Demand for DC space in India expected to increase exponentially: Savills

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The Indian data centre industry is experiencing a huge surge in demand. There has been a significant increase in the amount of data that is being used by the people not only in India but around the world.

With a restriction in people movement, a majority of businesses have gone virtual.

The government of India’s initiatives such as digital India and emphasis on self-reliance and data protection through data localisation is expected to increase the volume of data in the country, which will result in an increased demand for the data centre and cloud services.

Demand for data centre space is expected to increase by around 15-18 million sq.ft. across major cities in the next 4-5 years, according to a Savills report titled ‘Poised for Growth: Data centres in India’.

McKinsey has identified India as the second fastest-growing digital economy and projected that the IT and communications sector will double in size by 2025 to contribute US $355-435 billion to GDP.

Demand Drivers

India is increasingly seeing an opportunity in edge data centres. The smart city initiative and the adoption of 5G, IoT, AI are driving the demands for edge data centres.

The Savills report further added that the Finance Minister of Government of India, Nirmala Sitharaman announced that the government is planning to roll out a data centre policy enabling the private sector to establish data centre parks in the country.

“Data is the new oil’, she pointed. Various states including Maharashtra, Telangana and Tamil Nadu are already offering several incentive schemes for setting up data centre parks in their states.

An increase in the adoption of cloud services is another reason for an increased demand for data centres. According to an IDC report the India public cloud services market, including IaaS, PaaS, and SaaS reached $1.6 billion in H1 2020.

A NASSCOM report pointed out that cloud spending in India is estimated to grow at a CAGR of 30 percent to reach $ 7.1 billion in 2022.

This is mainly driven by demand for cloud archiving, cloud backup, and disaster recovery. The COVID19 pandemic has led to a shift in the adaptation of cloud services that are more secure and scalable.

A surge in data usage and increased mobile broadband penetration in India. According to the Nokia Mobile Broadband Index 2021, India has 702 million mobile broadband users and broadband penetration at 45 percent as of December 2019.

The data usage in India is likely to increase further due to an increase in the number of 4G subscribers. India has the second-highest internet subscribers after China, the report pointed.

Nokia’s Mobile Broadband India Traffic Index 2021, stated that the data traffic grew by 36 percent in 2020 in comparison to the previous year, mainly driven by 4G data consumption.

The report also added that the average monthly consumption grew from 0.8 GB in 2015 to 13.5 GB in 2020 due to increased online video consumption and data subscriptions.

The data traffic has grown to 60 percent in the year 2020, 77 percent devices are 4G, smartphone usage per hour of a person was 5 hours per day, added the Nokia Broadband Index 2021.

According to a Frost and Sullivan report the E-commerce penetration has increased to 3.0 percent in 2020 from 0.4 percent in 2017.

Currently, cities like Mumbai, Chennai, NCR, Bangalore and Hyderabad have a great potential to become the data centre hub in APAC due to the availability of high bandwidth speed, lower power tariffs and presence of hyperscalers along with the availability of state-of-art infrastructure is likely to fuel the growth of India’s data centre market.

Colocation and Captive Data centre

The geographic location, favorable climatic conditions, availability of power, proximity to customers, fiber connectivity and real estate costs are some of the key selection criteria for site selection before setting up a data centre.

The question here then arises which ones would organisations prefer in India?

“There is no simple formula to decide Captive or Colocation Data centre as companies shall do the detailed and comprehensive analysis from their business perspective as to what is best suited for the company as it may differ from company to company.

Uptime Institute has come out with a Framework called FORCSS (Financial, Opportunity, Risk, Compliance, and Sustainability & Service Quality). The organizations can use this framework to evaluate which option is best for their company,” said NK Singh, Founder & CEO, Data Centre Guru.

He further added that for the last 10 years the industry is witnessing an increase in adaptation of Colocation/Cloud Data centre as compared to a captive data centre and the few data points explain it better (Captive Data Center/Colocation Data Center):

 Year  Captive DC  Colocation DC
 2010  80 %  20 %
 2013  75 %  25 %
 2015  65 %  35 %
 2018  50 %  50 %
 2020  40 %  50 %

The advantage of Colocation Data Center as compared to Captive are the following:

Highly reduced Capex

Highly scalable

High Uptime

Improved Physical Security

Improved effectively

It was challenging for captive data center customers to meet reliability during the COVID period. However, it was much safer with colocation

“Demand drivers for Data centers have also changed. Earlier the Data Center was majorly built by enterprises or governments.

However, with an increase in demand for cloud, OTT and e-commerce have also fuelled the demand for Colocation Data Center,” added Singh.

IoT, AI, and ML will further boost the demand for Colocation & Edge Data Center.

Edge Data Center can be Captive as well as collocated. More than 50 percent of the demand for Data Center is driven by hyper scalar where they want Colocation Data Center only.

Most of the enterprise data centers are old and don’t have scope for expansion. Due to the advantages of Colocation over Captive, now almost all the enterprises are preferring to go for a colocation data center rather than a captive one.

“Majorly, captive data center demands are being supported by the government. i.e. state data centers and government departments or PSU’s are still using captive data centers.

With an adaptation of Edge Data Center, we may see some increase in Captive Data Center as normally Edge data centers are small in size and customers may decide to leverage their assets for this. But the trends are clearly indicating adaptation of Colocation over the captive,” concluded Singh.

“Tier 3 & 4 data centres will have equal scope in the industry. In today’s digital journey where data management and its security plays a vital role, it becomes imperative for IT leaders to adopt the best hosting services.

Multiple factors are to be considered such as architecture, designing, planning, implementation, traffic management, data replication, backup, restoration, uptime & availability, performance monitoring, data security, compliance, network and device monitoring are the ones to name out a few. The list is whopping though!,” said Vinod Nair, Head Data Centre Ops, HDFC Ergo.

Cloud has its own set of benefits. Nair added that cloud, colocation data centre, hybrid, tier rated or on-prem, a through scope, vision and strategy should be in place to gauge out the best fitment when it comes to data centres.

“The larger ones will look for a cloud model and smaller organisations will be looking for something called community cloud.

This is what is going to emerge in the future especially in countries like India because we are clear in how we want things to work out,” said Dr. Suresh Shan, Head Innovation and Future Technology, Mahindra and Mahindra Financial Services Limited.

He further added that corporate digital is moving away from customer digital because so far the organisations have been satisfying the regulators and the stakeholders.

As a result of the post COVID19 impact, everything will move from the corporate digital to the customer digital.

By going digital the organisations are trying to dominate to meet their financial requirements. The financial companies are closely working with their customers.

Every organisation in the coming future will be focusing more on the customers, therefore the demand for a community cloud will increase. It is not a public or a private cloud. It is a cloud which the end customer will decide as to what they wish to choose and what aspects they would want to add for their organisations.

The community cloud will create an earn-to-pay model. Data centres will move to a multilingual setup.

“District level cloud data centres will be expected in future because in India if you see the amount of data available is huge and we try to engage closely and diversify the expectations of the customers.

The research that I’m working on focuses on how data will be more behaviour based and converted into business benefits. The transformation is moving from corporate to the customer,” added Shan.

He further underlined that it is important for the organisation to decide as to what part of their data should be a part of the colocation data centre and which data should be with them because the expectation is that of a community cloud.

Anuradha Nagar

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