Digital Infrastructure

Solutions for improving the nascent but growing data centre sector

T.R. Dua, Director General, Digital Infrastructure Providers Association

The Covid-19 pandemic has led to a huge surge in data growth, primarily because of activities such as work-from-home, videoconferencing, e-commerce and online payments. This has led to the increasing demand for data centres in India. Further, with the 5G auction likely to take place in 2022, data consumption is expected to grow exponentially, with evolving technologies such as internet of things, artificial intelligence, machine learning and robotics also playing a big role. In order to make 5G a success story in India, it is essential to invest in network densification by providing fibre, small cells and data centres.

Types of data centres

There are four types of data centres – enterprise, managed services, co-location and cloud. Enterprise data centres are built, owned and operated by companies. They are optimised for us­ers and are mostly housed on the corporate campus. Mana­ged services data centres are managed by a third party on behalf of the company. The company leases the equipment and infrastructure instead of buying them. Co-locati­on data centres rent out space to companies while being owned by others and located off ca­mpus. Such data centres host the infrastructure needs such as buildings, cooling, bandwidth and security. Cloud data centres are situated off pre­mises with the data and applications being hosted by a cloud service provider.

Current status

India has around 375 MW of installed power capacity for data centres. This is projected to grow by over three times by 2025. With businesses in India aiming to extract investments in the data centre sector, they are likely to rea­ch $4.9 billion by 2025. The immense growth prospects of India’s data centre industry have led to merger and acquisition deals worth ar­ound $400 million over and above the organic in­vestments by operators during the year 2020. Moreover, the investment potential for 2021-23 is estimated at $3.7 billion.

Key drivers

The growth of the cloud ecosystem, with applications such as software-as-a-service (SaaS), platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS), has been one of the major drivers ge­nerating demand for data centres in India. Over-the-top platforms have also seen a high rate of adoption. The regulatory push in the form of a data localisation policy and the introduction of a personal data protection bill has also fostered confidence among businesses in the data centre platform. India has witnessed an increa­se in investments in edge data centres, which are located close to the edge of a network. Data ce­ntres are also exploring renewable energy options, thereby su­bsidising their environmental impact and ensuring sustainability. Such innovations drive the demand for data centres.

Opportunities for IP-1s

The data centre growth in India opens up various new revenue streams for infrastructure providers (IP-1s). Tower companies can expand fibre networks to get an edge in establishing data centres. There can be shared infrastructure offerings based on co-location services. IP-1s can also make structural changes to act as data centre pro­viders. Additionally, there is an opportunity in leasing space for data centres. Investing in micro data centres and deploying them on their sites for edge computing can be yet another opportunity for IP-1s.

Challenges and recommendations

Data centres require skilled manpower to be de­ployed, which needs to be good at problem-solving and critical thinking. India has a dearth of the necessary skilled labour. Paucity of adequate infrastructure is another key challenge in India. Ample infrastructure and uninterrupted fibre network connectivity are also needed. Un­sta­ble power supply and heavy reliance on generators is a major challenge for operators. Furth­er, scarcity of resources such as water for cooling facilities leads to various hindrances. Be­ing capital intensive, data centres require heavy investment to set up facilities. Factors such as high real estate costs, cost of im­proving wide ar­ea network connectivity and increased cost of eq­uipment have led to a further rise in the alrea­dy heavy capex requ­i­rement of the sector.

Concerted efforts are needed on several fronts, including creation of uninterrupted power supply at affordable cost, provisioning of financial incentives, and an efficient tax structure. The government will need to create a fa­vou­rable environment for investments in the data centre sector by according “infrastructure” status to data centres, simplifying clearance processes and setting up pre-provisioned parks. For the long-term growth of the data centre sector, it is critical to create a conducive, competitive and sustainable operating environment by making the needed resources available, including renewable sources of energy. The creation of data centre econo­mic zones wo­uld create an ecosystem of hy­perscale data centres, cloud service provi­ders, IT companies, R&D units and other allied industries. The government might also need to set up a key decision-making body to facilitate the implementation of various measures for the betterment of the data centre sector.

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