How colocation infrastructure is emerging stronger from COVID-19

The data centre and colocation facilities market in India is seeing strong growth due to the increasing popularity of cloud computing and virtualization. The Frost & Sullivan report indicates that the data centre market in India is predicted to expand at 9.9% CAGR (Compound Annual Growth Rate) from 2019 to 2024. In India, the increased utilization of smart devices and wide adoption of social media are driving enhanced use of internet bandwidth and more data consumption.

Indian companies have started digital transformation projects and McKinsey has named India the second-quickest growing digital economy. McKinsey predicts that the communications and IT industry will double its size by the year 2025 and contribute up to $435 billion to the Indian GDP.

The COVID-19 pandemic has speeded up data usage, boosting the demand for storage capacities and bandwidth. Students, professionals, the private sector, and the government are all using digital methods to study, work, or run their business. The Indian government's programs like Digital India as well as emphasis on data protection and self-reliance is anticipated to raise the data volume in the nation. This will increase the demand for cloud services, data centres, and colocation facilities.

Additionally, the government depends on data centres for its G2C (Government-to- Citizen) delivery platforms like the National CSR Data website, e-visa, NeGP (National e-Governance Plan), and others.

Growth Boosters

To avoid large upfront capital investments, minimize maintenance risk, and reduce operational expenses, many organizations are shifting from owned data centres to cloud service/colocation facilities providers. These vendors offer services such as VPS hosting, server hosting, and cloud hosting. Colocation facilities are largely occupied by companies in the BFSI, telecom, IT and ITES sectors, as well as Hyperscalers such as STT GDC India.

Captive data centres entail challenges such as the high costs of real estate, power tariffs and upfront investments, security, and maintenance. Therefore, most enterprises favor hiring third-party operators of data centres and colocation facilities. In addition, leading cloud service vendors are considering building their own data centres.

Two operational models are used in India which are colocation/third-party and captive. To clarify, captive data centres are company owned-and-run service delivery facilities. On the other hand, outsourced/third-party data centres are those leased by firms to get the needed hosting services and space from third-party vendors, for fulfilling the ever-increasing consumer demands of 1.3 billion population of the country.

Data Hubs

Currently, the data centre sector is seeing high growth in cities like Pune, Hyderabad, Bengaluru, NCR, Chennai, and Mumbai. India has great promise to become a hub of data centre operations in APAC because of the prevalence of hyper-scale facilities, relatively low power tariffs, and availability of high speed and bandwidth. In addition, advanced infrastructure is readily available which can fuel the expansion of the data centre market in India.

The sector is witnessing an emergence of innovative business models built-to-suit, pay - per-use, colocation services, and others. Data centre demand is determined by key factors such as dependable partners, sustainable practices, infrastructure, security, effortless scalability, design, and location. In India, while there's still the presence of captive data centres, however, colocation services are growing rapidly and are predicted to outrun captive data centres in terms of popularity and patronage.

Robust Growth Expected

The Indian government has announced that it will introduce a data centre policy to enable private sector companies to build data centre parks in the nation. State governments like Tamil Nadu, Telangana, and Maharashtra are offering plenty of incentives to providers to set up data centre zones in their respective states.

It is anticipated that demand and requirement for data centre space to rise by about 15 to 18 million square feet in the metros in the next two to three years. The pandemic has made it mandatory for enterprises to adopt scalable and secure cloud services. NASSCOM estimates that cloud expenditure in India will grow at 30% CAGR to top $7.1 billion by 2022.

Private players are expected to increase their investment activities. For example, a real estate firm based in Mumbai has stated that it plans to invest in and build data centres across India. Similarly, plenty of investors have plans to foray into this asset type.

The developing 5G technology is expected to be ready in 2021 and it will boost the use of IoT-enabled solutions by Indian users. The markets for IoT and big data are still nascent and offer vast potential to become robust drivers of data centre investments in India.