Data Center evolution in India

A Data Centre (DC) is the storehouse of all the computational infrastructures like servers, routers, switches, firewalls, and supporting backup equipment, like fire suppression facilities and air conditioning. It may not have been the centre of attraction until now, but it is the backbone of every company’s data system.

The recent COVID-19 pandemic and the subsequent lockdown resulted in an unexpected surge in the consumption of data. According to the Department of Telecom (DoT), in April 2020, India’s internet consumption rose by 13% since the lockdown in just a month. This rise is due to the increased consumption of streaming content and Work From Home, which demanded more facilities for data storage, and this increased demand for storage is giving rise to the need for data centres across the nation. As a result, India is witnessing a boom in data centres, owing to the digitization era.

To trace back the evolution of data centres in India, it is essential to head back to 2007, where it all started with the introduction of the dot com era. A CBRE report states that the DC evolution in India can be categorized into four stages, as shown.

Source: Data Centres: The Next ‘Charged Up’ Wave - CBRE

 

Data Centres in CRE

There was a 25-35% increase in data centre usage as India went into remote work. Pandemic and work from home acted as a catalyst to the adoption of digitalization. People started using online platforms to manage work. Daily work meetings shifted to phone calls and video conferencing, work chat moved to messages, and webinars increased in numbers. All this created the need for more data centres in the country — the government’s decision to make data localization mandatory further strengthened the future of data centres.

The main drivers for DCs in India are:

• The Digital India campaign
• Increased internet consumption due to remote work
• The rise in fintech and other sectors along with cloud service providers 
• The emergence of advanced techs, including IoT, AI, ML

The customer base for data consumption in these various fields is leading to an increased opportunity for more data centres. Technology and automation will play a key role in driving the demand for DCs in the coming years.

This surge in data centres in commercial real estate demand is expected to be met by metro cities like Mumbai, Hyderabad, Bengaluru, and Chennai, ultimately becoming the hotspots of the Indian DC sector. As power is the most significant cost factor for running a data centre, developers are also looking for environment-friendly sources to establish a sustainable DC sector from its nascent stage.

Even for investors, this is a new field to explore and is turning out to be a promising one. A Cushman and Wakefield report suggests that as the data storage scenario in India skyrocketed in 2020, it led to a surge in investment in the DC sector. The demand for hyper-scale data centres creates a need for DC parks, which investors will be interested in. The ‘new normal’ is expected to witness a tremendous growth story for data centres in India.

Additionally, the Hiranandani group states that investment in real estate works on two parameters – 1) capital appreciation over time and 2) the rental yields. Both these parameters are gaining investors’ attention from the global market.

 

To conclude

As the world progresses towards advanced 5G-enabled emerging technologies like IoT, Al, and ML, it will generate vast amounts of data, creating more requirements for data centres. One of the recently completed 0.82-million sq. ft. DC in Navi Mumbai is Asia’s largest and the world’s second-largest data park. This is just an example of the massive scaling and growth potential of the DC sector in India. As businesses adopt more new technologies and digital data takes over, India’s need for data centres will rise, attracting more investments with steady and long-term returns.