Datacenter Industry: Capacities Additions to Drive Growth

Published by Sharekhan Education | September 26, 2022

Amit Pathak |Sharekhan Education

Datacenter Industry: Capacities Additions to Drive Growth

The covid-19 pandemic has accelerated the rate of digital transformation across the country. Data consumption surged as education, work, banking, and shopping adapted to the digital ecosystem. A substantial volume of data generated would require enhanced storage capacity. The usage of digital devices is estimated to surge, which will drive the need for data centers in India. A data center is a facility that houses computer systems & associated components to store, process, and disseminate data & applications. 

Importance of Data Centers:

Data centers have been given ‘Infrastructure’ status in Union Budget 2022. This status will help data centers in the country gain easy access to institutional credit at lower interest rates; attract foreign investments and private capital. Indian government . has also started an incentive scheme of USD 120 billion to facilitate the installation of data centers. The government aspires to make India a regional data hub by enhancing the quality of supporting infrastructure such as power transmission & optical fiber network, easing the land acquisition process, and enhancing tax deductions for capital expenditure incurred on Data center infrastructure.

Growth Prospects:

Arizton’s research valued the Indian data center market at $4.35 billion in 2021 and predicts it will reach $10 billion by 2027, with a growth rate of 15% during 2022-2027. The growth drivers for the industry include the adoption of new technologies such as 5G in telecom and the Internet of Things (IoT), cost advantage and easy accessibility of skilled labor in India, and the Government’s thrust on data localization. Data localization has made it mandatory for companies that collect critical consumer data to store and process data in local data centers. 

Large hyper-scalers like Amazon, Google, IBM, and Uber are outsourcing their storage needs to third-party Data Center Providers in India. Operator credibility ranks highest in the selection criteria of Data centers by enterprises. Operators’ previous track record in ensuring low latencies & redundancies are the main criteria considered by enterprises. Over the next five years, India’s data center industry will shift from small and fragmented to consolidated and sizable.

Bharti Airtel:

We have a positive outlook of Bharti Airtel in this space. The company operates 12 data centers with 130 MW capacity and plans to add another seven over the next four years. It plans to invest Rs. 5,000 crores by 2025 to triple its data center capacity to over 400 MW. It offers the largest network of secure, scalable, and sustainable data centers, in India, to leading enterprises, hyperscalers, start-ups, SMEs, and Governments. We believe the Data Center business will be the main growth driver for the company in the coming times.

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