Why India needs massive data centres

India is one of the youngest and tech-savvy populations in the world today and digital adoption is at its highest in the country. Being the world’s second-largest telecommunications market, India also ranks second in the list of countries with the highest number of mobile phones on the planet. The rising adoption of digital transactions, IoT and smart devices over the last year alone has created a significant demand for digital services but more importantly, data centres. A recent report by JLL found that India’s data centre market size is expected to grow from 375MW in H1 2020 to 1,078MW by 2025, registering a CAGR of 21%.

Currently, India’s data centre industry is concentrated in four cities–Mumbai, Delhi, Bengaluru, and Chennai, accounting for most of the data centre sites and the IT load capacities. Notably, Mumbai has the highest installed capacity yet. The pandemic pushed the need for more data centres with businesses adopting the remote and hybrid work models. Data centres play a crucial role in allowing organisations to access, oversee, and process the large volumes of data that will be generated in the years to come. Here’s why India is a critical location for the development of data centres:

Digitalisation: Most of India’s population lives in rural areas and is expected to have about 830 million smartphone users by the end of 2022. Access to the internet is increasing rapidly as the tariff rates in India are becoming more affordable to people from all income groups. In most rural areas, people are able to access 4G networks and it’s only a matter of time before 5G technology becomes a reality. The digital delivery of entertainment, healthcare, education as well as goods and services is on the rise. Besides, the pandemic has had a huge impact on remote and hybrid work, requiring more investments to be put in cloud-based services and mobile technologies. This will significantly increase the demand in the country for data centres, specifically the most advanced tier-3 and tier-4 infrastructures which would benefit the Indian market tremendously in the near future.

Data sovereignty: The proliferation of cloud computing brought front and centre the importance of data sovereignty. With the massive amounts of data crossing borders and public cloud regions, the Indian government has incentivised the development of data centres locally to protect India’s consumers and keep data locally. The government’s proposal to classify the data centre sector on par with critical infrastructure sectors like power, railways and roads delivered new incentives for the construction of hyperscale facilities which resulted in more players entering the market.

While the opportunities seem limitless for the data centre industry in India, it comes with a few challenges. Here’s how data centre businesses can overcome the challenges and thrive in India:

Infrastructure: Data centres need continuous power supply and most cities in India have just one power service provider, with often limited alternatives. Although there are gaps in the distribution channels, the state governments are heavily invested in plugging these gaps to allow businesses to operate successfully in the future. Close partnership with the relevant government bodies along with a local partner can help overcome any logistical challenges.

Location: Site due diligence is a key component of the data centre development process. Not every site is created equal and issues that are not identified in time could lead to a pause in construction and significant delays. Seismic activities, flood records, flight paths, access to transportation facilities and critical utilities, as well as proximity to other industrial areas are also important parameters to be taken into consideration. For foreign companies aiming to succeed in the Indian data center market, having a local partner who knows and understands the environment and navigates the regulatory landscape is crucial. A local partner can help to develop a sound strategy for entering the market because they have established supply chains, know how to procure and build in the local market. Currently, the presence of global players in a field dominated by local firms is generating strong expectations of higher standards and new international customers. Foreign companies have the unique opportunity to bring to the market the global standards that international clients demand.

Skilled workforce: Global standards require talent in the data centre business to have specialised knowledge in power, fibre, mechanical cooling, security, civil engineering, fundamental technical skills such as programming languages and tools. India has a large skilled workforce for entry-level positions, creating an opportunity for training and upskilling the local workforce. With the data centre market expanding there are avenues for knowledge-sharing and training employees to meet global standards, thereby pushing India forward as a major technology player.

It’s clear that the opportunities for early movers and the potential for growth is huge. When compared with global data centre giants, India is where the United States was 10 or 15 years ago. The growing demand for infrastructure-as-a-service and storage-as-a-service, has made it ideal for global players to enter the Indian market. There are currently very few global providers with a presence in India. Foreign companies can share their knowledge of catering to clients with global standards with the Indian market. This would not only help global customers but the domestic markets too.

The article has been written by Christopher McDermott, Director, Yondr Group