Interview with Business World

Pattern of growth in the data center market in India over the last couple of year and how it is poised to grow in the coming 3-5 years?

The existence of data centers in India can be traced back to more than a decade. But most of them were out of business with the dot com melt down in 2000, because their business model was structured around the growing number of Dot-Com companies. The Indian data center market has traditionally been dominated by captive data centers. Few of the 3rd party data centers were Telco's and companies providing bandwidth like Reliance, Sify, etc. The Indian data center market grew very slowly till 2004 due to the high cost of hosting which can be attributed to the expensive bandwidth. But with the bandwidth costs going down drastically data centers in India is all set for a giant leap. As a matter of fact, India is all set to become competitive to US by Mid 2008 for hosting a 3 kW rack. Conservative estimates suggest that the overall data center market is poised to grow annually at least 25 -35% for the next 3 years. Data Center Industry in India will see the following trends in future:

•  Increasing power density
•  Consequent cooling challenges
•  Energy Efficiency
•  Green Datacenters

How big or small is India within APAC

India currently has 9% data center market share in Asia. This is projected to go up to14% by 2012. Manufacturing and Financial services form ~53% of the data center market size in India followed by Public Sector-11% and Telecom-9%

How is in house data center market faring Vis a Vis 3rd Party IDC

If you look at the present Data center market in India, it is mostly captive data centers. As a matter of fact they are double the third party data centers. But the success story of data centers in India is being written by third party data centers.

The above graph clearly tells us that the growth in data center industry in the coming years would be driven by 3rd party data centers. Of the 7 million sft of data center space to be added in the next 4 years, more than 90% of it would be 3rd party data centers.

Companies in the past were concerned about outsourcing their data center because of concerns like security, availability, accountability and Intellectual property rights. Scarcity of quality data center space was also an issue. With the entry of focused data center companies in India i.e. the Managed Service providers, the trend is quickly shifting to outsourcing of data centers by companies cutting across sectors like Financial Service, Manufacturing, Portals, SAAS Providers, etc. These MSP's not only address the security concerns of the company but also provided additional benefits like Superior Infrastructure, Scalability, Zero Capex, Expertise and option to choose bandwidth providers which will not give them the highest availability but also lead to considerable amount of cost saving. Strategically outsourcing helps them deliver what they are best at i.e. focusing on their business, their core area of expertise.

I strongly believe that the 3rd Party data center market will grow by 80% annually for the next 3 years. This is due to factors like

•  Decreasing trend in bandwidth cost
•  More than 10 new Telcos have been given licenses increasing the effective competition.
•  New applications driving up data center demand. Gartner predicts that 33% of Software will be sold as service
•  Increased incidence of IT usage by companies
•  Globalization of Indian Companies

And with talks about technologies like cloud computing, where is this expected to go?

Cloud computing is the way companies would meet all their requirements of hardware and software with IT infrastructure hosted in huge data centers. Data centers would become a necessity for all enterprises and would be the heart of all their computing requirements. This would not only reduce the costs associated with hardware and software for companies but also significantly reduce their operation costs. The future of processing and storage lies in Cloud Computing, Grid Computing &Virtualization which will be provided by data centers.

GEO-GRAPHY 2006 2007 2008 2009 2010 2011 2012 CAGR 2007-2012
India 662 806 983 1,200 1,467 1,795 2,199 22.2%
Asia 8,135 8,905 9,812 10,887 12,168 13,705 15,558 12.9%
World 45,394 47,602 50,052 52,788 55,861 59,336 63,291 5.9%
India 2006 2007 2008 2009 2010 2011 2012
As % of Asia 8% 9% 10% 11% 12% 13% 14%
As % of World 1% 2% 2% 2% 3% 3% 3%
Asia 2006 2007 2008 2009 2010 2011 2012
As  % of world 18% 19% 20% 21% 22% 23% 25%
Geography India World
VERTICALS 2006 2012 2006 2012
Financial Services 28% 33% 23% 24%
Manufacturing 25% 24% 21% 22%
Public Sector 11% 9% 15% 15%
Telecommunications 9% 11% 9% 10%
Retail, Wholesale and Distribution 8% 6% 10% 9%
Travel, Transportation, Logistics & Hospitality 5% 4% 6% 5%
Energy and Utilities 4% 3% 5% 4%
Healthcare 4% 5% 5% 6%
Other 2% 2% 2% 2%
Life Sciences 2% 1% 2% 2%
Media and Entertainment 1% 2% 1% 2%


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