Why are datacentres getting big in India?

Dec 14, 2022
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Sumit Mukhija
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Originally published in Times of India Blog.


You see what’s happening now actually has been in the works for the last one decade….


If you recall, many years ago, the industry talked about 4 megatrends – that of Social, Mobility, Analytics and Cloud and actually delivered on all these for fronts:


  • Mobility brought Internet into the hands of the consumer
  • Social brought in the scale and inclusion 
  • Cloud made everything ubiquitous
  • Analytics helped make more sense out of the data


Then came Artificial Intelligence, IOT and Machine Learning which further catalysed these and helped amalgamate these megatrends into what we now call as “the Digital” 


What is happening now is that digital is going main stream in India with more and more  powerful and relevant use cases and business models are emerging that enterprises, governments, users and consumers are leveraging. 


All this is leading to massive amount of data being generated, stored, managed and consumed.


Remember, India has the largest and the youngest population in the world that has taken data generation and consumption to the next and exponential levels 


So ultimately, it is data that is driving everything including the change in scale and quantum of datacentres being deployed. 


How prepared are Indian data centres for accelerating growth?


Let’s talk about preparedness in two aspects:


  • New Capacity creation to meet the projected demand and 
  • Operational readiness


In terms of new capacity creation, I see a lot of intent and in fact a race between old and new players to build capacity. Mumbai alone is seeing almost 100MW capacity getting added every year and pan India, almost 200 to 250MW is expected to get added in terms of Design Capacity. 


There is a significant amount of liquidity that Datacenter Industry is enjoying at the moment. So funding is not an issue. 


India has enough land banks available in pockets in all cities, so at least for now, The legal and technical due diligence may take more time than expected but the land options are there so there are no big issues in the short term- at least none that can’t be solved. 


Everyone is getting power sanctioned from the utility companies so at least on paper there are no issues. 


At this point in time, do keep in mind here that there is a difference between Design capacity and operational capacity. Someone may create a DC building that is capable of delivering 30MW but may actually fit out only 5 or 6 MW to start with. 


So the operational capacity addition in a given year is expected to be 30 to 40% of the new design capacity. It’s a touchy subject and we can delve deeper on this later if we have time but for now, let’s take it that is a good amount of new Design capacity is getting announced and added every year and that trend is going to continue for the next 3 to 5 years.


Three major issues have emerged due to this rapid addition in Design Capacities:


  • There is a dearth of quality construction companies and general contractors who can actually undertake and execute such specialized purpose-built facilities. 
  • Cost of construction and MEP fit-outs have increased considerably over the last couple of years – partly because of the speculative builds that are happening to the extent that many projects may actually not remain commercially viable. 
  • Finally, the Delivery lead time of key infra components like DGs, Chillers, Panels etc has increased by 3 to 6 months. 


As an ecosystem of DC providers, OEMs, contractors and even customers, we must find a solution to issues


And this is just the build phase, the real test will come when the new capacity being added comes to the operations stage. That is when the rubber will meet the road. The Operational preparedness will be required detailed discussion but in the interest of tie.


What do they need to do differently from today in terms of location, design, build, operation etc.?


Let me comment on the Location and the operational aspects of this question:


A majority of the current Datacenter builds are happening in Mumbai, Chennai and Hyderabad. While these builds are necessary and must continue, providers, as well as customers, will need to look beyond these obvious 2-3 cities as these cities don’t have an unlimited supply of resources like land, power, water, skilled technicians etc. They will need to look at the next 5-6 cities like Noida, Manesar, Pune, Kolkata, with similar rigour and in parallel, groom some tier -2 cities like the Vizags, Chandigarhs, Jaipurs etc with entry level capacities as a build-up to larger core capacities later.


Operations will need a complete revamp… Simply because there ain’t enough skilled technicians to support 100% uptime requirements of hundreds of megawatts that are being built…


So, to keep operational pace with the builds that are happening and planned in the years to come, providers will need to:


  • Upskill and right skill existing and new resources
  • Leverage automation and even Artificial intelligence to the fullest 


STT GDC India is doing it’s bit by training multiple hundreds of fresh technicians from ITI’s and Polytechnics by giving them the required skills upgrade using actual datacenter components at it’s Center for Excellence in Bangalore. We plan to open more such centers in the coming years


What impacts will external factors play – legislation, technological, customer-driven, resource-driven, keeping data on-shore etc?


Both Central and State governments have come up with Draft Datacenter policies and incentives and some progressive states like UP and TN have actually rolled out the policies already. In addition, the industry has been accorded the infrastructure states and included in the harmonized list of infrastructure by the central government. These are commendable steps indeed and must be lauded. However.  a considerable amount of work still needs to be done in getting the underlying departments to understand, endorse and internalize these policies so that providers can actually benefit from these on the ground.


The legislation will have to evolve – 6 to 8 months of approval cycles are just not viable… Government and authorities will have deliver actual single window approvals and bring the timelines down to less than 3 months.


On the data localization front, more than the government, it is the customers and consumers who are driving the need for data localization.


The consumer awareness levels are significantly higher. No one wants to wait for multiple tens of seconds for the pages or content to load and the OTT and application providers can’t hide behind network speeds as everyone even today has 4G and 5G rollout has started as well. 600 Rs per month gets you 100 Mbps unlimited to your home…


So content, OTT, gaming and other services providers are forced to keep the data local to meet the rising customer expectations.


On the business customers front, Banking and Insurance always required the data to be local. Much before the PDP bills came into discussion, the IRDA mandated data to be local.


As resources like Power and water become even more scarce in India, the players will strive to make cleaner and greener datacentres than ever before. Specifically, the cooling and supporting backup infra components will evolve into more efficient and cleaner options.  


Significant shifts in compute and data storage technologies will potentially require disruptive changes in Datacenter design. 


How will India’s data centre ecosystem be different in 10 years?


On a positive note, the datacenter ecosystem will continue to thrive over the next decade – demand will continue to increase and DC capacity and it’s uptake by customers will continue to grow. 


This is because the Digitization wave and demand is real and so is the corresponding growth in cloud deployments and Datacenter infrastructure both of which will continue to grow between 20 to 25% over the next decade.


Having said that, Datacenter business is not for the weak hearted or for people who work solely on market capitalizations. In any case, 25+ DC players in the Indian market is not a sustainable set. So we will see a massive consolidation back to 5-6 serious and long term players – very much on the lines of what happened in the Telco Industry a few years ago.


So the ecosystem will still be thriving albeit with lesser DC players and with some tectonic technology shifts in supporting infrastructure components.


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