In the context of global digital transformation, India has a very credible growth story. As one of the fastest growing economies in the world, India’s digital transformation is being driven by a multitude of factors, including the significant growth of internet penetration. As internet penetration and teledensity increase, the country’s GDP also increases. Even at the village level, people are using the internet to meet their needs. Internet penetration in India is expected to reach 78.5 per cent by 2025.
India currently has over 500 internet service providers. However, one of the segments that is capitalising the most on this robust growth is over-the-top (OTT) distributors, or content distributors. India has over 40 OTT distributors and more than 17 content delivery networks, generating large volumes of data. This will further propel the country towards its goal of a $1 trillion digital economy.
The internet economy serves as a fundamental pillar of the digital economy. It is projected to account for 12-13 per cent of India’s GDP by 2030. The factors driving this surge in growth include the rising digital demand in Tier 2 cities, the digitalisation of traditional businesses and the success of the India Stack.
The contribution of the internet economy to India’s technology sector is expected to increase from 48 per cent in 2022 to 62 per cent by 2030. Furthermore, business-to-customer e-commerce is projected to drive 40 per cent of the digital gross merchandise value, followed by business-to-business sectors and software-as-a-service.
Digital transformation challenges
However, digital transformation at the enterprise level poses several challenges. Over 70 per cent of digital transformations fail due to employee resistance. Therefore, it is important to address the various challenges posed by digital transformation, such as process digitisation, performance management, customer understanding, customer touchpoints, digitally modified businesses and tracking top line growth.
Data centre market
India has the fastest growing data centre market in the Asia-Pacific region, with a compound annual growth rate (CAGR) of 12 per cent and a value of $7 billion. Capital investments are also increasing at a CAGR of 5 per cent, which is twice the global market rate. Currently, India’s 138 data centres have an IT load of over 750 MW. However, the number of data centres in India is expected to increase to 183 by 2025, with an IT load of over 1,750 MW.
Amidst rising growth, data centre operators must also ensure that maintaining carbon neutrality and net zero are part of their organisational objectives. However, there are many challenges with achieving net zero. Many nations have stringent regulations due to their net-zero commitments. This makes it difficult for data centres to achieve net zero in cities with warm temperatures. Additionally, end-customers may have requirements based on their own net-zero commitments, which may have a direct impact on costs for data centre operators. This can be due to specific requirements for mechanical, electrical and plumbing equipment; sourcing raw materials; and more.
Furthermore, the addition of renewable energy capacity may not be able to keep pace with the deployment of data centres in the company. India currently has 1.5 GW of new supply in the pipeline, and banking land with operators could potentially add another 3 GW of supply. Meanwhile, the costs of retrofitting and upgrading existing data centres to reduce carbon emissions are also significantly high. The costs of installing technological upgrades such as artificial intelligence (AI), monitoring systems and sensors can be very high.
India is expected to experience a significant boost in digital transformation in the coming years due to the ever-increasing demand for data and storage. To meet this growing demand, data centres can be outsourced. Outsourcing data centres offers several benefits, including reduced capital and operational expenditures, improved application and infrastructure delivery automation, enhanced security-to-effort ratio, and greater availability with increased uptime.
The increasing digital transformation across the country is also expected to have a positive impact on the GDP. In the International Monetary Fund’s 2022 GDP growth projection, India was ranked as the country with the second-highest GDP growth at 7.4 per cent, behind Saudi Arabia’s 7.6 per cent. Boosting the global digital transformation was also on the agenda at the G20 summit held in India in 2023, which highlighted topics such as digital education, digital health, digital government and digital finance.
Based on a presentation by Amit Agarwal, Chief Business Officer, Web Werks-Iron Mountain Data Centres