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IoT, AI and Big Data to Drive Data Center Market: Study

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“Data is the new Oil” – the adage by British mathematician Clive Humby which dates to the early 2000s is even more relevant today given the business dynamics with businesses looking to analyze data to draw meaningful trends to understand and address the needs of their clients and help increase their products or services’ growth.

A new report on ‘Data Centers – The sunrise of a new era in global infrastructure’ shows that data centers growth in terms of IT power load capacity has witnessed a robust 18% CAGR between 2007 and 2020, reaching about 432MW; in terms of real estate capacity, it has witnessed 13% CAGR growth during the same period, the report said.

The Data Center IT power capacity is expected to reach about 800MW during 2021-2024, progressing at a CAGR of 16% according to the report by Praxis Global Alliance, a global management consulting and advisory firm. The Data Center revenue is progressing at a CAGR of 8% to reach US$ 4 billion during the forecast period.

The Growth Drivers

Data proliferation over the last few years has created significant demand for Data Centers. The introduction of digital means of doing business, social media and e-commerce activities have triggered this growth over the last one decade.

Key segments such as Social media, e-commerce, BFSI, etc. have led to the growth in data consumption. COVID-19 has further increased digital adoption and hence the demand for Data Centers will continue to be on a growth path, making it the sunrise of a new era in global infrastructure,” Aryaman Tandon, Practice Leader, Infrastructure, Praxis Global Alliance said.

He mentioned that upcoming technologies related to the Internet of Things (IoT), artificial intelligence and machine learning, predictive maintenance, and big data would increase the demand for Data Centers.

The India market boom

Data Center growth in India has been significant over the last 4-5 years with major investments from real estate players as well as from PE funds to set up various categories – colocations, hyperscale, managed services to Edge Data Centers, etc.

The report noted that the demand for hyperscale Data Centers are growing rapidly and captive Data Centers are moving towards third party Colocation (Colo) type Data Center business models. Domestic players are witnessing a CAGR growth of about 20%; Margin profiles becoming better with scale.

“There is a shift from Captive Data Centers to third party Data Centers with business models like hyperscale, colocation and Edge gaining significant traction,” Arindam Bhattacharjee, Domain Leader, Data Centers, Infrastructure, Praxis Global Alliance observed.

While the focus has primarily been metro and tier 1 cities such as Mumbai, Chennai, Bengaluru, and Hyderabad; other areas such as Pune, Indore, etc. are slowly but steadily increasing.

According to the report, Indian Data Center industry attracted around $238 million worth of private equity investments in 2020. India has lower average monthly charges than other developed countries due to lower cost and increasing demand.

The report said, the country’s draft Data Center policy aims at creating a sustainable ecosystem for Data Center players with supporting infrastructure and skilled manpower availability.

In India, Data Centers are used by large customers across industries such as IT, BFSI, Ecommerce and Social Media which require storage of a large volume of customer data and together contribute to 75-80% of the total data consumption. However, data consumption in India on a per capita basis is far lower than its Asian and Western counterparts.

Going ahead, Data Center revenues are expected to clock about $ 4 billion by 2024; while the IT power load capacity is expected to continue growing at a CAGR of almost 16% during the same period.

Key trends to monitor

The research noted in the next few years, some of the key global trends to monitor in this segment would be:

Connected grid – The growth in electric vehicles, smart grid, smart infrastructure would be on the back of digital growth which would result in significant data consumption.

Digital transformation – Digital transformation in terms of blockchain, IoT, AI, ML would disrupt data consumption significantly. Most of these data would be on the cloud which would further push the demand for Data Centers.

Sustainable Data Centers – Data centers would look at renewable and new energies to provide net-zero carbon or sustainable business models. Replacing or reducing the usage of diesel gen-sets as backup power with solar + storage would be a key trend.

Digital Data Parks – Digital data parks set up across the country would house huge data, creating an unparalleled digital infrastructure. As the report suggests that top 8 Data Center players account for above US$ 6 million sq. ft; while Mumbai currently accounts for about 50 percent of all Data Center building space in India.

Technology – 5G and Edge computing would further help the growth of data consumption and hence the requirement of data centers

As Savio Monteiro, Senior Vice President, Infrastructure, Praxis Global Alliance said, “Data center capacity is expected to witness significant growth over the next five years with new technologies like 5G and Edge computing along with new demand drivers such as autonomous vehicles, connected devices, etc. All these would push the demand for data centers.”

The report authors conclude that data centers will witness a boom time ahead as governments (central and state) are playing their part in creating policy and regulations to benefit the growth of Data Centers and Data Parks across the country, while the private sector is pushing for scaling up the potential in Data Centers.

It can be expected that digital transformation and digital infrastructure, including data centers would play a pivotal role in India’s march towards a five trillion economy by 2025.

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