Growing Digital Ecosystem: Emerging trends in the data centre space

 

 

 

 

 

 

 

 

In line with the global trends, India’s data centre market is booming due to increased digitalisation across industries, significant investment inflows and rising internet penetration. This growth is expected to persist in the next year as data centres will be the backbone of the 5G-powered digital economy. Industry leaders from key data centre companies discuss advancements in the field during 2022, po­licy initiatives and gaps, the impact of 5G, and their future outlook…

What have been the key highlights in the data centre industry during 2022?

Surajit Chatterjee

The Indian data centre market is expected to see exponential growth. An increased emphasis on sustainability and energy efficiency, the expansion of edge computing, and the application of artificial intelligence (AI) and machine learning (ML) in data centre management are some of the major developments in the data centre space. The dema­nd for data centre infrastructure is increasing due to a rise in the adoption of cloud services by companies and organisations in India. India’s data centre market has attracted considerable investment from both domestic and international bu­sinesses. As the environmental impact of data centres becomes more widely recognised, several businesses are already building eco-friendly data centres to reduce their carbon footprint. For CapitaLand Data Centres, 2022 has been a significant year, with a committed investment of Rs 110 billion over the next five to six years in In­­dia. We are one of the fastest growing co-location service providers in the country with ambitions to expand into all the major metro cities.

Nikhil Rathi

Data centres have faced critical challenges over the years, especially with regard to the 24×7 aspect. But data centre companies have been able to cope with these cha­llenges and have been successful in executing plans and processes that resulted in expansion in Tier I and Tier II cities.

In 2022, edge-first deployments conti­nued to gain traction along with a wave of technology innovations across the infrastructure stack to address the increasing complexity of reliably scaling and orchestrating distributed infrastructure at the edge. The year also witnessed an increase in sustainable data centres. Sustainable and green data centres are predicted to be a trend in the coming days with the focus on renewable energy and carbon neutrality. Last year was expected to see a significant increase in grid and sustainability-positive data centre projects.

Cities such as Bengaluru, Delhi, Mu­m­­bai, Pune, Hyderabad, Chennai and Kol­­kata experienced an influx of data centres. With technologies such as AI, internet of things (IoT), ML, big data and clo­ud computing becoming more mainstr­eam, data centre developers have inc­rea­singly redesigned their offerings with the aim of incorporating edge computing in order to process data as close to their end-users as possible.

The lockdowns and social distancing requirements sparked a surge in interest in automating jobs, including using robots. This reduced the need for human intervention in data centre operations, which was a significant benefit during the pande­mic. Also, as 5G came into the picture in 2022, enterprises leveraged the IT envir­onments that are close to 5G access poi­nts. 5G opened up new opportunities and po­ssibilities for robotics, drones, auto­nomous vehicles, telemedicine and tactile internet, among others. Lastly, given the country’s rich network connectivity, India attracted significant data centre investments, leading to an increase in the de­mand for data centre space.

Rohan Sheth

India is now a rapidly expanding hub for data centres, thanks to its sizeable and still-increasing internet user population, the explosion of data, and the creation of a favourable environment through the government’s Digital India goal. Enterprises accelerated the transition from captive to multitenant data centres as they adjusted to a changing technological landscape. As a result, businesses are anticipated to ad­opt “as-a-service” solutions at an increasing rate in the data centre market. The main forces behind this adoption have be­en great scalability and high quality infrastructure. As businesses modernise their IT infrastructure, multicloud set-ups are gaining popularity. Multicloud allows businesses to choose from a wide range of products that are better suited to their co­m­pany needs, creating an environment for personalisation. While companies continue to stock up cloud services such as so­ft­ware-as-a-service, platform-as-a-service and anything-as-a-service, they are also investing more in cybersecurity.

Data centres receiving infrastructure status in Union Budget 2022 was an im­p­ortant step in advancing India’s digital ecosystem. Furthermore, as businesses embraced local service providers, data protection and localisation also gave the sector a huge boost. Meanwhile, with the go­vernment’s announcement of 5G deployment, edge computing and 5G have co-evolved, with data centres acting as a link between them.

India’s critical significance in the APAC region’s digital ecosystem, the availability of fast bandwidth, affordable power prices, cutting-edge infrastructure and the presence of hyperscalers all combine to create and sustain India’s rise as a hub for d­ata centres. As 2022 has been a fruitful ye­ar for the industry, new solution delivery models including built-to-suit, pay-per-use, and as-a-service will surface and gain market share.

JLL has predicted that data centres are likely to create a $4.9 billion investment op­portunity in India, resulting in a three-fold increase in the nation’s data centre capacity by 2025. Fulfilling the evolving ne­eds, India will need to build substantial data centre capacity over the next decade to keep pace with digital transformation.

Piyush Somani

The data centre industry saw several key developments in India and globally in 2022. In India, the growth was driven by the increase in digitalisation and the demand for cloud services post-pandemic. If the Ken Research industry report is to be believed, then the Indian data centre market size by total gross space was re­corded at 15.5 million square feet, which grew from 12.5 million square feet in 2021. This was largely due to the expansion of existing data centres and the construction of new ones to meet the growing demand. On the global level, sustainability remained a key area of focus, with companies utilising technologies such as renewable energy sources and efficient cooling systems to reduce their carbon footprint. The emergence of edge computing and 5G networks also played a significant role in driving industry growth. Additionally, th­e­re was an increasing demand for modular data centres, which offer greater flexi­bility and scalability for companies. Fur­th­er­more, cloud service providers continued to expand their offerings, and there was a growing emphasis on data privacy and sec­u­rity as companies sought to protect their valuable information.

How will the grant of infrastructure status to data centres impact the industry in India? What, in your view, are some of the critical policy gaps that remain?

Surajit Chatterjee

Granting infrastructure status to data centres in India will have a significant impact on the industry. The cost of constructing and operating data centres may be lowered through tax benefits for data centres, such as depreciation on capital investments. Fu­r­ther, fewer rules and approvals may apply to data centres, making it simpler and fas­ter to establish and expand data centre op­erations. By granting data centres infrastr­ucture status, the industry may become mo­re attractive to investors and more co­m­petitive with other types of infrastructure. However, the actual impact will de­pend on the specific details of the infrastructure and how it is implemented in the coming months and years.

Several critical policy gaps still remain in the data centre policy in India. There are concerns about the potential for data br­­eaches and exploitation of personal data as India currently lacks a comprehensive data protection law. Furthermore, the lack of industry standards for data centres in India may make it challenging for businesses to compare and select among various data centre operators. India also lacks enough data centre parks or clusters, whi­ch could improve economies of scale and lo­wer data centre expenses. These gaps ne­ed to be addressed to promote the gro­w­th and development of the data centre industry in India.

Rohan Sheth

The Ministry of Electronics and Informa­tion Technology (MeitY) granted data ce­n­tres the equivalent level of “infrastructure status” if their IT load capacity is greater than 5 MW. This has helped data centre companies get easier access to institutional credit at lower rates and attract foreign investments.

Both the state and central governme­nts are aware of the critical role being pl­ay­ed by data centres in enabling digitalisation. Following the policy interventions by the central government, we are seeing inc­rea­sing interest from the state governments, allo­wing businesses like ours to set up edge data centres in small towns and high capa­city data centres in major cities. Yotta has also been playing a role in helping the government and public sector organisations progress in their Digital India mission. One such example is Yotta being empanelled with MeitY as an accredited cloud service provider that offers an extensive portfolio of cloud and cloud-enabled services.

However, there are a few other things that the government could consider to further grow the data centre industry. Some of the recommendations are assistance from the government in the form of str­ea­mlining the approval process or creating a single-window approval process; drafting policies to extend benefits under special economic zones (SEZs), which include cheaper land, power and electrical duty; reducing the value added tax and excise on diesel or bringing the same under the goo­ds and services tax umbrella; and ensuring zero or lower import duties on compone­nts and long-term tax rebates. This would greatly benefit data centre operators and investors. The government should also consider adding SEZ incentives to the Ce­ntral Data Centre Policy or allowing data centre builders to charge domestic clients freely in Indian rupees if they construct their data centres in an SEZ. Additionally, as data centres consume a large amount of energy, a national policy is needed to assist them in setting up captive power plants based on renewable energy sources.

It is also necessary to emphasise da­ta localisation in the upcoming Digital Protection Bill 2022. Countries that allow data transfers of their nationals to India and do not require Indian consumers and court orders to pass through foreign cou­rts can receive data from Indian users. Ho­w­ever, it is imperative that a copy of the user data sent abroad be kept in India as well. Indian data centre operators’ investments could potentially be put at risk by less stringent data localisation regulations. Moreover, it will have an impact on both direct and indirect employment created by data centres.

It is recommended that the governme­nt creates an open access policy based on a uniform model across the entire nation and this policy should have the same tariffs and fees across all states or the entire nation.

Piyush Somani

In the budget session of financial year 2022-23, the finance minister announced the grant of infrastructure status to data centres. The first question that came to mind was, “What exactly will be the im­pact of this move on the industry?” The grant of infrastructure status to data centres in India is expected to positively impa­ct the industry by attracting more investment through benefits such as lower borrowing costs, tax benefits, and easier access to land, among others. This will likely re­su­lt in an increase in the construction of new data centres and the expansion of exi­sting ones, which will meet the growing demand for cloud services in the country. Despite this positive development, the in­dustry still faces critical policy gaps such as the need for more affordable and reliable power, particularly in rural areas, and clearer regulations and standards for data privacy and cybersecurity. The absence of a comprehensive legal framework can create uncertainty for businesses and affect the long-term growth of the sector. While the granting of infrastructure status is a positive step, it is important to address these policy gaps to ensure the continued success of the data centre industry in India.

How will the roll-out of 5G impact the dema­nd for data centres? What will be the other de­mand drivers in the coming years?

Surajit Chatterjee

It is anticipated that there will be a significant rise in data usage due to the faster speeds and lower latency of 5G networks, which will increase the demand for data centre capacity. The utilisation of edge computing, where data is handled closer to the place of origin rather than in centralised data centres, will be made possible by the fast speeds and low latency of 5G networks. To support edge computing, additional data centres will be required in more places.

In addition to the roll-out of 5G networks, there will be several other demand dri­vers for data centres in India in the co­ming years as more firms strive to digitise their operations. Government initiatives like the Digital India and Smart Citi­es Mission are expected to spur the dema­nd for additional data centres in In­dia. To protect their data from cyber­thr­e­ats, orga­nisations will enhance their security measures and certifications.

Rohan Sheth

In the data centre industry, 5G allows for quicker information access, which will bo­ost the deployment of more edge data centres. The creation of private 5G using cl­o­ud architecture will generate a data-intensive application that is latency-sensitive, which will stimulate the growth of bo­th data centres and edge data centres. Busi­ne­sses, cloud service providers and te­lecom firms are all making significant in­vest­me­nts in edge data centres. The key factors driving data centre demand are:

• Cloud adoption: According to a 2022 NASSCOM-EY survey on cloud computing, 78 per cent of IT enterprises ha­ve increased their cloud adoption over the past few years. Enterprises are thus moving from captive data centres to third-party data centres due to ease of management and cost benefits.
• Edge computing: By addressing some of the biggest problems currently faced by industries, such as real-time information monitoring and processing, management of expanding IoT applications and delivery of improved service pro­vi­der experiences, edge computing will tr­a­­nsform how businesses leverage and benefit from data. With processing close to the data source, the response time is reduced while producing precise and desired outcomes.
• Smart cities: IoT-based smart city ar­c­hi­tecture will rely on an indefinitely ela­stic data infrastructure to process the ge­nerated data. For the smart city to operate effectively, a data centre with uptime reliability and scalability is crucial. Strong data infrastructure will offer greater connectivity, cutting down on latency and ensuring easy access to the data needed to perform its functions.
• E-governance: An intelligent data centre can combine best practices, predictive analytics and IT automation to ma­ke an e-governance system nimble and responsive. It uses AI and analytics to enhance customer experience, minimise risk and reduce IT expenses while also optimising cooling and overall data centre efficiency.

Piyush Somani

The roll-out of 5G is expected to impact the demand for data centres significantly. 5G networks are designed to support a lar­ge number of connected devices and provide higher bandwidth, lower latency, and improved reliability compared to previous generations of cellular technology. This will drive the growth of new and emerging technologies, such as the IoT, autonomous vehicles, and augmented reality, generating a huge amount of data that needs to be processed, stored and analysed. As a result, demand for data centres will increase as companies look to sto­re and manage this large volume of data. In addition to 5G, several other demand dri­vers will shape the future of the data centre industry in the coming years. The growth of cloud computing will continue to be a significant driver of demand as more companies look to adopt cloud services to meet their IT needs. The increasing use of AI and ML is also expected to drive demand for data centres, as these technologies require large amounts of computing power to process and analyse data. The trend to­wards edge computing, where data is pro­cessed closer to the source rather than in cen­tralised data centres, will also contri­bu­te to the industry’s growth.

What is your outlook for the Indian data centre industry in 2023? What will be your key focus areas and strategies for the year?

Surajit Chatterjee

The outlook for the Indian data centre market is generally favourable. The Indian data centre market is attracting higher levels of investment from both domestic and global investors, which is anticipated to fuel the industry’s expansion and development. As more businesses choose to outso­urce the administration of their data centre infrastructure, the demand for colocation services in India is anticipated to inc­rease. In order to enable edge computing, there will be a greater need for data centres in more places.

To ensure further growth, it will be crucial to address the industry’s problems. CapitaLand will focus on offering the best quality solutions to consumers. For this, it will utilise cutting-edge cooling techni­ques and energy efficient devices. We will also concentrate on offering scalable solutions that can expand to meet customer needs. Data centre operators in In­dia need to constantly innovate to compete successfully in the market.

Nikhil Rathi

With the number of applications requiring storage increasing, there has been an inc­rease in the development of software auto­mation and AI in data centres, demonstrating that digital ecosystem connectivity is the key to the future success of data centres. According to reports, end-users will spend up to 88 per cent of their time this year on mobile platforms utilising the­ir favoured apps. Hyperscale data centres would provide the scale and connectivity required to keep up with the rising usage. Services will be distributed, deployed and run across multiple resources in 2023 and beyond.

AI will be distributed and move towar­ds the edge: Since AI algorithms and tra­ining work best with large data sets and auto-scaling compute clusters, public clo­u­ds have traditionally been a popular place to deploy AI. With applications, worklo­ads and data spread across various on-pre­mises, off-premises and traditional environments, the interdependencies are all set to surge intensely.

The data centre sector is anticipating a thrilling year in 2023. In order to remain competitive and seize new opportunities, it is important for enterprises and operators of data centres to keep up with these tren­ds and advances. Web Werks is likely to an­nounce the acquisition of a land parcel of approximately 4 acres for a standalone purpose-built greenfield data centre in Rabale, Navi Mumbai, along with the an­nouncement of a data centre in Hy­dera­bad, Bengaluru and Chennai.

Rohan Sheth

Yotta continues to focus on providing hy­per­scale data centre infrastructure and ma­naged services to customers across enterprises and the public sector by leveraging economies of scale and transferring the cost benefits by providing top-notch digital infrastructure and services. We aim to build data centre parks across the country over the next five to seven years as a part of our overall plan to bridge the digital divide and make India a $1 trillion digital economy. Yotta also plans to invest Rs 9 billion by 2026 to set up 100 edge data centres across India, starting with 8-10 sm­­aller cities, comparable to the scale of Na­g­pur, Jaipur, Coimbatore, Guwahati and others, with an investment of Rs 80 million to Rs 100 million in each city. We plan to deliver around 1,000 MW of data centre capacity across Maharashtra, Guja­rat, Tamil Nadu, West Bengal and Delhi-NCR by 2030. We are also planning to expand in global markets with a data centre park in Dhaka, Bangladesh, and ex­plore potential markets in Southeast Asia.

Apart from focusing on data centre and co-location services, Yotta offers a wide ar­ray of cloud services for organisations advancing towards public, private, hybrid or multicloud models under the Yotta Enterprise Cloud. These include desktop-as-a-service, high performance compute-as-a-service and SAP compute. Yotta also offers managed services such as IT security and IT management. Our strategy is to be a complete solutions provider to our customers and support their digital transformation journey.

We will also bring our own enhanced cloud platform to draw customers from the government and Indian unicorns as data localisation gains traction. Yotta is developing internal cloud services in addition to constructing numerous large-scale and edge data centres in the nation so that not only is our data hosted in India, but the underlying IP is also held by Indians.

Piyush Somani

The outlook for the Indian data centre space in 2023 is positive, with continued gr­owth and expansion expected in the in­dustry. The increasing demand for cloud services, driven by the rise of digitalisation in India, will create demand for new and expanded data centres. Additionally, the grant of infrastructure status to data centres is expected to provide an impetus to the industry by attracting more investment and stimulating growth. In terms of key fo­cus areas and strategies for 2023, sustainability will continue to be a top priority for the industry. This will involve a focus on reducing the carbon footprint of data centres, as well as adopting technologies such as renewable energy sources and efficient cooling systems. Further, security will remain a key concern for companies, and I anticipate a growing emphasis on protecting data privacy and ensuring the security of sensitive information stored in data centres. Another key focus area in 2023 will be cloud computing and new and emerging technologies, such as AI and ML. To support this growth, it will be im­portant for data centre providers to ex­pand their offerings and build new, state-of-the-art facilities to meet the demand for cloud services. Finally, I anticipate a growing emphasis on edge computing and data centres that are closer to end-users, which will require a different set of technical ski­lls and capabilities.