Emerging Ecosystem

Hyperscale and edge data centres to drive the 5G revolution

Data centres are the ba­sic infrastructural buil­ding blocks for every organisation’s digital project. Of late, hybrid solutions are being seen as the most ideal set-up for enterprise computing in­frastr­u­c­t­u­re. This is expected to gain mo­re pro­minence once 5G kicks in. The growing data centre and cloud market presents a combined opportunity of $14 billion in financial year 2026. The Indian data centre and cloud market is ex­pe­cted to grow from $1.2 billion in fin­an­cial year 2021 to $3.5 billion-$4 billion in financial year 2026. Further, the Indian public cloud market is expected to grow from $3.5 billion to $9 billion-$10 billion in financial year 2026.

A look at the evolving role of data centres in the 5G era, key trends and the way forward…

Hyperscale and edge data centres

The concept of a data centre has been ar­ound since the 1940s. Data centres have since then evolved from mainframe to edge data centres. The edge data centre market has grown from $5.5 billion in 2019 to $20 billion in 2026. Gro­wth in 2022 is estimated to be 12.49 per cent, of which 46 per cent will come from North America. By 2024, the global edge data centre market is expected to record an incremental growth of $7.48 billion.

As far as India is concerned, one of the key factors fuelling the need for hyperscale data centres is the accelerated cloud adoption being seen among Indian enterprises. Among the key sectors driving cloud gro­w­th are manufacturing, retail, automobile, healthcare, media and entertainment. Fur­ther, factors such as growing internet traffic, the coming of data localisation nor­ms, the government’s digitalisation initiatives, the growing start-up ecosystem in India, and increasing artificial intelligence and machi­ne learning (ML) technology adoption, are also adding to the demand for hy­per­scale data centres. Conse­qu­ently, traditional data centre providers are moving towards hybrid cloud offerings.

Key trends

Some of the key emerging trends domina­ting the edge data centre space are:

  • Arrival of 5G – Decentralised small cell network of edge data centres provides low-cost, low-latency support for high-device-density 5G use cases ((such as smart city applications).
  • IoT proliferation – Low-latency edge processing is key to managing the inc­reasing volume of data as more and mo­re IoT sensors and devices are being installed in home and industrial settings.
  • Widening data gap – By filtering the data close to the source, low-cost edge centres can help close the potential 64 zettabyte gap bet­ween global data centre traffic and usable data created.
  • Adoption of SDN and NFV technology – Software-defined networking (SDN) and network function virtualisation (NFV) enable software running on data ce­ntres to replace costly specialised hardware.
  • Video streaming and augmented reality (AR)/virtual reality (VR) – Decen­tra­li­sed, low-cost edge data centres re­duce streaming la­tency and provide the performance that consumers and business users demand.

Data centre in the 5G era

Data centres are the core hub of the 5G digital ecosystem and will play a pivotal role in 5G’s evolution. They will be able to meet the network and service requirements of 5G. Next-gener­ation data centres employ new technologies such as SDN, automation and ML, which allow for better control of physical and virtual resourc­es, real-time monitoring and performance optimisation, thus resulting in far greater efficiency and lesser room for error.

With the shift towards 5G wireless networks, deploying 5G-enabled devices to the edge and managing the movement of crucial data bet­ween locations is becoming more practical. This is because the edge provides intelligent ser­vi­ces at the network edge near the source of the data to meet the critical requirements of real-time services, data optimisation, application intelligence, security and privacy protection of industry digitalisation.

Given that data centres are one of the foundational blocks of a robust 5G eco­system, the adoption of new-age technology is expected to have a considerable impact on the data centre space. The introduction of 5G brings with it the possibility of more edge-based localised data centres. They pr­o­cess data locally and only send some data to the cloud. This hel­ps reduce latency and pro­mote speeds. Further, 5G is likely to have a domino effect on the existing data ce­­­ntre infrastructure and on new in­vestme­nts. Also, data centre operators will look for more energy efficient and cost-effective up­­­­gra­des that can handle resource-intensive data, such as content re­lated to ML and VR. Industry experts also predict that 5G re­adiness could give data centres a competitive advantage.

The way forward

Going forward, the data centre industry has the potential to generate incremental opportunity to the tune of over $4 billion across the ecosystem. Data centre construction al­one requires a capex of $4.1 million-$4.4 mi­llion per MW of IT power capacity. Of this, 53 per cent is expected to be consumed by low-side and high-side electricals, 28 per cent by building (including design and external development), 11 per cent by safety and security, and 8 per cent by heating, ventilation and air conditioning.

Based on a presentation by Purushothaman K.G., Partner and Telecom Sector Leader, KPMG

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