Cloud Adoption and Data Centers in India

2020 has seen COVID-19 and the subsequent New Normal intervene in our professional and personal lives. The global pandemic has been a rude wake-up call—businesses realizing that to survive and service, they need to respond fast and adapt to changing dynamics even faster.

The world of data centers, on the other hand, has experienced significantly increased data traffic. With the need for social distancing and new workplace safety measures, maintaining continuous uptime also has become an operational challenge for the last-mile technical experts.

2019 TO 2020: WHAT’S CHANGED IN THE DATA CENTER MARKET?

Before we dive further into 2020, let’s backtrack to the forecasts made earlier. Back in November 2019, a newly released Gartner report predicted a 25 percent growth in Public Cloud Services in India by 2020. The rise in cloud-adoption also meant increased data center activity, and a similar report pegged the growth of the market by a CAGR of 11 percent between 2020 to 2027.

Despite COVID-19, data center market in India has grown by 8 percent, in the first half of 2020. Sure, the significant surge in data traffic during the lockdown and the rise in the number of applications hosted were key driving factors. However, the growth story was already being scripted, with global players entering into the local market and indigenous data center providers (CtrlS included) expanding existing infrastructure.

But why this surge in market entry and capacity addition? What makes India the seed of $5 Billion Greenfield investments? The reason is a cumulative of five key factors—Technology Adoption, Rising Demands, Data Localization and the Prospect of Continued & Stable Returns.

TECHNOLOGY ADOPTION

Think of technology, think of Cloud Adoption, where a Cloud-only strategy is driving double-digit growth. Organizations are moving their legacy workloads and applications on cloud-application services, with subscription-based consumption reducing expenditure against licensed on-prem infrastructure. Also, technologies like cognitive AI, virtual reality, big data, blockchain, etc. are accelerating this move to the cloud.

Data center providers are reverting to colocation—existing and upcoming hyper-scale data center infrastructure being setup to colocate space to market leaders in cloud services. It is a surge that will continue to drive the data center market in the next couple of years.

RISING DEMANDS

Our country is home to almost 700 million netizens. The pandemic and subsequent lockdown have seen them double their net activity, skyrocketing the data consumption in the last few months. As working from home continues and the re-openings of educational institutions get delayed, a rise in data consumption demands sustainable availability, security and storage.

This means additional infrastructure for colocation and power, to sustain the demand of this rising digital economy. It will also support the government’s digitization drive, focusing on smart cities and mission to connect villages through 4G networks.

DATA LOCALIZATION

2019 saw emerging economies take a definitive stance toward sovereign control of their data, mandating for localizing data within domestic territories. India was no exception, proposing the Personal Data Protection Bill. Though the bill is currently under analysis, RBI has already issued mandates for financial data to be stored within borders.

Localization has opened another window of opportunity for data centers, scoping several operational advantages like reduced costs of storage and network latency besides the availability of qualified professionals. No wonder, existing players are ramping up their infrastructure and foreign conglomerates are venturing into the market.

THE PROSPECT OF RETURNS

Demand, Technology and Localization Norms—together necessitate the scaling of data centers, promising a lucrative return for both existing and new entrants. Global conglomerates and investors are either funding leading domestic operators or supporting renowned developers to foray into the sector. The market, valued at $2 Billion, is projected to cross $5 Billion by 2023, with almost 9 million sq. feet of additional space and 705MW capacity to be added to the current 375MW colocation capacity.