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India data centres part one: Embracing a cloudy future

The first of a two part report series looks at how the data centre sector in India is evolving thanks to the presence of international companies including cloud providers and local initiatives.

India is the second most populated country in the world with more than 1.2 billion people. It is also one of the fastest growing economies thanks in part to its IT services and business outsourcing sector.

The technology industry contributes nearly 9.5% of India’s GDP and is the largest private sector employer, generating some 3.5 million direct jobs, and over 10 million indirect jobs, according to India IT industry body the National Association of Software and Services Companies (NASSCOM).

However, according to the World Bank, there is still a lot of inequality when it comes to levels of digital penetration and access to technology in India. For example, mobile and Internet penetration in India are still relatively low and not evenly distributed.

Data centre growth
The inequality in digital penetration and technical development generally has to some extent impacted demand for data centre capacity in the country in the recent past. However, the data centre sector is now evolving quickly with demand increasing aided to some degree by foreign investment but also public sector initiatives. India IT spending is projected to total $87.1 billion in 2018, an increase of 9.2 percent from 2017 estimated spending of $79.7 billion according to industry analyst Gartner.

India’s colocation and hosting market will generate almost $2 billion in annual revenue by 2019, up from just $1.3 billion in 2016, according to industry analyst 451 Research. The company recently published its first in-depth report on the multi-tenant data centre (MTDC) market in India. “It is clear that there is now a significant demand for data centre capacity in India,” said Teddy Miller associate analyst at 451 Research in a webcast.

A number of factors have driven that growth according to 451 Research. These include:
• Sustained economic growth
• Government initiatives
• Increased global business presence
• Rising adoption of IT outsourcing services including public cloud.

For example, the government introduced the Digital India initiative in 2015 to improve the availability of digital infrastructure as well as digital literacy and skills. The programme has had some success and helped to increase levels of digital access across the country.

Recently introduced data regulations in India also mandate that government data should reside within data centres within its borders. This has also spurred some local data centre development.

The vast majority of India’s MTDC capacity is still concentrated in its largest cities including Mumbai – with nearly a third of all capacity – as well as Chennai, New Delhi, Bangalore and Pune, according to 451.

Mumbai is the largest city in India and a major financial and commercial hub with more than 21 million people. It has about 1 million operational square feet of data centre space, according to 451. “Carriers in the city have constructed almost a dozen sub-sea cables landing near the city to provide quick reliable connections to Europe, Asia and the Middle-East,” explained 451’s Miller.

Data centre providers in Mumbai include international companies such as ST Telemedia from Singapore, and Netmagic which is owned by Japan’s NTT.

Impact of public cloud
The public cloud services market in India is projected to grow 43 percent in 2017 to total $1.9 billion, according to Gartner. As a result in a similar way to other markets, public cloud is taking up more space in colocation facilities. “The growth of the cloud industry in India has been and will continue to be a major boost the country’s data centre providers,” added Miller.

Google launched its first cloud region in India in 2017. The service is hosted across three sites in Mumbai. Rivals Amazon Web Services and Microsoft Azure also have cloud data centers in India.

Most of India’s local data centre providers have partnerships with global hyperscalers that can make up to 50% of new revenues. Global hyperscalers either place edge-nodes with a number of data center providers – such as AWS in Mumbai – or as Microsoft Azure does, work with one or two providers, according to 451. Locations such as Pune, which has cheaper land and power costs, is particularly popular with hyperscale deployments.

India may have gone through a period of rapid economic and technological development, but the benefits are not evenly distributed. “This presents a number of challenges for the development of the data centre market,” explained Miller.

One example that is relevant for the data centre market is that while India’s Internet user base is the second largest in the world it only accounts for 35 percent of the population.

Other challenges include:
• Lack of basic infrastructure
• Unreliable power grid
• Ineffective bureaucracy
• Socioeconomic inequality
• Corruption and crime

Design and build
As with other developing countries (See Future-tech’s Africa data centre reports), the lack of infrastructure and unreliable power grid as well as high humidity and ambient temperatures introduce additional challenges for designing and building efficient and resilient data centres.

That said innovations in IT and mechanical and electrical equipment design and integration is helping to overcome some of these challenges. These design challenges, innovations and developments will be examined in more depth in part two of this report series.

To read part two of India data centres click here.

Future-tech has helped a number of clients with data centre projects in developing markets. For more information contact us at: