American telecommunications operators, the summit promises to be a milestone in the evolution towards a more open ecosystem of solutions for the industry.
