Enterprises rush to rent data centers amid rapid digital transformation

Data center service providers in India are set to see a boom in business as enterprises increase dependency on third party service providers. Rapid digital transformation due to the pandemic has forced corporates to move to third party data centers instead of managing the complexities associated with on-premise and owned data centers, industry experts said.

While enterprises have traditionally been relying on on-premise data centers to support business operations, the increasing complexities and cost of creating and managing captive setups, and the availability of major cloud operators within the Indian shores has resulted in the movement of enterprise workloads to the cloud, or rather third-party data centers. Now, organisations across verticals are looking for a trusted partner that could not only support them with a reliable data center infrastructure but also ensure seamless round-the-clock operations.

"Third-party data centers bring in resiliency in the form of high availability, low power usage effectiveness (PUE), carrier neutrality, interconnectivity, low latency, effective cooling, continuous availability of power, resilience in the form of quake proof and flood proof infrastructure, ability to scale rapidly aligned with the needs of customers,” said B.S. Rao, vice president, marketing, CtrlS Datacenters, an Indian data center company.

According to Sunil Gupta, co-founder and chief executive officer (CEO) of data center solutions provider Yotta Infrastructure, the pandemic has been a “major accelerator” of migration from captive data to third party colocation facilities. “Amidst the pandemic-driven restrictions, enterprises were hit hard by inaccessibility, along with operational and manageability challenges in their captive setups,” he said.

Colocation data centers are data center setups which allow multiple companies to rent server racks in the same server farm, along with other computing hardware, like networking and storage, to host their workloads. With colocation, companies share the cost of power, cooling, communication and data center floor space with other tenants. While they get their own servers and other equipment to a colocation facility, the service providers offer them power, cooling, bandwidth, and security. Colocation players also offer a whole host of managed services to support business initiatives of enterprises.

Gupta said that multi-tenant colocation “assures enterprises that their data centers will continue to operate uninterrupted at all times”. 

Industry estimates point towards a rapid growth of data centers in the Indian market too. According to a NASSCOM report from February 2021, investments in the Indian data center market are expected to reach about $5 billion by 2025. A May 2021 report by global real estate firm JLL predicted that the Indian data center industry is expected to more than double to 1007 MW by 2023 from its existing capacity of 447 MW.

According to Sanchit Vir Gogia, chief analyst, founder and CEO of Greyhound Research, the availability of high-speed Internet, favourable government policies and increased consumption of software-as-a-service (SaaS) solutions have led to the rapid growth of data centers in India. He said that India’s geographic location and political scenario make it perfect for enterprises to bank on colocation data centers.

Further, Rajesh Dangi, chief digital officer of IT infrastructure provider NxtGen Infinite Datacenter, large scale adoption of digital only channels and growing digital transformation has led enterprises to choose to focus on innovating in their domains, and “de-risking” their tech investments by allowing third parties to handle the complexities of infrastructure management.

Jatinder Singh Pabla, senior vice president, sales, marketing and customer experience management at STT Global Data Center India, pointed out that enterprises can benefit from economies of scale in colocation data centers. “Capacity is made available to customers on a consumption basis, which reduces their capital expenditure (CepEx) requirements. It also means that capacity is available when the customer needs it without waiting for multiple years of self-build cycle,” he said.

However, experts also warned that the move to third-party data centers will also require companies to step up due diligence regarding reliability, redundancy, resiliency and scalability. Vimal Kaw, who heads data center services at global tech services provider NTT Limited, said that financial stability is “the most critical” as data centers are CapEx and OpEx heavy business. "Organizations are working 24X7 to meet their customer demands and they can’t afford even a single minute downtime. Hence, they need highly reliable sites and efficient data players to maintain resiliency," he added.