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Data centers in India are expected to lead the next wave of real assets investments

Roopesh Kumar

A report by JLL stated that India’s data center industry is expected to attract approximately $3.7 billion between 2021 and 2023.

The National Digital Communications Policy 2018 aims to attract investments of $100 billion and create 4 million direct and indirect jobs in the digital communications sector, which includes data centers.

Mr. Roopesh Kumar, Head – Data Center projects, Sify Technologies Limited

What role does a data center play in boosting the economy of a country 

As an ever-growing part of business in the modern world, datacenters have changed the global digital economy. It is powering diverse industrial activity from retail and manufacturing to infrastructure and transport, and it is the datacenter that is forming the backbone to the data influx.  As per a recent report the internet economy is projected to grow to 1 trillion by 2030. In such a scenario data centers are definitely going to play a crucial role in bolstering a country’s economy. By providing the infrastructure and resources to store, process, and manage vast amounts of data, data centers enable businesses, organizations, and government agencies to make informed decisions and drive operational efficiency. They foster innovation, attract investments, and support digital transformation across various sectors, leading to job creation, increased competitiveness, and expanded market reach. Additionally, data centers promote data localization, creating opportunities for job growth, enhancing national security, and ensuring compliance with data protection regulations. Overall, data centers are essential in driving economic growth, empowering businesses, and positioning countries at the forefront of the digital economy. 

How is the data center market in India shaping up 

The data center market in India is undergoing significant growth and holds great potential. Factors such as the digitalization of industries, the increasing number of internet users, government initiatives on data localization, and India’s appeal as an outsourcing hub are driving this growth. The demand for data centers is rising due to the need for a robust infrastructure to support digital technologies and the storage of data within the country. This presents a favorable landscape for data center providers, with India, positioned to become a prominent player in the global market. 

What kind of government policies are facilitating the growth of data centers  

The Indian government has implemented policies supporting the growth of data centers in the country. These include data localization mandates, streamlined regulatory processes, improved digital infrastructure, incentives for renewable energy adoption, and skill development initiatives. These policies foster data security, ease of doing business, connectivity, sustainability, and a skilled workforce, driving the expansion of the data center industry in India 

What kind of power and water supply requirements do data center providers require to decide on a location  

Data centers are highly energy-intensive facilities that require a reliable and robust power supply to ensure uninterrupted operations. Providers typically look for locations with access to stable and redundant power infrastructure, including multiple power grids, backup generators, and reliable electrical connections. In terms of power supply, data center providers seek areas with sufficient power capacity and the capability to scale up as their operations expand. This involves assessing the availability of reliable power grids, transmission lines, and substations in the vicinity of the proposed location. Additionally, the stability and consistency of the power supply are crucial factors, as any disruptions or fluctuations can lead to downtime and potential data loss. 

Concerning water supply, while data centers primarily rely on power, they also require water for cooling systems and other operational purposes. Providers consider locations that have access to a sustainable water source, such as proximity to water bodies, reliable water supply infrastructure, and availability of water treatment facilities. Efficient water management practices, including recycling and reuse, are also taken into account to minimize environmental impact and ensure long-term sustainability. Moreover, data center providers may evaluate the quality and reliability of the local power and water supply infrastructure, considering factors like grid stability, voltage consistency, water quality, and availability. Adequate redundancies, backup systems, and contingency plans for both power and water supply are essential to mitigate risks and ensure uninterrupted operations. Overall, data center providers prioritize locations with robust and reliable power and water supply infrastructure, ensuring a seamless and sustainable environment for their operations. By evaluating these crucial requirements, providers can make informed decisions when selecting a suitable location in India for establishing data centers. 

What are the business drivers of the data center market in India? 

The data center industry in India is driven by several factors that create a favorable business environment and opportunities for growth. Starting with, the rapid digital transformation across industries is a significant driver. Businesses are increasingly adopting digital technologies, such as cloud computing, IoT, artificial intelligence, and big data analytics. These technologies generate massive amounts of data, requiring reliable and secure data center infrastructure to store, process, and manage this information. The demand for data centers is propelled by the need for scalable, efficient, and cost-effective solutions to support digital initiatives. 

Then the rise of e-commerce and online services contributes to the growth of the data center market. India has witnessed a significant increase in internet users and online transactions, leading to the expansion of e-commerce platforms, digital payment systems, and other online services. These platforms require robust data center infrastructure to handle large volumes of data, ensure seamless user experiences, and maintain high levels of data security. We should also consider that government initiatives and regulations play a vital role in driving the data center market. The Indian government’s emphasis on data localization and data protection policies requires businesses to store and process certain types of data within the country’s borders. This promotes the establishment of data centers in India and creates opportunities for data center providers to offer compliant solutions.  

What kind of business imperatives/use cases is driving the growth of data center services? 

Talking about the business imperatives and use cases driving the growth of data center services I recognize several business imperatives and use cases driving the growth of data center services. These include the adoption of cloud computing for enhanced scalability and cost-efficiency, the demand for data-intensive applications and analytics, the increasing importance of cybersecurity, the growth of IoT devices requiring data management and analysis, the need for reliable connectivity to support remote work and collaboration, and compliance with data localization and regulatory requirements. These factors collectively contribute to the expanding demand for data center services as organizations seek secure, scalable, and efficient solutions to meet their evolving business needs. 

What is the estimated ratio of hyper-scalers versus co-location capacity in the country? 

According to industry analysis, of the current data center supply in India, occupancy on a pan-India level stands at 68%, irrespective of whether power has been brought in. Out of the total current occupancy, 39% of contracted capacity has been sold to hyper scalers, while colocation accounts for 61%. Looking at future planned supply, 22% has already been contracted. Going forward, hyper scalers are expected to adopt a hybrid strategy, combining “Own & Operate” and colocation data centers. Colocation in sectors such as Banking, Payment Services, Financial Services, Cloud, and Technology are expected to be the largest consumers of data center space in the next 4 years. Based on demand analysis and the overall industry size, it is estimated that there will be an aggregate future demand for colocation data center space of approximately 2,100 MW of IT capacity over the next 3-4 years. This estimate excludes demand from hyper scalers that could be developed under an “Own & Operate” model. The projected mix between hyper scalers and enterprises is expected to be 35:65, but could potentially be 50:50 if we include the aggregate demand for DC space from hyper scalers under the “Own & Operate” model. Considering the planned future supply, the data center colocation industry in India may potentially face a supply shortfall of around 800 MW. However, it is important to note that the market dynamics can change significantly if unplanned supply is introduced without proper consideration for demand or on a speculative basis. 

Which regions/states in the country are witnessing more data center investments and why 

When it comes to regions and states witnessing significant data center investments, it is evident that the demand has experienced robust growth across the country. In the first half of 2022 alone, the estimated absorption of data center capacity reached 89 MW, a substantial increase from 47 MW in H1 2021. Mumbai has consistently maintained its position as the leader in data center demand, accounting for a remarkable 65% share of the total absorption. This can be attributed to the continuous expansion of cloud players in the city. The migration to the cloud has been gaining significant momentum, leading to an increased footprint of cloud service providers (CSPs) in Mumbai. The delivery of pre-committed supply to these CSPs has further fueled the growth in data center absorption in the region. Pune, another prominent city, accounted for a 10% share of the total absorption during this period. This can be attributed to periodic space taken by hyperscale cloud players in the region. These cloud players recognize the potential and advantages offered by Pune, leading them to establish their presence and invest in data center infrastructure. Chennai also witnessed notable growth, representing a 9% share of the total absorption. The city’s strategic location and favorable infrastructure have attracted cloud players, making it an attractive destination for data center investments. 

What kind of capabilities does a world-class data center offer 

A world-class data center must offer a comprehensive set of capabilities to ensure the efficient and reliable operation of critical IT infrastructure. These data centers are designed to scale effortlessly and handle increasing demands for storage, processing power, and networking capabilities. They provide redundancy and high availability through redundant power sources, cooling systems, networking equipment, and storage devices. Advanced security measures, both physical and digital, are implemented to protect against external threats. These data centers also prioritize disaster recovery and business continuity, with regular backups, off-site storage facilities, and failover mechanisms in place. They must have efficient power and cooling infrastructure to minimize energy consumption and optimize performance. Network connectivity must be robust, offering high-speed and low-latency connections through multiple carriers and peering relationships. Compliance with industry standards and regulations is maintained, and monitoring and management systems ensure real-time tracking of performance, capacity, and security. 

What kind of certifications should businesses look out for while selecting a data center? 

When selecting a data center in India, businesses should consider specific certifications that demonstrate compliance with industry standards and regulations. The certifications to look out for include ISO 27001, which verifies adherence to international information security standards, and STQC certification issued by the Indian government, ensuring compliance with India’s security, quality, and reliability standards. Additionally, the Uptime Institute Tier Certification provides insights into the data center’s infrastructure reliability, while PCI DSS certification is crucial for businesses handling credit card transactions. It is also important to ensure compliance with TRAI guidelines and consider certifications and schemes offered by MeitY, such as CERT-In empanelment, for cybersecurity and incident response. 

These certifications provide assurance that the chosen data center in India has met rigorous assessments and follows recognized standards for security, quality, and compliance. By considering these certifications, businesses can select a data center that aligns with their specific requirements and industry regulations, while also complying with local guidelines and regulations specific to India. 

What kind of green initiatives/policies/measures data center providers are embracing to make it a sustainable proposition 

Datacenter providers in India are committed to implementing green initiatives and policies to ensure sustainable operations. They focus on energy efficiency by adopting technologies, such as energy-efficient servers and optimized cooling systems, to minimize energy consumption. They also prioritize renewable energy adoption by utilizing solar panels, wind energy, and renewable energy credits to power their data centers. Water conservation measures, such as advanced cooling technologies and water recycling systems, are implemented to minimize water usage. Datacenters in India also emphasize responsible waste management and recycling practices, actively participating in e-waste recycling programs. They incorporate green building design principles by using energy-efficient materials and maximizing natural lighting and ventilation. Environmental certifications, such as the IGBC Green Data Center rating, are pursued to showcase their commitment to sustainability. Collaboration with industry organizations and participation in initiatives like the Green Grid enable knowledge sharing and promote sustainable data center operations in India. 

Through these green initiatives and measures, data center providers in India contribute to the country’s sustainability goals, reduce their environmental impact, and provide businesses with more sustainable infrastructure options.  

What kind of manpower skillsets are required in the industry? How are you managing the need for highly specialized data center talent? 

In the data center industry, there is a need for a wide range of manpower skillsets to meet the complex requirements of managing and operating data centers. At ESDS Software Solution Ltd, we recognize the importance of highly specialized data center talent and have implemented various strategies to address this need effectively. First and foremost, we focus on attracting and hiring individuals with relevant technical expertise and experience in areas such as server administration, networking, storage management, virtualization, security, and cloud computing. We actively seek out professionals who possess certifications and qualifications specific to data center operations. 

We invest in training initiatives, both internal and external, to enhance their skills and keep them up-to-date with the latest industry trends and technologies. This ensures that our workforce remains well-equipped to handle the evolving demands of data center operations. Additionally, we foster a culture of innovation and knowledge-sharing within our organization. Our employees are encouraged to collaborate, exchange ideas, and contribute to the development of cutting-edge solutions in the data center domain.  

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