“Data is the new Oil” – this quote by British mathematician Clive Humby which dates to the early 2000s is even more relevant today given the business dynamics with clients and corporates looking to analyze data to draw meaningful trends and suggestions to understand and address the needs of their clients and help increase their products or services’ growth. Data consumption and usage have grown multi-fold over the last two decades with the introduction of digital means of doing business/work, social media and Ecommerce activities, etc.
Digital growth in India had its roots laid down in the early 1990s with e-governance initiatives taken by the Government. These were the initial steps towards a larger more defined flagship program of the National e-governance plan and then the subsequent digital India program.
The digital India initiative has propelled considerably since its announcement in 2015. The key successful programs being the Jandhan-Aadhaar-Mobile (JAM) initiative providing banking access to many Indians to direct benefit transfer schemes to enhance the ease of living as well as doing business via digital applications. The growth in digital applications has bridged the urban-rural divide and has bought rural India closer to development as well as helped businesses to reach the rural heartland with ease and speed.
Data consumption in India primarily revolves around BFSI, Ecommerce, social media which together contribute to 75-80% of the total data consumption. The growth of smartphones in India over the last decade or so has also supplemented this growth in data consumption. However, data consumption in India on a per capita basis is far lower than its Asian and Western counterparts.
Significant growth in these existing segments that are aiming at substantial CAGRs are expected to create a data proliferation. Adding to this, the incremental growth in smartphones over the next five years expected from about 600 million to crossing 1 billion would incrementally propel the usage of data. Data consumption itself would increase to 25 GB per individual per month by 2025 from about 12 GB per individual per month in 2019 as per a recent Ericsson mobility report. This digital boom would be backed by newer means of digital demand such as connected grid, autonomous vehicles, and digital transformation via Artificial Intelligence (AI), Machine Learning (ML), Internet of Things (IoT), etc as well as technology advancements such as 5G and Edge computing, etc.
COVID accelerated the growth in consumption of data with work from home and digital purchases of everything. The data usage witnessed a significant jump during the lockdown.
This digital data demand needs robust security, low latency, protection from cyber threats, and reliability of continuous uptime. Given this, cloud management systems have started gaining importance over the last 5-7 years or so which provide data collection and protection on large servers across locations under Data Centers.
Data Center growth in India has been significant over the last 4-5 years with major investments from real estate players as well as from PE funds to set up various categories – colocations, hyperscale, managed services to Edge Data Centers, etc. While the focus has primarily been metro and tier 1 cities such as Mumbai, Chennai, Bengaluru, and Hyderabad; other areas such as Pune, Indore, etc. are slowly but steadily increasing.
As per our analysis, India’s existing Data Center IT power load capacity of the top eight players stands at about 512MW in 2020 and is expected to grow to over 1 GW by 2025. The data consumption in India stands at about 1 MW per million people which is very low and would be witnessing significant growth over the next few years.
Central Government via its draft Data Center policy along with states like Telangana and Uttar Pradesh is providing Data Centers specific policies and the much-needed regulatory support for the segment. However, policy push in terms of data localization for protection and security would result in a significant surge in Data Center requirements with the country.
The Data Center infrastructure market is expected to witness a significant boom with revenues growing at a CAGR of 8.3% from US$ 2.6 billion in 2019 to US$ 3.9 billion in 2024 and investments expected to witness a steady CAGR of 5.4%, from US$ 3.4 billion in 2019 to US$ 4.4 billion in 2024.
Key trends that will shape the Data Center industry in the coming decade are:
- Connected grid – The growth in electric vehicles, smart grid, smart infrastructure would be on the back of digital growth which would result in significant data consumption.
- Digital transformation – Digital transformation in terms of blockchain, IoT, AI, ML would disrupt data consumption significantly. Most of these data would be on the cloud which would further push the demand for Data Centers.
- Sustainable Data Centers – Data centers would look at renewable and new energies to provide net-zero carbon or sustainable business models. Replacing or reducing the usage of diesel gen-sets as backup power with solar + storage would be a key trend.
- Digital Data Parks – Digital data parks are planned to be set up across the country which would house huge data, creating an unparalleled digital infrastructure.
- Technology – 5G and Edge computing would further help the growth of data consumption and hence the requirement of data centers
In conclusion, Data Centers are the backbone, the fulcrum based on which the digital revolution would grow manifold. Developing this digital infrastructure and helping build a robust architecture around Data Centers would be the objective of the Government as well as the private sector. Government (central and state) are playing their part in creating policy and regulations to benefit the growth of Data Centers and Data Parks across the country, while the private sector is pushing for scaling up the potential in Data Centers. Digital transformation and digital infrastructure (Data Centers) would play a pivotal role in India’s march towards a five trillion economy by 2025.
Aryaman Tandon, Practice Leader, Infrastructure
Savio Monteiro, Sr. Vice President, Infrastructure