The Success Story of India's Data Center Industry

India is on the cusp of a data center evolution. India’s data center industry is expected to witness a robust demand growth. Increased cloud adoption has further fuelled the rise of third-party colocation facilities by attracting more hyperscalers, which in turn required data center space to expand their availability zones 

According to an ASSOCHAM-EY analysis, India’s data center market is projected to grow to $8 billion by 2026, whereas the country’s data center footprint will grow to 183 by the end of 2025, totalling 24 million square feet and 1,752 MW of IT capacity. With the acceleration of Internet of Things (IoT) and Artificial Intelligence (AI), attention is shifting to third-party data centers and cloud platforms to support the infrastructure needs of these technologies. The advent of 5G will further lead to a boom in the volume of data consumed in the country. 5G technology will bring edge to life, and it will demand infrastructure to be deployed as near as possible to customers to avail critical latency benefit. This will result in a significant increase in demand for network dense edge data centres.

Srividya Kannan 
Founder & CEO, Avaali Solutions

This, combined with the government’s increasingly favourable policy environment, is expected to provide a huge impetus to the data center industry. With a strong focus on ‘Digital India’ and the rise of a digital economy, the Ministry of Electronics and Information Technology (MeitY) created a policy that accords infrastructure status to data centers. This has helped data center companies get easier access to institutional credit at lower rates and attract foreign investments from global enterprises, cloud service providers, technology solution providers, and hyperscalers. 

 “In the Union Budget 2023-24, the government has proposed the provisioning of ‘Data Embassies’, which could provide a tremendous boost to the data center industry in the country by encouraging countries to look at India as a haven for data storage and processing, along with the freedom of autonomous data center operations,” points out Rohan Sheth, Head- Colocation & Data Center Services, Yotta. “In addition, India’s seamless connectivity to Asian, European and Western regions through subsea cable landing stations, one of the largest pools of skilled resources, significantly lower cost of data center operations and a reliable power infrastructure offer compelling advantages to enterprises to consider India for their data center needs.”

Piyush Somani, Managing Director and Chairman - ESDS Software Solution Ltd. believes that in just five years, India will outperform America in terms of capacity. “The Indian Data Center industry is booming rapidly. India has the potential to become a hub for Data Centers in the next few years, and several factors will make it happen. Factors include a large pool of technical talent, favourable government policies, and increasing demand for data storage and processing services.”

He however adds that the country still needs to improve its infrastructure and data privacy concerns that must be addressed to realize its potential as a hub for Data Centers fully.

“The advent of new-age technologies like AI, IoT, and 5G, coupled with a focus on cloud infrastructure, is fuelling the unprecedented growth of data that needs to be managed and exchanged,” says Manish Gupta, Vice President and General Manager, Infrastructure Solutions Group, Dell Technologies India.  “While these technologies are opening up new avenues for Indian industries, there is an urgent need to effectively process critical data at the edge, core and cloud and all of this contributes to the increasing demand for Data center infrastructure in the country.” 

Ashish Arora
CEO - Nxtra by Airtel

According to reports, the Indian data center market will see a five-fold growth in the next two years which, coupled with the Centre’s decision of granting infrastructure status to datacenters will encourage the proliferation of datacenters throughout the country. 

Recently, Dell worked with PhonePe to launch their first Green data center in the country, bringing in alternative server cooling technology using liquid cooling. Dell is not only helping businesses meet their data needs but also enabling them to become environmentally responsible through sustainable data center infrastructure. “Our industry leading servers, which are the bedrock of modern datacenters, continue to provide best-in-class performance, scalability and security,” Manish adds.  “We feel that datacenters will form the backbone of the digital economy and are optimistic of the data center growth in India. 

“India finds itself at a very exciting place. Its digital consumption and investment in new age technologies is increasing consistently which is leading to rising demand for cloud based services,” says Ashish Arora, CEO - Nxtra by Airtel. “Cloud is becoming a big market in India and is expected to reach $13.0 billion by 2026, growing at a CAGR of 23.1% for 2021-26. This is leading to large domestic data centre market.”

Rohan Sheth
Head - Colocation & Data Center Services, Yotta

For Nxtra by Airtel, 2023 is going to be a ‘year of build’ as it continues to accelerate its development of hyperscale data center park in Mumbai with total capacity of 85 MW and 7500 Racks. 

“Plus, we have already initiated construction of our data centre parks in Pune and Kolkata along with purchase of lands in the city of Bangalore, Hyderabad and Noida. This will further strengthen our position of largest network of interconnected datacentres in India. Currently we operate 12 large and 120 edge data centres in India. The investment commitment of Rs 5,000 crores in next few years will scale up our installed capacity by 3X to over 400 MW to meet the surging demand and help India become the digital-first economy,” explains Ashish. 

“As per a study by Vertiv on data centers, there will be network availability extending to rural and remote areas which will put additional strain on data centers to maintain connectivity even at the very edges of their networks,” says Nitin Gavde, Director, Offering Management - Global Edge (ASI) + Racks & ITMS (India), Product Development/Engineering, Vertiv. “With networks, data, and the cloud all migrating to the edge, it is only natural for data centres to follow the same route.” 

Nitin Gavde
Director, Offering Management, Vertiv

Vertiv assists in resolving some of the most pressing issues confronting data centers, communication networks, and commercial and industrial facilities. From the cloud to the network edge, Vertiv has a diverse portfolio of power, cooling, and IT infrastructure solutions and services. With customised pre-tested and pre-integrated data centres, it helps businesses maximise efficiency, deliver flexibility, and ensure scalability, while also easing the process of expanding core data centres and critical facility capacities.

“India's advantages as a potential hub include its strategic location along major global internet backbone networks and its diverse range of service offerings that have proven reliable and secure,” says Srividya Kannan, Founder & CEO - Avaali Solutions. “This includes low latency networks connecting areas within India with those outside of it, making it possible to connect seamlessly with any part of the world. Additionally, India has showcased its commitment towards digital infrastructure through favourable policies such as tax incentives for data centre operators and investment security for foreign investors.”
 

Manish Gupta
Vice President and General Manager Infrastructure Solutions Group, Dell Technologies India

He further continues, “India is also ahead in terms of digital literacy among its citizens compared to many other countries across the globe. This provides access to digital services and products by many people helping support the rapid growth of data centres in India. Moreover, Indian companies are increasingly investing more resources in research and development, further driving innovation in technology-related fields that can help provide data centre operators with better tools and solutions to meet their needs.”

  Another factor driving the growth of the data centre industry is the increasing demand for high-performance computing (HPC) solutions. HPC solutions are becoming more accessible due to advancements such as AI and Big Data analytics, which require robust infrastructure support including powerful processors, large memory capabilities, and secure networks. Data centres must be able to provide businesses with reliable access to these resources to remain competitive. 

India’s data center position globally
As of March 2022, India had 138 data centres, which is projected to reach 183 by 2025. Although the number of data centres has been growing at a healthy rate in the last few years in India, globally USA dominates with over 2,700 data centres. India ranks 13th globally among countries with the highest number of data centres, which means 1.5% of data centers worldwide are currently located in India. This makes this market to be continuously expanding and is expected to record strong growth.

Bhaskar Bhattacharya 
EVP - Enterprise Business, Aurionpro Solutions

This growth will be supported by a slew of investments by local and international players who have identified vast opportunities in this market. Notably, the growth of data centers in India is also complemented by an increasing focus on quality, adherence to global standards and best practices, and sustainable operations supported by the country’s growing renewable energy infrastructure. 

India as a region has strategic advantage of strong connectivity with APAC region and rest of the world through a number of submarine cables, new cable investments etc. “In addition, its inherent strength of costs, availability of skilled labour, low climate risk, strategic location, and land supply make it a stable choice. This coupled with challenges around power and land in Asia Pacific region and in general, India can easily be a regional hub for data center and that is where one should keep a watch on,” says Ashish of Nxtra by Airtel.

Agrees Yotta’s Rohan, “This also positions India as a preferred data center hub for foreign enterprises. India is already emerging as a data center hub in the Asian region owing to its proximity to the existing South East Asian data center markets.”

Sushil Goyal
Co-Founder & COO, Rahi

Yotta, as one of the largest data center players in the country, has planned substantial investments to increase India’s data center capacity, thus strengthening the digital backbone of the country. Currently, it has two operational data centers – Yotta NM1 in Navi Mumbai and Yotta D1 in Greater Noida – delivering a total capacity of 59.2 MW. Yotta has also completed the core-and-shell of Yotta NM2, the second data center building at its Navi Mumbai Data Center Park, besides launching the Yotta D1 data center in October, 2022. 

“We plan to construct five more data center buildings at the Greater Noida Data Center Park, offering a total capacity of 160MW. Our investment in Uttar Pradesh will total Rs. 39,000 crores as we expand our data center park,” says Rohan. “Additionally, we aim to build four data center parks across the country over the next five to seven years as part of our overall plan to bridge the digital divide and make India a $1 trillion digital economy. Yotta is coming up with two data centers in Pune and Gift City, Gujarat. While Pune is slated to have a 90MW data center park, we will go live with around 200 racks at our data center building in Gujarat, specifically for international businesses and exchanges.”

With the availability of a skilled workforce, low climate risk, cost advantage, and a favourable government, India is certainly well-positioned to become the world’s hub for data centers in the coming years. 

“India’s growing digital economy (digital payments, Various Govt’s Initiates & schemes), appropriate Govt policies for DC growth, push on robust communication, transport infrastructure, power sector reforms & impetus on sustainable energy along with creating additional cable landing infrastructures along its cost line and availability of Industry relevant Technical manpower, all are contributing to India’s story to become a prominent DC player,” says Bhaskar Bhattacharya, EVP – Enterprise Business, Aurionpro Solutions. “There are many policy initiatives being taken at central and state government level. Hopefully more states will create data centre policy eventually resulting in uniform policy applicable across country.”

Aurionpro formed a separate DC Business unit and inducted fresh talents to join Aurionpro, in various faculties of DC Design Consultancy & Engineering, Solution Architecting and project Delivery. It has large experience in colocation, hyper scale & High-Performance Computing (HPC) environment. Presently Aurionpro offers DC Turnkey Design and Build Services and DC consultancy Services (site selection & due diligence, concept design & master planning & detailed design, advisory services during construction & integrated site testing) to its clients. 

Data center growth in Tier-II and III cities 
The growth of data centers in Tier II and Tier III cities historically was slow compared to metro cities. At that time, data centers needed a consistent power source, which was a problem that existed, besides having other obstacles like the availability of fiber optic cables, favourable land areas, and proximity to consumer locations. But this will soon change with many Tier II and Tier III cities gearing up to witness the next wave of growth as more Edge data centers will be built in these locations to cater to the last-mile needs, thereby bridging the digital divide. There has also been interest from state governments, encouraging data center companies to set up edge data centers in numerous smaller cities. 

Furthermore, non-metros have experienced industrial growth opportunities due to their outstanding capabilities in skill-based manufacturing industries such as automotive, consumer, capital goods, engineering, textiles, pharmaceuticals, and IT/ITeS sectors, paving the way for rapid urbanisation. This has further pushed for the need to have edge data centers. 

 “The demand for data center services in these cities is much higher compared to Tier-1 cities, which is currently booming the industry's growth in these areas,” says Piyush of ESDS Software Solution. “Moreover, the cost of setting up and operating Data Centers in Tier-II and III cities is lower than in Tier-1 cities, making it easier for Data Center providers to make a return on their investment in these cities. In conclusion, while the growth of Data Centers in Tier-II and III towns could have been more active in yesteryears, the industry is now getting ample space to grow in these areas.” 

In terms of metros, Mumbai continues to have the highest percentage of data centers among the cities and that number is expected to stay the same until 2025. Bengaluru and Chennai, with 13% and 10% of the market share, respectively, are second to Mumbai. By 2025, Bengaluru's capacity share in data centers is predicted to fall to 11 percent, while Chennai's share will increase to 15%. Slowly and steadily, India will be ranking amongst the countries with higher numbers of data centres in the world. In spite of the country having a relatively lower capacity, India has seen significant growth in recent years. 

However, in a bid to not be behind the race, other cities such as Kolkata, Pune, and Hyderabad are also incentivizing companies to set up data center facilities, which they hope will add more jobs to their economy.

“The addition of more real-estate space and sustainable energy infrastructure will certainly double the data center business by 2024. India will need to allocate nearly 7.8 million square feet of space to make it happen. The good news is that as the country increases its efforts to become more digitally connected, and provides lucrative incentives both to the companies and cities, there is a greater probability that the data center market in India will skyrocket in the coming years,” opines Sushil Goyal, Co-Founder & COO - Rahi.

The Uttar Pradesh government- announced in June 2022 to set up four data centers in the state for Rs 15,950 crore. Several other states are also in the process of announcing their own separate policies and are at various levels of obtaining required approvals and consensus from various stakeholders within the State Government Framework. 

The Central Government of India had also announced the Draft Data Center Policy document under the aegis of the Ministry of Electronics and Information Technology, during 2020. There are plans to add new landing stations across south eastern coastal cities which would mean development of new data centers in the vicinity. There are also plans to develop cable landing stations in coastal cities like Vizag, Kochi etc. which will ensure availability of high-speed internet and global outreach.

World’s leading hyperscalers and cloud service providers have announced their availability zones in India. Amazon Web Services (AWS), Microsoft, and Google are further augmenting Availability Zone (AZs) in India. Other Colocation players like NTT, STT, Reliance, Adani, have been expanding its DC footprints not only cities like Mumbai, Chennai, Delhi-NCR Hyderabad and Bangalore but also expanding in Tier 2 and Tier 3 cities. Along with that there is an augmentation of edge data centers across India.

And so…
As the world transitions to a digital ecosystem, the importance of data centers and their reliance on them grows. Increased demand for cloud computing services, massive technological advancements, rising demand for data storage and processing, expansion into new geographical regions, adoption of edge computing, and rising demand for security and compliance are some of the key factors that potentially double the size of the data center industry by 2024. 

According to the most recent JLL report, India's data center market will more than double in the next two and a half years, from 637 MW to 1318 MW. With the massive impetus the Indian government is giving this sector and the investments in the past two years, India is certainly poised to be a data center hub in the coming years. 

A few key Govt policy thrust areas in datacenter space include – 

•    Availability of uninterrupted, clean and cost-effective electricity for Data
•    DoT to facilitate robust and cost-effective bandwidth
•    Data Centers to be declared as an Essential Service under “The Essential Services Maintenance Act, 1968 (ESMA)” 
•    Recognize Data Centers as a separate category under National Building Code
•    Setting-up of Data Center parks and Economic Zones
•    Promote indigenous technology development, research and capacity building
•    Introduce data center infrastructure course at degree & diploma level