The need for connectivity, increasing penetration of smartphones and wireless devices and growing complexity of IT set-ups have resulted in huge volumes of data creation at the customer and enterprise levels. Managing data growth – both in terms of storage and analysis – is proving to be a challenging task for companies. As a result, they are increasingly turning to data centres to achieve cost and operational efficiencies.

A data centre houses a large group of networked computer servers which store, process and distribute the large volume of data generated within enterprises. The data centre footprint in India is expanding as several enterprises adopt cloud and virtualisation technologies. These are emerging as a viable option for companies to manage data while freeing up resources to focus on their core businesses.

Over the years, the telecom industry – operators and internet service providers – has emerged as an important part of the Indian data centre space. Besides using these services to manage the surging data demand and meet their data storage needs, telecom operators are leveraging their existing infrastructure for providing data centre services to other enterprises as well. This has helped them in generating additional revenues at a time when ARPUs have been on a continuous decline.

tele.net takes a look at the data centre market in India, growth drivers and key emerging trends…

Market size and growth

The Indian data market has grown steadily over the past few years and was valued at $2.2 billion in 2012. The data centre space available in India stood at 3.7 million square feet as of end-2012. Driven by surging data demand from all sectors of the economy, the data centre space is expected to almost double to 6.3 million square feet by 2017, while the market size would increase to $3 billion.

Captive data centres currently account for about three-quarters of the market with the remaining share being held by third-party outsourced data centres. However, with the increasing complexity of the data requirements of businesses, in-house management of data centres is becoming ineffective and expensive. This is driving the third-party data centre market, which is estimated to reach $1.1 billion by 2015, witnessing a compound annual growth rate of 29 per cent during 2010-15.

As for participants, the market comprises a mix of players from the IT, non-IT and telecom sectors. These are classified as hosting providers (offer a comprehensive portfolio of services but do not own bandwidth), space wholesalers (build and sell shell space), telecom operators (co-location and hosting services, also serve as platform providers), facilities management players (own real estate and lease facilities with power, cooling, security and safety arrangements) and outsourcers (own data centres, and offer services such as infrastructure outsourcing, business continuity and data resiliency).

Some of the key players in the Indian data centre space are Bharti Airtel, Cisco, CrtlS, Emerson, IBM,  GPX India, HCL, HP, NetMagic Solutions, Reliance Communications (RCOM), Schneider Electric, Sify, Tata Communications, Tulip Telecom and Wipro.

Bharti Airtel owns seven data centres across India – two in Noida, and one each in Chennai, Bengaluru, Pune, Bhubaneswar and Mumbai. These together offer about 160,000 square feet of hosting space and are managed by the operator’s newly created subsidiary Nxtra Data. The company plans to establish new data centres across cities, including Bengaluru, Delhi NCR and Kolkata over the next few years, which will add 100,000 square feet of hosting space to its portfolio. Tata Communications offers data centre services to its customers through 10 facilities across Mumbai, New Delhi, Bengaluru, Hyderabad, Pune, Chennai and Kolkata.

RCOM also has nine data centres – four in Mumbai, three in Bengaluru and one each in Chennai and Hyderabad. These offer more than 650,000 square feet of hosting space. The operator is setting up state-of-the-art data centres in other major cities and aims to make 1.4 million square feet of hosting space available over the next year.

Sify Technologies is a key player in the Indian data centre market and as per industry estimates, has 100 per cent uptime across its data centres. Recently, the company launched its fifth data centre in India. Located in Noida, the green data centre has been built at a cost of $30 million (first phase) and has been certified as Tier III by the Uptime Institute. The company has assisted the government in developing six state data centres (SDCs) and connected over 36 data centres across India with its high capacity data network. It has invested around $200 million in building network and data centre capabilities over the past five years. It is currently working on a new facility in Mumbai.

Tulip Telecom is another key player in this space. In February 2012, the company launched the Tulip Data City (TDC) in Bengaluru. With a built-up area of 900,000 square feet, TDC is Asia’s largest and the world’s third largest data centre. The Tier IV facility, built for managed services and co-location, can house 12,000 racks. Currently, Tulip has about 1 million square feet of space across Delhi, Mumbai, Navi Mumbai, Bengaluru and Kolkata, with a total raised floor space of 500,000 square feet. It plans to set up large data centres in Delhi and Mumbai over the next two to three years.

NetMagic Solutions, a subsidiary of NTT Communications, has seven data centres in India – four in Mumbai and one each in Bengaluru, Noida and Chennai. Currently, it is adding 100,000 square feet of net floor space in Bengaluru, which will become operational in December 2013. Meanwhile, CtrlS, a Hyderabad-based data centre service provider, is planning to add 5,500 racks in the next 8-12 months across Delhi, Bengaluru and Chennai. It has a capacity of about 6,500 racks in Hyderabad and Mumbai.

Bharat Sanchar Nigam limited entered the data centre space with the launch of six facilities across the country, in partnership with Dimension Data in 2012. These are located in Mumbai, Faridabad, Ahmedabad, Jaipur, Ludhiana and Ghaziabad, and provide co-location, managed hosting and cloud-based services. By May 2013, about 15 per cent capacity of these data centres was occupied and the operator is aiming to engage around 50 per cent of the capacity by March 2014.

Emerging trends

•Enterprises adopt co-location and hosting: Medium-size and government- owned enterprises are increasingly turning to managed hosting and co-location services, as these drive down costs and help enterprises in focusing on their core business. In a managed hosting environment, the data centre provider leases the server to a customer and provides add-on services like monitoring, updates and application management. On the other hand, under a co-location model, a customer can place its own server in the space offered by the data centre provider and share resources like power with other customers. In both scenarios, customers can save on significant capex by avoiding the use of captive data centres.

Gartner forecasts the co-location and hosting market in India to be worth $1.3 billion by 2016, an increase of over 50 per cent over the $609 million in 2012. Big data centre users such as banks and the government will drive the outsourcing of data centre requirements during the forecast period.

•Data centre business as a separate entity: Given the growing demand for data centre services, integrated telecom service providers are now hiving off their data centre business into separate subsidiaries, primarily to adopt a more focused approach towards this vertical. For instance, Bharti Airtel, in August 2013, transferred its data centre and managed services business to its wholly owned subsidiary Nxtra Data under a Rs 1.77 billion deal. The operator claims that the move will help it in increasing its reach and strengthening its data centre service portfolio. The data centre business, while operating as a part of Bharti Airtel’s core operations, was focusing only on the top 2,000 companies; however, Nxtra can now tap into the medium enterprise segment as well. Further, Nxtra’s data services will not be limited to Bharti Airtel and would cater to other operators, thus driving higher revenues.

Tata Communications is also in the process of spinning off its data centre business into a new subsidiary to avail of the dual benefits of creating a focused organisation to drive business strategy as well as a vehicle for raising funds. The company has received board approval for transferring its Indian data centre business to its wholly owned subsidiary S&A Internet Services and plans to invest Rs 12 billion in this business over the next five years. The move is likely to increase Tata Communications’ market share in the co-location market, which currently stands at about 20 per cent.

•Government emerging as a key consumer: Traditionally, the demand for data centre services has been driven by sectors such as manufacturing, banking, financial services and insurance, IT and IT-enabled services, business process management and telecom. However, the government is emerging as one of the major customers for data centres, as it is undertaking digitisation of various citizen data and services as well as enhancing the public-private interface.

Besides, the National eGovernance Plan approved in May 2006 had establishment of SDC as one of its key objectives. As of March 2013, 21 SDCs had been established in the country while the government targets to take this number to 26 by March 2014. These SDCs host state-level e-governance applications for effective delivery of government-to-government, government-to-citizen and government-to-business services.

•Consolidation emerging as a key theme: The data centre market is undergoing virtualisation-led consolidation to drive higher efficiencies. While server virtualisation is a well-accepted trend in the Indian data centre market, during 2012, companies have experimented with storage and desktop virtualisation as well.

•Service differentiation is becoming key to growth: With several companies entering this space, data centre providers are now diversifying their portfolio by offering specialised services such as storage and security services.  To this end, data centre providers are partnering with vendors and solution providers to meet customer needs. For instance, in May 2012, Tulip partnered with EMC Technologies to access its EMC VNX unified storage, EMC Avamar and EMC Data Domain technologies to provide services such as information storage, backup, archival and de-duplication to its customers under a pay-as-you-use model. Prior to this, Tulip had partnered with Iomega and MindTree to provide surveillance services based on cloud technology.

•Changing data centre design and effectiveness: The increasing demand for data centres has resulted in higher power consumption and greater requirement for real estate. However, given the rising costs of energy as well as property prices, managing costs is becoming a key issue for data centre developers. According to Gartner, power-related costs currently account for around 12 per cent of overall data centre expenditure.  As a result, new data centres are now being designed to be efficient in terms of power utilisation, space allocation and capex. Modular data centres are also becoming popular wherein companies can expand data centre capacity in line with demand while not being burdened with idle capacity.

Data centre-in-data centre is another concept which is gaining traction. Under this model, a data centre provider hosts service providers which host infrastructure for their own customers. This results in significant cost reduction for service providers as they do not have to invest in power and cooling. Green data centres have also emerged as a key focus area, especially in light of the growing carbon footprint and need for environmental compliance. Most of the data centres that are developed in the country are designed to be modular as well as energy efficient.

Challenges and the way forward

The increasing need for data management, storage and security and for achieving cost efficiencies is driving growth in the data centre market in India. However, there are challenges in the form of unreliable power supply, inconsistent internet connectivity, inadequate infrastructure, and limited bandwidth and optic fibre network. Addressing these challenges will be crucial for companies to run their systems in an efficient manner.

In the next few years, significant activity can be expected in the Indian data centre space, which is reflected in the strong capacity enhancement plans of service providers. The investments are expected to drive both greenfield and brownfield expansion in the captive and third-party space. Further, the focus would be more on developing green, energy efficient and modular facilities. The emergence of the government as a key consumer of cloud services will provide a fillip to the Indian data centre market.