As Data Centre Adoption Rises, How Does the Indian Economy & Tamil Nadu Stand to Benefit

In 2019, India’s total colocation Data Center (DC) capacity was around 630 MW with Chennai standing at 59 MW approximately. The push towards digitisation, fuelled by the disruption caused by the Covid-19 pandemic, was expected to multiply supply across most cities in India.

Currently, Chennai has the third-highest data centre capacity in India, after Mumbai (199 MW) and Bangalore (57 MW). Chennai also has high occupancy levels (83 per cent) due to space being taken up by large cloud companies.

In light of this, the Tamil Nadu data centre policy is playing a major role as it aims to cater to the requirements of data centres and provide an attractive business environment. AdaniConneX and other prominent players including Equinix, Nxtra, CapitaLand and Web Werks have also announced their intentions of either building a data centre or increasing their state of the art facility in Tamil Nadu.

However, Chennai still stood at only about 97 MW by the end of 2021. The city was high on cloud penetration with all cloud majors establishing their presence in Chennai however site acquisition and development spree was yet to be witnessed.

In the Limelight

The year 2022 has started on a much more positive note for India and Chennai. “New cloud regions have been announced in Hyderabad which are greenfield developments and acquisitions of sites in Chennai has increased the limelight on the city,” stated Vivek Dahiya, MD, India Lead-Data Centers, New Initiatives, Cushman & Wakefield.

Mumbai still remains as the priority city for most firms as was the case in 2020 and 2021. By mid-2022, about 30 acres of new sites had been acquired for DC development in Chennai. Although not as large as Mumbai this will be a significant addition to city’s capacities, stated Dahiya.

Introduction of large cloud regions in India is a significant move, importance of which cannot be understated. Cloud computing has pushed the full capabilities of a DC and online applications into the hands of small-and-medium-sized enterprises.

Such abilities were limited or lacking for the fast-growing firms of the Indian economy due to the unavailability of massive, dense, and almost infinitely scalable data centres. This is only possible due to the adoption of hyperscale technology that has resulted in a new standard for DC take up with 20 MW to 50 MW leases becoming more commonplace and self-build and owned DCs of cloud firms going up to a 100 MW at one location.

Key DC Ecosystem

Chennai would remain a critical part of the DC ecosystem in India, primarily as its one of the five cities in the country with submarine cable landing stations. The city will continue to find mentions in the upcoming/ announced submarine cable projects that are expected to improve India’s connectivity even further.

This along with the growing IT/ ITES sector in Chennai and increasing move towards digital services and applications by corporate and individual users would sustain demand for DC space in the city. It’s clear now that there are enough tailwinds for DCs in India and Chennai.

In the same breath, the increasing incidence of unpredictable extreme weather phenomena (heavy monsoon and cyclones coupled with waterlogging/infrastructure-related matters) do pose challenging questions. Just as the Tamil Nadu state government has taken a very proactive step of laying optic fibre network in most of its cities and villages, a similar initiative should be taken for augmenting infrastructure in Chennai.

While incidences of waterlogging might not have impacted DC micro-markets of Chennai directly, if accessibility to these locations is ensured even during adverse conditions, it would only make the city more attractive to further investments.

By end of 2021, Chennai was still lagging in Bangalore in terms of total, live capacity. However, based on the expansion plans announced and site acquisitions already undertaken, by 2025 we expect Chennai to be in a clear second rank.

While Mumbai is expected to retain the lead for quite some time in the future, Chennai is also expected to consolidate the new rank. It remains to be seen if greenfield, availability regions are announced by Cloud firms in Chennai which would further augment the DC infrastructure of the city, concluded Dahiya.

 

For a detailed study comparing data centre policies of key states in India, download this report

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