The data centre market is growing very rapidly, both globally and domestically. The global data centre market is poised for growth, driven by the adoption of disruptive technologies. The global installed data centre capacity in 2020 stood at 970.3 million square feet. The global data centre market is expected to observe a 17 per cent compound annual growth rate (CAGR) during 2019-23.
Domestically speaking, India currently has 126 third-party data centres (co-location or hyperscale). Some of the key data centre hotspots in the country are Delhi, Mumbai, Bengaluru and Chennai. Apart from this, some of the emerging data centre spots in the country are Uttar Pradesh, Gujarat, Pune and Hyderabad. The Indian data centre market is heading for a big boom over the next five years driven by the massive demand for digital services. Owing to this demand, around 6 million square feet of additional area will be required over the next three years. Further, the Indian data centre market is expected to attract $8 billion in investment by 2026, observing a CAGR of 12 per cent.
A look at some of the demand drivers and opportunities in the data centre space and some of the key considerations that players have to take into account before setting up their facilities…
Demand drivers
Fuelled by government incentives and the demand for digital services, there has been a flurry of investments in the Indian data centre market. The following is a brief description of various factors driving the demand for data centres in India.
- Government initiatives and support: The central and state governments have come out with various incentives to attract more investment in the Indian data centre space.
- Covid-19 impact: The pandemic has induced a work-from-home culture, pushed enterprises to digitise their operations, provided a boost to the demand for OTT, telemedicine and other such services. All this has increased the demand for data storage infrastructure.
- Entry of global vendors: India is attracting a lot of investment from global players, owing to factors such as incentives offered by the government, and availability of cheap resources.
Key considerations for setting up a data centre
There are various key factors and considerations that data centre players have to take into account before setting up a data centre. These include ecosystem considerations such as cloud market growth potential, fibre connectivity, infrastructure (power, water, transport) availability, availability of and accessibility to sustainable energy resources and talent. In addition, a new entrant into the market has to gauge the regulatory and political landscape of the country and the city where it wants to set up facilities. Factors such as incentives offered by the government, political stability, tax advantage or subsidies provided, cybersecurity regulations and power also play a critical role in the decision of a data centre service provider. Over and above this, operators have to look into location and physical considerations such as real estate availability, costs of real estate and construction, environmental risk preparedness and resiliency, and the presence of optimal climate and humidity conditions. Every city has a mix of favourable and unfavourable conditions. As such, to overcome entry barriers, data centre players are focusing on forming synergistic partnerships. Of late, companies are focusing on opening data centres in Tier 2 cities.
Opportunities and the way forward
India is a very dynamic market. There are a lot of opportunities in the Indian data centre space. One such opportunity is the hyperscale opportunity. Enterprises are shifting to massive centralised data centre hubs, which offer scalability, operational efficiency, speed and flexibility. In fact, there has been a threefold growth in the number of hyperscale data centres in the past six years. Another opportunity is around hybrid and multicloud adoption. Cloud is expected to represent about 95 per cent of the total data centre traffic. Winning edge is yet another opportunity. People are adopting smart technologies in their homes and businesses that demand edge computing and so the demand for edge data centres is growing. The growth of edge computing will also drive the demand for 5G technologies.
Data centres are increasingly becoming smart and more tech enabled. Of late, there has been a rise in intelligent data centres. Data centres are exploring the use of artificial intelligence (AI) for reducing downtime, improving security, server optimisation and even energy conservation. In fact, by 2023, 50 per cent of enterprise data centres will leverage AI- and machine learning-enabled controls to transform operations. Last, green energy is also presenting a host of opportunities in the data centre space. According to a recent survey, around 60 per cent of Indian organisations believe in powering a portion of the data centre capacity with renewable energy sources. As such, all new players are investing in renewable energy as well.
Given the various opportunities present in the space, the sector is seeing a massive influx of investments and a lot of new players are coming and setting up shop here. The government is also actively engaging in the space by offering various incentives.
Based on a presentation by Swapnil Srivastava, Global Technology, Telecoms and Media & Entertainment Analyst Leader, EY
