Data Centres Market in India

2015

Contents

Executive Summary

Industry Overview

Market Size

Comparison with Global Markets

Growth trend and forecasts

Demand-side analysis
o

Demand drivers across major sectors

Emerging demand from public sector schemes (Digital India Programme)

Outlook of data requirements from major sectors

Supply-side analysis
o

Types of players: captive vs. third party

Major players

Comparison of major players across select KPIs

Location analysis
o

Comparative analyses of major sub-markets

Recent developments in top three sub-markets

Trends and outlook

o

Technology trends

Industry outlook
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Executive Summary

Market size and

growth

Data centre infrastructure market, in terms of revenue, is estimated at $2.03 billion for 2015
enterprise networking contributes the maximum share (47%) to this, followed by servers (33%)
Growth of Indian data centre market is forecast to reach 20% YoY, against the 11% globally for the
period 2013-18
Cloud service adoption is driving much of the data centre market. The Indian market in this regard is
unique due to the rapid growth in all cloud segments such as IaaS, PaaS, etc.

Demand Drivers

BFSI, telecom and IT&ITES are the major sectors driving demand for data centres in India. Adding to the
momentum is the rising IT penetration and social media consumption in the country
A bigger demand potential in Indian data centres market is being generated by public investments in
large scale digitisation christened as the Digital India Scheme

Data Centre
Providers

Captive data centres have a dominant share of the market. But they are gradually ceding ground to
third-party service providers they account for about 40% share, compared to 20% five years ago
Most of the data centres are Tier III based, though increasingly suppliers are enhancing their standards
with higher availability and redundancy
An investment worth $1.6 billion is underway in the Indian data centre market
Based on projects under construction, 2.38 million sq ft. expected before 2017

Software-led
business model

Software-defined infrastructure is setting the case for next generation data centres. These are part of
ongoing steps towards technology integration and automation in data centre processes
Analytics platforms increasingly playing a key role, to manage data centres growing complexities as
well as demanding requirements of development costs, network availability, security, etc.
Open source architecture is finding greater preference due to its amenability in integrating legacy
systems as well as maintaining vendor neutrality

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Demand

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Major Sectors Driving Demand for Data Centres

BFSI

Indian financial services sector is the predominant demand driver. It already has the highest
penetration in the data centres market, and will be maintaining its leadership
The industry as a whole is projected to grow at CAGR 12-15% in next five years
New banking licences (payment banks and full-service commercial banks) involve technology
play as entrants seek to reduce costs through cloud-based services
In about a year, Governments payment gateway RuPay accounted for about a third of total
debit cards operational in the country. By March 2016, RuPay credit cards are expected

Telecom

Driven by increasing mobile penetration and usage, telecom service providers are augmenting
infrastructure not only to meet demand (mainly data) but also quality
The top three players (over 90% revenue market share) reported 70% YoY growth in data
revenues for the quarter ended June 2015
Shift to 4G as a key differentiator network rollout will necessitate significant investments.
Reliance Jio is working on 14 data centres to complement its 4G rollout by end-2015
M-Governance a government initiative about mobile-based public services involves State
owned Data Centres for cloud-based offerings

IT and IT-enabled
services

The demand in IT and IT-enabled services is creating the need for new data centres. Third-party
provision is increasingly attractive for the costs and efficiencies involved
IBM recently announced its plans to set up a second data centre in India. Microsoft plans to
get its data centre operational by end-2015
Enterprises network solutions is the focus area. Airtel partnered with Amazon Web Services
(AWS) to offer private network solutions. AWS is planning data centres in India to scale up

Source: Ministry of External Affairs, India Mobile Broadband Index 2015, NASSCOM, Times of India, Data.gov.in

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Key Enabling Factors Contributing to Data Centre Demand

Technology

Cloudcomputing

Projected Growth in Indian Cloud Services Market

2,000
1,500

$ million

Virtualisation

Virtualisation across server, desktop or

storage, helps reduce the hardware cost
and enables greater flexibility and
efficiency in data centres
As per IDC, server virtualisation market
in India will reach $3.89 billion by 2020

1,000

Advent of cloud-computing has

increasingly led to a service-based model
of data centre
The exponential growth in cloud services
market is shaping data centre demand

1,900

500
632
0
2014

2018

Operational costs

Increasingly, IT managers are seeking converged infrastructure to

reduce complexity and overall costs of managing data centres
Hyperscale IT (such as those of Amazon and Facebook) is
being sought for lowering costs and higher efficiency
Automation in processes, especially in software-defined
environments help service providers cut costs

Rationalisation in Cost of Leased Line

Rs million per annum

Lately, broadband costs have declined. In July 2014, TRAI

reduced the ceiling rates for domestic bandwidth by 60% - this
contributes towards the operational costs of data centres

Existing tariff

20

16.5

15
10
5

7.0

6.2
0.9 0.3

2.7

2 Mbps

Source: Dazeinfo, StorageServers, Express Computer, The Hindu BusinessLine

6

Revised tariff

Alchemy Research and Analytics

45 Mbps

155 Mbps

Anticipated Demand from the Digital India Scheme

Digital India Scheme salient features

Key projects in focus

100 Mbps rural broadband through common service

centres at capex of $5 billion by December 2016
Virtual Network Operators for urban broadband

Aadhaar

Worlds largest unique ID project so far

generated 903 million IDs
Outlay of $2.13 billion for 2009-17

DBT

Almost 90% of subsidy beneficiaries data

being digitised
To be integrated with unique IDs

PMJDY

Worlds largest financial inclusion project

177 million accounts till August, 2015
Universal access to financial services

Mobile services to 55,669 unpenetrated villages and

upgradation of 150,000 post offices
Electronic delivery of public services (e-governance),
electronic databases and workflow automation in
government department
Digital locker a sharable private space on public cloud
system to safely store e-documents and certificates

Infrastructure
demand
generated

National information infrastructure, at an estimated cost of $5 billion to integrate networks like

SWAN,NKN and NOFN with cloud-enabled national and state data centres
Third-party cloud data centres planned to manage costs. Governments cloud-service Meghraj
seeks to provide high-speed connectivity to various departments

Recent Major Investment Announcements

Company

Planned initiative

Proposed investment ($ billion)

Reliance Industries Ltd (RIL)

Infrastructure for broadband network

39.06

Bharti Enterprises

Digital infrastructure

15.63

Reliance ADAG

Digital, Cloud and Telecom infrastructure

1.56

Source: Financial Express, Economic Times, Forbes India, PMJDY website, Mint
7

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Supply

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Captive centres dominate. But third-party providers on the rise

2010

2013

2015
Captive

20%

3rd party

25%
30-40 %

80%

75%

Projected growth in third-party data centre capacity

million sq. ft.

9.14

Over 70% of the projected growth in third-party data centres to

be driven by verticals of BFSI, media and entertainment, telecom
and retail among others
High opportunity cost of reliable power supply as well as real
estate is increasingly tipping the scale in favour of third party

3.15

2012

2018 E

Third party data centres are increasingly consolidating their

position through steps in technology and value added services
Outsourcing requirements of BFSI and government
services fuelling the multi-tenanted data centre segment
Telcos transition to 4G/LTE technology another key driver

Source: Frost & Sullivan, CyberMedia Research, NetMagic Solutions, Financial Express
9

60-70 %

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Service providers augmenting capacities

Market share across DC players

Major players- by size of data centres

*Netmagic
7%

Reliance
IDC
48%
Tata IDC
31%

000 sq ft

Others
14%

16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
0

* As of 2012

Planned capacity addition by 2017

Reliance
Tata
Pi
ESDS
Netmagic
CtrlS
-

Size (sq ft)

500,000

10

12

About 80% of the market appears to be concentrated between the data

centres of Reliance and Tata
With Tata group scouting for buyers for its data centres, the market
shares are set to change significantly in the near future
As with Tata group, a consolidation can be expected in the market for
other players as well. Airtel and BSNL for instance are operational in
both captive and third party segments
Based on plans, an estimated $1.6 billion worth of investment is being
committed for upcoming data centre capacity during the period 2015-18
Reliance is in the process of establishing its 10th data centre in
Mumbai with a capacity of 650,000 sq. ft

Source: Rcom, The Economic Times, Business Standard, NDTV Profit, The Indian Express, The Hindu Business Line

10

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Presence across segments

Captive

Third party

Storage

Server

DR*

Netmagic Solutions

Sify Technologies

CtrlS Datacentres

Trimax

Net4 India

ESDS Software Solutions

Security Managed service

Reliance

Tata Communications

BSNL

Bharti Airtel (Nxtra Data)

Spectra Solutions

Cyfuture

DataGalaxy

Aride Ocean

* DR- Disaster Recovery

Most of the data centre providers operate in the service segments of third party, storage and server due to demand for
consolidation and virtualization
Tata Communications is reportedly in talks for hiving off its data centre business. Key players reported to be in discussion
for acquiring the capacity are Google and Amazon Web Services
BFSI and telecom verticals are predominant in the captive data centre segment
Source: Company Website

11

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Trends and Outlook

12

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Virtualisation to manage costs and scalability

SMB enterprises are driving the adoption
of virtualization to slash operational costs
Servers offer the maximum scope
Pure-play service providers are
tailoring solutions for SMBs

SMBs

Potential $3.8 billion Impact of Virtualization by 2020

Floor space
1%
Power/cooling
17%

Incremental data centre investments are

relying on virtualisation for disaster
recovery centres
It is expected that upcoming data centres
for Digital India scheme will significantly
deploy virtual servers for disaster recovery
mechanisms

Disaster
Recovery

Server
administration
21%

Servers
61%

VMware RoI calculator of total cost of ownership

Investment

Saving

10

$ million

218%

331%

280%

252%

2016

2017

RoI
368%

413%

382%

2020

2021

430%

149%

4
2

-29%

0
2013

2014

2015

2018

2019

Source: ResearchGate Report, StorageServers, CXOtoday.com

13

Alchemy Research and Analytics

2022

500%
400%
300%
200%
100%
0%
-100%

Cloud services shaping the data centre market

Gartners Cloud Adoption Survey in January 2015 revealed
53% of organisations were using cloud services. Another
43% in the same survey indicated planned adoption by end
of year

Growth in Public Cloud Service Market

2,000
1,500

$ million

Key segments driving the growth in cloud services include:

Cloud infrastructure as a service
Cloud management and security service
Cloud application infrastructure platform as a service

1,000

1,900

500

The Indian market is witnessing growth in all segments of

cloud services

477

632

838

0
2013

2014

2015

2018

Planned investment
Microsoft

$22.7 million for setting up three cloud service data centres in Mumbai, Pune and Chennai

IBM

Planning to set up second data centre in India, to add to the one operating in Mumbai presently

Amazon Web Services

Multiple data centres planned by 2016. In the fray to acquire Tata Communications data centre

NTT Communications

$100 million through Netmagic Solutions (NTTs Indian subsidiary) to set up ninth data centre in Mumbai

ESDS Software

About $53 million to set up data centres in Navi Mumbai, Bengaluru and Nashik

NxtGen Datacenter &

Cloud Technologies

Raised $13.5 million from IFC, Axon Partners Group and Intel Capital for data centre in Bangalore and
enhanced cloud service offerings

Source: IBM India, Times of India, Gartner, International Business Times

14

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Ongoing transition to a next generation data centre

Traditional data centre

Software-defined data centre

Next-generation data centre

Workloads assigned manually to

server, storage and networking
Manual IT optimisation
Reactive approach to scenarios of
threats and opportunities

Automatic workload assignment

to best-fit resources
Software-defined optimisation
Proactive approach to threats and
opportunities

Workload assignment based on

infrastructure pattern analysis
Dynamic optimisation with
cognitive learning
Proactive approach to threats and
opportunities

Stages in transforming data centre from traditional to next-generation

Consolidation
and Integration
Better asset utilisation by
removing redundant
systems and applications
Virtualisation to enable
greater flexibility in IT
resources
Deploy analytics to get
accurate estimates of
system redundancies and
efficiencies

Standardisation
and Optimization
Define and prioritise the
operational services in
data centre
Standardising the
common IT services for
consistent delivery
Service optimisation to
re-orient IT spending
from routine activities to
innovative practices

Automation and
Simplification
Managing IT services with
the minimum of human
intervention
Automated workflow
Self-service portals and
standardised catalogue of
services for users
Determine effective price
points of several cloudprocessed services

Source: Alchemy Research Analysis

15

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Dynamic
Optimization
Extension of cloud and
automation to a software
defined environment
Infrastructure to
dynamically respond to
changes in workload
Enhanced security and
compliance
Big data analytics assumes
a critical role

Contact

Niladri Paul
T: + 91 (0) 343 255 0131
M: +91 (0) 980 008 6550
Email: niladri@alchemy-research.com
www.alchemy-research.com

16

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