How the pandemic is powering a shift in data centre investments in India

Widespread lockdowns, WFH and a general physical divide have shifted several daily processes, especially within a professional sphere to digital. This has eventually resulted a massive phygital growth, stimulating a rise in the demand for digital infrastructure, including storage facilities like colocation centres and other data centres.

Data centres are one of the top-performing asset classes in REIT markets around the world since the beginning of the pandemic. As per McKinsey, India is the world’s second fastest growing digital economy. Going by projections, the IT and communications industry is estimated to double in size by 2025, contributing to India’s GDP with $355-435 billion. Overall the burgeoning amount of data generated across the country has contributed tremendously to the shift in data centre investments. 

What’s Beyond Data? 

1. Cloud Adoption: The lockdown and the subsequent move of most organisations to WFH has resulted in an increase for cloud adoption. Experts have predicted an increase in enterprise spend in cloud technology in 2021, which will ensure the smooth and efficient running of enterprises and businesses. Cloud spending in India is estimated to grow at a CAGR of 30% to reach $7.1 billion in 2022, according to NASSCOM. This continued rise in demand for cloud services has also accelerated demand for hosts such as colocation services and data centre infrastructure to accommodate the cloud and hyperscale needs. 
2. Adoption of New Technologies: As  advanced technologies like  internet of things (IoT), AI, ML, edge computing etc. became more popular, it leads to an accelerated adoption of the same, fuelled also by the pandemic. Companies were then faced with the challenge of maintaining and building the networks and infrastructure that allowed them to capitalize on this technology’s potential. IoT edge devices can generate massive amounts of useful data, due to which they presented a tremendous opportunity for companies willing to make investments in the IT infrastructure necessary to support them, like data centre networking and data centre architecture.
3. Data centre security solutions: Data storage facilities have multi-layered and routinely upgraded security systems in place to ensure monitoring data centres. Such a high degree of operations requires advanced technology and skilled manpower, which is not always readily available in-house. Therefore, hosting your data with a data centre vendors and at specialised storage facilities is a more convenient and viable option for businesses while they can focus on their core functions. 

Government Initiatives 

Data has become an asset and secure data storage is assuming utmost importance in the current times. The Indian government has also recognised the potential of growth of this sector and has come up with the several initiatives and policy changes within the past few years, like the following:

1. Government enterprises and agencies are setting data centre infrastructure management solutions. Several major banks in India along with IT department of Tamil Nadu are investing in their self-built or captive facilities in the country. 
2. Observing the importance of the mission-critical services that data centres provide and to position India as a data centre hub, MeitY (Ministry of Electronics & Information Technology, Government of India) has redrafted the data centre policy in 2020 with inputs from the top DC players in the country which is in the process of consideration and implementation at the moment.
3. During the budget 2020 the Finance Minister Nirmala Sitharaman announced the new policy along for data centre parks in India.
4.  Several state governments like Maharashtra, Tamil Nadu etc. have come up with special policies to encourage data centre investments within the state enabling an increase in employment opportunities for skilled and unskilled labour.

Industry Specific Growth 

The Indian colocation providers are witnessing high demand from BFSI, logistics, transportation, e-commerce, and government agencies, as the need for these services have shot up due to the outbreak of the pandemic. STT GDC India has the largest data centre footprint in the country with world class hosting solutions and mission-critical infrastructure in its 18 state-of-the-art data centre facilities across 9 cities and a global clientele including several Fortune 500 companies. Many global colocation service providers and data centre providers have been showing an inclination towards the Indian data centre market, which will therefore contribute to the market growth. Investments are pouring in the form of construction, materials, operations, electricity expenses, and more. According to CRISIL, the industry capacity is expected to expand by more than three folds from the current 360MW in fiscal 2020. It is also likely to see an investment of over $4-5 billion in both brownfield and greenfield projects. 

The data centre industry plays a prominent role in facilitating massive shifts in businesses. And though the implementation of cloud application is still at a growing stage in India, its importance is only going to rise as businesses and enterprises are realising that the only way to survive and thrive is to keep up with the changing course of the Indian digital ecosystem. All these aspects along with the Government’s support are steadily powering a shift in the data centre investments in India