The next billion Dollar opportunity - Data center business in India

The global data center services market is estimated to reach $228 billion by 2020. Data centers are at the heart of technological focus and continue to experience physical transformations of their own.

The global data center market is dominated by America with 40% of market share or $68 billion in investments, followed by Europe and Russia together at 32% or $54 billion. The APAC market is growing rapidly with a 25% market share at $42 billion and the Middle East and Africa region hold a 3% share with nearly $6 billion in investments. The Asia-Pacific has the explosive digital needs of emerging economies with huge population such as China, India, and Indonesia. Specially, China and India stand to exploit the market the most and fuel the growth in APAC.

As digital transformation is a continuous journey, the move towards a connected, inclusive digital economy means more and more data is being generated across platforms such as Cloud and social media as well as accessed by more people using mobile technology.

With the growth in mobile data consumption, the government’s digitisation drive and thrust on Smart Cities is also fuelling demand for more data centres. Besides, data is moving from being stored on-premise to the cloud, with many enterprises adopting the ‘as a service’ model of infrastructure consumption and the banking and financial services institutions have been the earliest adopters of local data centres.

India recorded third-highest growth rate globally and the India revenue represented 1.2% of the global public cloud services total in 2019. India ranks among the nine countries whose growth rate will be higher than the global average growth rate (16%).

India paced to record the third-highest growth rate in 2019 after China (33%) and Indonesia (29%), taking into consideration that their revenue base is much smaller than those of mature markets.

Various domestic colocation providers such as CtrlS, Netmagic, and Reliance are investing aggressively in cities like Mumbai, Bengaluru, and Hyderabad. Apart from this, strict government policy for companies to store their data locally will boost the market for captive datacenters and cloud providers such as Amazon, Microsoft, and IBM have launched their own datacenters in India.

Recent Developments

• Colocation providers, such as CtrlS, Netmagic, Sify, and NxtGen, have announced big investment plans in India. For example, GPX Global Systems inaugurated a 16-MW data center in Mumbai by Q1 2019, and CtrlS has launched a USD 73-million project in Bengaluru and will be adding new data centers in Hyderabad and Mumbai within 3 years
• Ascendas-Singbridge is investing $1 billion on new constructions in Chennai, Mumbai, and Hyderabad
• Government also focuses on setting up more state data centers. NIC (National Informatics Center) is building its data center of 1,000 racks in Bhopal with the help of CtrlS. Asia’s largest data center would be set up in Sindhudurg, Maharashtra, with an investment of about USD 680 million by the state government to connect it with another data center located in Malta using undersea cables
• NTT has already launched a hyperscale data center each in Mumbai and Bengaluru. CtrlS is also planning to enter the hyperscale market. Also, Amazon, Microsoft, Google, and IBM have already launched their cloud data centers in India which they can expand to hyperscale data centers when required
• Sify Data Centers have distinguishing features that help you stay ahead of the competition. The Chennai Data Center provides the largest space of 100,000 sq. ft. and has highly robust operational services. Bangalore has one of the most high-tech Data Centers in the country. Noida and Rabale Data Centers provide Z level infrastructure security which is unmatched by most of the competition. Noida Data Center is amongst the few green Data Centers available in India.

The datacenter of future will be more agile and nimble built on a more flexible infrastructure based on virtualization, convergence and automation of all layers of datacenters to support both traditional IT and newer cloud environments. This will help them deliver services needed to run tomorrow's business.
Data Center Market in India: Promising Future

This report includes detailed segmentation by IT Infrastructure, Electrical Infrastructure, Mechanical Infrastructure, General Construction, Tier Standards, and Geography.

The adoption of server infrastructure is dominated by rack servers, which account for over 70% of the market share. However, tower servers are experiencing a negative growth rate. The adoption of converged and hyper-converged infrastructure solutions will have a high impact on the server market growth during the forecast period.

The increased adoption of all-flash storage arrays and hybrid storage arrays is boosting the demand for storage systems. High-performance operations aid the growth of flash storage systems in data centers that require strong I/O capabilities. The unstable grid connectivity in India makes UPS systems a critical component for uninterrupted service operations.The use of water-based cooling is likely to increase in the India data center market during the forecast period. However, the scarcity of water in a few cities will pose a challenge for facility operators in supporting operations. Most facilities are powered with air-based cooling systems.

With the increasing focus on building highly efficient and reliable data centers, the investment in Tier IV facilities is expected to grow in India. Most new facilities are designed as Tier III standards with minimum N+1 redundancy and can be reconfigured with up to 2N redundancy as the demand arises. The data center market in India witnessed the development of around 20 Tier III category projects. This trend is likely to continue during the forecast period, with many large operators expected to move to Tier IV category due to the growth in rack power density and critical applications.

Investments from CtrlS, GPX Global Systems, and Pi DATACENTERS will continue to grow the revenue for the Tier IV category in the market. Building a Tier IV facility in India will cost around $5-6 million. The labor cost is low than in developed countries, thereby reducing the construction cost to a considerable extent.

Mumbai, Bengaluru, Chennai, Delhi, and Hyderabad will be the major cities driving data center growth throughout the forecast period. AWS, Microsoft, Google, Alibaba, IBM, and Tencent have established their physical presence in the cities mentioned above. The global service providers such as Equinix and Digital Realty are expected to invest in the market during the forecast period.

Moreover, government initiatives to migrate all their operations to the cloud platform to push digital economy will aid in the development of multiple facilities in states such as Kerala, Assam, West Bengal, Andhra Pradesh, Gujarat, Madhya Pradesh, Odisha, Bihar, Jharkhand, Uttar Pradesh, Haryana, Punjab, Himachal Pradesh, and Jammu & Kashmir.

The market has a strong presence of vendors in the three categories: IT infrastructure, support infrastructure, and data center investors. Tata Consultancy Services (TCS), Wipro, Cognizant, Infosys are the major contributors to the market offering managed data center services. Managed services majorly dominate the colocation market in the country.

"India is the fastest-growing region for NTT and a substantial amount of the US$7 billion commitment will be invested here,” said Sharad Sanghi, Managing Director & CEO at NTT-Netmagic.

A significant part of NTT's USD 7 billion global commitment for data centres business would be spent in India over the next four years.

The company also feels that there will be margin compression issues for the data centres business in India as capacity supply goes up along with an increase in competition and secondly as the demand is coming from global hyperscalers like the cloud service providers, data localisation requirements and as a greater number of enterprises move to the cloud, Sanghi said.

Ctrl4C is a public cloud product also known as Tier IV Cloud. The product creates four copies in 4 different data centers in different seismic zones and offers customization. Being a true Tier IV product, it comes with a 99.995 percent uptime guarantee at the cost of a 99.95.

Business Need Data Centers:

Today, around 2.5 quintillion bytes of data are created daily; the future promising with the numbers are increasing on every minutes. This requires datacenters to change the perception and method of storing, governing and managing data.

“The shift from ‘cloud first’ to a ‘cloud only’ model is pushing organizations in India to increase their spending on public cloud services to advance their digital business initiatives,” said Sid Nag, Research Vice President at Gartner.

“Disinvestments in new data centers are also one of the early signs of this move,” confirms Nag.

The Gartner CIO Agenda survey validates the rising move to cloud among organizations in India. The survey found that 34% of CIOs in India increased their spending on cloud services in 2019. “Organizations want to reduce capital expenditure spend by consolidating existing data centers and halting the buildout of new ones,” said Nag.

Table 1. India Public Cloud Services Revenue Forecast, 2018-2020 (Millions of U.S. Dollars)

Segment 2018 2019 2020
Cloud application infrastructure services (PaaS) 204 251 313
Cloud application services (SaaS) 935 1,149 1,396
Cloud business process services (BPaaS) 178 213 261
Cloud management and security services 187 224 269
Cloud system infrastructure services (IaaS) 462 605 809
Total revenue 1,965 2,442 3,048


Note: Totals may not add up due to rounding.Source: Gartner (June 2019)

Data centres are measured in two ways — on the power that they consume and the data that they store or process.

Colocation data centres are shared facilities where the infrastructure is used by different companies. In India, colocation setups are being deployed with cloud computing architecture, putting the country on a path to becoming one of the biggest hubs for colocation data centres globally.

With cloud adoption rising, a robust and scalable infrastructure is critical. Secondly, cloud computing is now moving towards edge computing.


In the course of the next few years, we anticipate the edge to become the most mission-critical part of an organisation’s digital ecosystem,” said Sunil Khanna, Managing Director, Vertiv India, projects demand will be driven by the IT, BFSI and telecom industries.

“We will go from 30,000 square feet to 2 lakh square feet by 2020-22,” said Nikhil Rathi, CEO of Web Werks, which has over the last ten years operated a single data centre in Mumbai.ESDS Software Services, which started out with operations in Nashik, its home market, is now expanding in India and outside.These local data centre players are now actively looking beyond Tier I cities and setting up operations in Tier II towns.

Netmagic, was acquired by Japanese tech firm NTT a few years ago and remains among the biggest in this space, with further capacity expansions planned in Mumbai, Chennai and Bengaluru. The US-headquartered Linode, which offers data centre solutions mainly to the software developer community, set up base in the country recently.

“We already had a lot of customers in India, but now instead of Singapore, their data will be hosted in India,” said Blair Lyon, VP Marketing, Linode.

Datacenter growth in India

The Government of India, in its recent budget has also emphasized the importance of creating a cloud warehouse that will safely store an enormous amount of data. With the current investment in the Datacenter infrastructure business by numerous companies, this would further enhance India’s market share in the Global and APAC markets, making India an attractive destination for the Datacenter business in the region.

Key Highlights Of The Report:
1. $10 billion will be invested in India Data Center Market over the next 6 years.
2. $3 billion will be spent building data centers in India. L&T and Sterling and Wilson to be the major benefiters
3. Data explosion and favorable government policies to aid the establishment of data center parks across the country
4. As of October 2019, there were over 10 data center projects, which are expected to be operational between June 2020 and December 2022.
5. Adani Group, Bridge Data Centers, Colt DCS, and Yotta Infrastructure are among the new entrants to the market, targeting hyperscale investments with multiple facilities covering over 40 MW of power capacity.
6. State governments in Telangana, Gujarat, Andhra Pradesh, and Mumbai have introduced incentives for data center development.

Telangana is growing at the fastest CAGR of around 19% during the forecast period, with Hyderabad being the major city for data centre operations with a presence of over 10 facilities in the Indian market. Mumbai is the prime focus of data center developers in India with more than 20 percent of market share, followed by Bengaluru. Mumbai is the hub for facilities deployment by major companies such as AWS, Microsoft, Alibaba, and Google in the Indian market. All government-owned companies in every industry vertical have their data centers located in Mumbai and Bengaluru.

Factors influencing the growth :

The mass adoption of smartphones, 4G, broadband, etc. by end users, adoption of cloud computing, growing start-ups in India, blockchain, AI, etc. by Indian enterprises, increasing number of interconnected devices due to IoT, etc. along with the government’s focus on digitization under the Digital India scheme and rising social media consumption and IT penetration in the country has led to the growing need for data centers in the country. Further, the need for high-performance infrastructure will lead to the growth of rack density to an average of around 8-10 kW in the India data center market.

Secondly, Govt Initiative of localizing the Personal data will be a real booster for the data center industry. India is coming up with a data privacy and protection bill and draft e-commerce policy that enforces the storage of critical data within the country. In addition, in the last two years, enterprises, both IT and non-IT, have migrated to cloud and adopted newer technologies such as AI and IoT. This has also increased the demand for data centres in the country.

Moreover, the Reserve Bank of India has mandated all payment firms should store their data in India. All the social media companies, payments and wallet services, credit card companies, e-commerce sites, and other online services that operate overseas but have Indian customers will need local data centres.

eCommerce and proliferation of online marketplace in India has driven the market for colocation datacenters in India and is expected to drive the market in the coming years as well and secondly, higher adoption of technology by SMEs in every sector combined with stringent government regulations will also spur the demand for more datacenters in India. Another key reason of growth is with the telecom & IT sector needs to deal with high volumes of data on a daily basis. Such data is conventionally stored on servers in large scale data centers.

Growth mantra:

Data center demand is the entry of international cloud-based service providers as well as consolidation of domestic players. DigitalOcean, the 2nd largest cloud hosting provider in the world launched its data center in Bengaluru, with an investment of $5 mn and is likely to increase its India investment in future. The one in Bengaluru is a collocated data center, hosted by Netmagic Solutions. It employs SSD storage (solid state devices or flash memory storage), and not hard disks.

Alibaba, the global cloud giant has set up its first data centre in Mumbai, collaborating with existing Cloud Service Providers (CSP) in India to set up its second data centre in India. To support the massive customer demand for cloud services in the country, Oracle announced to come-up with its Gen 2 Cloud region in Mumbai, with plans to open another region in Hyderabad. This aggressive expansion is in line with Oracle’s plans to add 20 new Gen 2 Cloud datacenters globally by the end of 2020. Now, customers and partners in India can harness the power of Oracle Cloud and leading services like Autonomous Database to unlock innovation and drive business growth.

Colt Data Centre Services is another company coming to India and planning to open a hyperscale campus in Mumbai in 2020, with power capacity of up to 100MW. The company has acquired land and secured a “substantial” high-voltage utility feed of 150MVA. The facility is expected to become operational in the second half of 2020, with Colt DCS claiming it to be the first “main-stream western” data center operator to enter the Indian market. Colt DCS owns 17 carrier-neutral data centers across Europe and manages a further seven in the Asia-Pacific region.

As data consumption continues to rise at an exponential rate, more businesses and consumers are demanding a reliable data and network infrastructure to deliver fast connectivity and on-demand services.

"Colt DCS will play a key role in providing the data centre infrastructure to enable this through its investment in Mumbai,” said Detlef Spang, CEO, Colt DCS.

With respect to data center infrastructure, India is a highly underserved market. Smartphone penetration, social media, rise of OTTs, cloud computing adoption, government initiatives etc. are driving massive data growth. Estimates show that we need 15 times more datacenter capacity to meet the growing digitization needs of the country.


5G rollouts and use cases for industrial IoT start gaining steam, demand will increase, It will only go up, and not slow down. To address the growth opportunity, Yotta is introducing Hyperscale, Integrated Data Center Parks for the first time in India"
Says Sunil Gupta, Managing Partner and CEO - Yotta Infrastructure, “Our proposition is to offer practically unlimited scalability for data center requirements at the same site. Our campuses across Chennai and Maharashtra will be spread over 50 acres, offering 11 DC buildings with 60,000 racks. At this scale, we’ll be able to cater to the growing requirements of hyperscale cloud providers who need to set up their grids in India, and also meet the requirements of enterprise customers with our full suite of data center services including managed IT services, multi-cloud services, connectivity and security services.”

ESDS Software Solution manages to save over 30% of its cooling cost through highly innovative solutions. Through its state-of-the-art facilities across India, ESDS provides colocation services as its data centers host mission critical IT assets which are secure and backed by exuberant support.

“Most of the demand coming currently is geared towards cloud, as clients are clearly looking for speed of delivery and an OPEX model. Given this market scenario, we have several products around cloud offerings. This includes As a Service solutions, namely Security as a Service, Back up as a Service, Disaster Recovery as a Service, Containers as well as several other customized IaaS and PaaS solutions,” says Kalyan Muppaneni, Founder & CEO - Pi Datacenters.

2020 will see the rise of Edge computing for using 5G’s super high speed, low latency machine-to-machine communications will be introduced. These new offerings – like high-resolution cloud gaming, industrial IoT process control and onsite augmented reality guidance for workers. For example, with 5G’s ability to provide latencies of less than 10 milliseconds, it will soon become much easier to deploy low-latency 5G applications – and 2020 will see the data center preparing itself for their arrival. We’ll see more data centers move to Edge computing in 2020 to bring these applications to fruition.

AI will drive data center adoption of new technologies, we expect to see the use of AI accelerate next year, as companies increasingly build and deploy AI models. This will create new services and generate new business insights.

In 2020, we expect data center owners and operators to increasingly focus on how they can deliver the performance their customers need for AI-enabled cloud services.


Data center operators will lean heavily on AI in 2020 to support workforce efficiency to prepare for the next phase of the data center, while the deployment of machine learning and other AI technologies will create new ways of learning and doing.


Lastly, the captive model of data center in India is being overtaken by colocation model at a significant rate. It is expected that the consolidation of data centers will cannibalize the captive data center market, and colocation market will grow exponentially keeping in view that the outsourcing of data centers will help reduce the operating cost significantly for the clients.


Moreover, the current trend shows that with people moving away from capex to OPEX models, colocation is growing significantly, compared to captive data centers.

Netmagic to invest $1.5 billion in India

Nitin Mishra
Senior Executive Vice President & Chief Product Officer - NTT Netmagic

Since over two decades, India has been among one of the leading providers of IT and ITES services, and evolution of the data center industry is a natural progression. At present, the demand is greater than the supply, and NTT expect this accelerated growth to continue in the foreseeable future. They are already one of the largest players in the sector with various unmatched service offerings and excellent customer experience. They have robust plans to expand their footprint across India in a systematic and environmentally responsible manner.

According to Nitin, Netmagic is one of the leading names in the Indian cloud computing services vertical. For enterprises to successfully adopt to cloud technologies, scalable, strong and cutting-edge infrastructure is of utmost importance. 

We are scaling up massively to keep up with the rising demands. Currently, we have a capacity of 1.2 million square feet across 9 data centers located in Mumbai, Noida, Chennai and Bengaluru and in the coming years, we will increase it to 1.5 million square feet. We have already planned an investment close to $1.5 billion in India itself. With the rapid proliferation of IoT technology, devices and connectivity, edge computing will be adopted by the large enterprises as it promises faster connectivity and better computing ability along with a higher degree of personalization. In the next five years, India is expected to constitute 20% of the global IoT data market and are planning to set up edge DCs to address the emerging technology needs.

Cloud growth has a wrong perception in the minds of people

Piyush Somani
CMD & CEO
ESDS Software Solution Pvt. Ltd

Data Centers will become the backbone of all future Technologies in India, so the Data Center business should not be looked from the colocation footprint size or their Dollar revenue. Growth brings a lot of challenges. Cloud growth has a wrong perception in the minds of people. People look at Cloud growth from the revenue of IaaS business only, while the majority of the Cloud growth is happening in SaaS.

According to Piyush Somani, ESDS was the first Cloud service provider in India in 2010 and since then they have continuously modernized their Cloud Infrastructure to stay ahead of the competition. A Tech company in Today’s times cannot evolve if they don’t get challenges.

Our eNlight 360° is going to be a game changer for Edge computing, as all the virtual machines running on the Edge will be able to automatically scale and they won’t need any manual intervention. We are betting big time on growth in Edge computing, as that will become the next Billion-dollar opportunity for ESDS. Our customers have continuously rated us India’s No.1 for our Managed Services and amongst top 4 for IaaS, SaaS and Data Centers.

Today ESDS has more than 350 banking customers in India, 170 Enterprises running their SAP HANA on our Cloud and 135+ Govt organizations from all over India running their core business from our Cloud. We will continue to strengthen these business verticals where we already have established ourselves as No.1 in India, but moving forward we are also going to focus big time on SaaS, IoT and Edge computing. If there is a 4-digit growth opportunity today, then that is in SaaS, IoT and Edge Computing for ESDS.

Cloud adoption in India is still at its nascent stage

B.S. Rao
Vice President(Marketing)- CtrlS

According to B.S. Rao Cloud adoption in India is still at its nascent stage. SaaS applications are being consumed more rapidly, while Infrastructure as a Service (IaaS) is underpenetrated. IaaS adopting in India is under 5% at the moment and will take another decade to cross the 50% mark meaning we will witness real growth in the next 3,000 days in the country. Employment in cloud will also grow as millions of cloud experts would be required by the year 2030. Public cloud infrastructure in India will also grow as hyperscale such as Amazon, Azure, Google Cloud will continue to make investments in the country to tap the growth. We currently serve over 4,000 customers including 60 of the Fortune 500 Global Multinationals.

Edge is the future, as data is processed where it is generated. India will witness at least 10,000 edge data centers over the next decade as more and more applications get closer to the customers. Most of the edge data centers would be deployed in Tier-2 and Tier-3 cities in India. IoT, Cloud, OTT, Gaming will be the key drivers for edge computing.

We have been growing at 50% year on year. Our roadmap is to build 5 million square feet of Rated 4 hyperscale data centers in the country. We are in the process of building our 2 million square feet hyperscale data center in Mumbai. This apart we have planned another 2 million square feet Rated 4 hyperscale data center in Hyderabad followed by a 1 million square feet facility in Chennai. We will be doubling the Indian capacity by owning 6 million square feet in the next six to eight quarters. Yes, by the way, we are also planning 500 to 1,000 Edge Data Centers in Tier-2 and Tier-3 over the next 36 months.