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Here's why data center colocation in India is trending

The pandemic triggered a societal paradigm shift past everybody’s expectations. Over the last two years, the data center industry has accelerated the rate of digital transformation across the globe. The industry has observed that the world is ruled by technology and anything is achievable be it remote working, online education, e-commerce, and the increased use of online gaming and video streaming services. These changes are not short-term trends, but rather lasting alterations that require a corresponding shift across the data center system.

Despite challenges it also brought some promising changes, especially in technological advances that support our increasingly digital lifestyles. Increasing digitization and increasing reliance on computers has created enormous opportunities for the data center industry.

With all the technological advancements, the dependency of organizations on the IT infrastructure has increased multifold. They need full-scale data centers, as small server rooms or individual servers cannot withstand the increasing demands for scalability, security, and availability.

Despite all these growing requirements, organizations these days don’t want the hefty investment and management that data centers require. The ultimate option then is colocation services, as with colocation data center facilities, organizations get to rent space for the necessary hardware and servers without worrying about it. As with colocation, organizations get all the required scalability, security, and availability of resources similar to that of a data center, just with reduced capital expenditure.

Why colocation is winning

1 Saving time and money:

Constructing a data center is expensive and takes many years, most of which are occupied by convoluted and drawn-out approval processes. Hence, renting from a colocation provider is frequently quicker and less expensive because businesses require increased capacity quickly. Many organizations often lack the land needed for a data center and buying the right site results in additional expenses and further delays.

2 Skilled management: 

Only a small number of businesses are genuinely able to ensure the efficient 24x7 running of a data center. Since most of them work with low staffing levels, they are often unable to respond quickly to problems when they occur. Colocation providers possess the expertise and tested concepts needed to operate and safeguard the facilities.

3 Compliance adherence: 

To protect the overall digital infrastructure, many sectors must adhere to stringent regulatory standards. It takes time to design your own data centers in accordance with this and obtain the necessary certifications. However, data center providers already hold industry-recognized certifications, giving firms planning security if, for instance, they need to adapt to new business models or digital services. Additionally, by having data centers in geographically distinct locations, colocation firms make it much easier to execute disaster recovery techniques.

4 Sustainable development:

Compared to creating a single extensive infrastructure with equivalent capabilities, constructing several smaller data centers necessitates additional funds. As a result, the colocation providers' facilities are typically more environmentally friendly than corporate data centers. This also holds for operations, where scale affects things like more effective cooling and backup power. Additionally, service providers constantly refine their processes and spend money on R&D, which is typically not lucrative for a single business with its data centers. This makes colocation a lot simpler for companies to accomplish their environmental objectives.

5 Technological limitations:

A decade ago, the growing demand that we witnessed for computing was being compensated by new generation Compute machines. These machines could deliver more and more power in less space. But, the development also had to have some limits, especially regarding chips. Now it's been a few years, and we are increasingly unable to increase the density of chips. This implies that we're about to reach a threshold, so the chips can no longer deliver more power in less space. This limitation is a significant reason why the requirement for horizontal space is increasing, and hence there is a significant rise in the requirement of colocation services.

The Indian perspective

A report published by JLL India stated that India's colocation market is set to double by 2023. As per the report, the leading data center markets in India, starting with the "Silicon Valley of the East", Bengaluru, followed by Mumbai and Chennai, had a colocation uptake of 46.4MW in the first six months of this year (2022);. This represents 90 percent of the 51.8MW in power capacity installed during the period. The nation's colos are anticipated to provide more than a gigawatt of power by 2023, resulting in over five million square feet of property investment to fulfill the rapidly expanding demand. Within Mumbai alone, the demand raised by data center companies has stood up to 500MW by 2021.

This demand shows that approximately five years from now, Mumbai alone is expected to have a data center capacity of close to 5GW. This way, India will have a data center capacity of up to 10 GW with an industry CAGR of 24 percent.

To propel India's transformation into a digitally empowered society and knowledge economy, the Government of India launched the 'Digital India Programme' in July 2015. The digital ecosystem is also expected to generate US$1 trillion in economic value by 2025, a significant factor in reaching the US$5 trillion economy target. A series of 30 digital themes was identified by the Government across a range of sectors including banking, agriculture, healthcare, education, energy, and digital payments. These topics rely on 21st century IT and IT services, highlighting opportunities for digital adoption. The wave of IT adoption has allowed firms to transform backend operations, resulting in an enhanced customer value proposition. Another major reason is the new generation technologies like IoT, AI/ML, Blockchain, AR & VR. Video games and so on. All these new gen technologies will continue to consume massive amounts of computing and storage.

Additionally, IT services make technological capabilities available to companies of any size, whieh were previously only available to large enterprises. Among Indian data centers, colocation services, and cloud operators, there are more than 200, targeting a US$3.8 billion market in fiscal 2020.

5G is another intriguing aspect of this domain. India's 5G spectrum auction was postponed until May 2022, and the actual networks are due to begin launching this month (september 2022). . According to research, the substantially higher bandwidth provided by 5G when it ultimately launches should lead to a sharp surge in data consumption that would eventually rely on the overall enhanced importance of colocation services.

More data centers needed

We need dedicated data center parks in Mumbai, Bengaluru, Hyderabad, and other major IT hubs. We need to connect these cities with highways, fibre channels, and dozens of dark fibres running across these big cities of the country.

Edge data centers are another opportunity for the country, which can be a good option if built across the border area and coastal areas of the country.

Thinking about the future, autonomous drones and autonomous vehicles of the future will require to connect with Edge data centers. India has some 100 defense organizations, which will need to connect to Edge data centers, which will further require connecitons with core data centers.

What we as a nation will need is a plan for all of this now, and good policies could produce strong benefits for India.

There have already been policies from central and state governments that seem very proactive in attracting data centers. If something similar can be done across the nation, I am sure we will very quickly become a hub of data centers for the whole of Asia.

If policies identical to the Netherlands and Finland are undertaken in India, we may surpass Japan in terms of the size of the data centers in the coming seven to eight years.

Currently, we are at 800MW, and how fast can we grow from 800MW to 30GW? I am sure everything will happen in the next ten years if everything goes well.



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