Digitalization spurs demand for Data Centers in India

In the face of the unprecedented COVID-19 crisis, data centers have found an unexpected growth opportunity due to the burgeoning demand. Market research company Technavio estimates that the global data center industry at $284.44 billion between 2019-23. An S&P study reveals that for the period 2017-2022, while the global data center industry is expected to clock a 7% CAGR, the Asia-Pacific region would touch an estimated 10% CAGR. India’s trajectory would be far ahead with a steep 23% CAGR for the same period.

The extended lockdowns and stay at home orders led to the emergence of distributed workforces, resulting in a sudden data surge and the need for secure storage to ensure business continuity and prevent disruptive downtime.

Moreover, rapid inroads by new-age technologies like AI, automation, robotics, and predictive analytics have also enhanced the demand for data center services with a preference for cloud-based storage to access data from multiple locations.

With digital emerging the ‘new normal’ with heavy online traffic, huge data volumes and associated storage needs, security concerns, and potential risks, customers rely on data centers, classified as essential services, to meet cybersecurity, data protection, and robust compliance norms.

Another trend being witnessed is the preference for an OPEX cost-driven, cloud-based data center ecosystem as against the traditional CAPEX model, brick and mortar data centers set up.

This is attributable to the value that the cloud system offers- — secure remote data access and backup facilities, efficient maintenance with near-zero disruption, reduced equipment, and physical space needs, and lower resource consumption i.e. of power and water. Thus, organizations can adopt an effective de-risking strategy, optimize costs, and focus more on core business goals rather than onerous IT maintenance.

Broadly, the customer segments of data centers may be categorized into retail enterprises or wholesale i.e. hyper-scale operators, cloud service providers, or OTT players.

Data centers offer multiple economic advantages to end customers through virtualization benefits including capacity augmentation, improved performance levels reducing the organizational requirements for servers, hard disks and software licenses, compatibility with existing IT architecture, reliable systems, complete data protection at financially feasible costs.  

Before deciding on data centers, it is important to consider the network server strength and its data capacity, adherence to data privacy protocols, and processing power availability that support enhanced bandwidth.

According to IDC, the size of the global data-sphere will grow to 175 ZB by 2025. Accordingly, it is imperative to select a data center with adequate flexibility and scalability to expand rack capacities and increase data storage facilities to manage higher workloads.

As organizations pursue faster GTM turnarounds, data centers must be well-equipped to handle changing customer expectations. Since technical know-how is critical in the data center business, clients must assess the technical capabilities and skilled manpower before selecting one.

With sustainability gaining momentum, the energy consumption needs to be factored in. A lower PUE factor indicates energy efficiency and a reduced carbon footprint of physical infrastructures in the data centers.

Research and Markets forecast that India's data centre market would achieve a value of $4billion by 2024. India’s Personal Data Protection Bill 2019, a much-needed reform related to security and storage of personal, critical, and confidential data, once enacted as a law, is expected to boost demand for localized data centers, aided by data re-repatriation, owing to restrictions in hosting PI data outside the country.

IT sectors especially hyper-scale and colocation providers, BFSI players, online education, and government bodies implementing e-governance initiatives like smart city projects, Digital India, supercomputing, etc., are expected to be key demand drivers.

The adoption of 5G telecom technology will accelerate demand for Edge data centers. Digitization of patient records in the medical and healthcare sector would boost data center demand. The growing technical complexity and need to stay updated with the latest technology stack would result in a gradual transition from captive on-site data centers to outsourced, third-party data centers.

Running a data center is capital intensive and involves huge outlay on land, equipment related to power and network connectivity, and hiring skilled manpower with the domain expertise to undertake maintenance and disaster recovery services. With competition set to heat up in the data centerindustry in the coming days, quality of service offerings, economies of scale, sizeable capital investment, brand reputation, and adherence to stringent security standards would serve as key differentiating factors.

• by Mr. Sudipta Sanyal, CTO, Data Center Business, Sterling and Wilson Pvt Ltd