India’s data center industry is growing at a compound annual growth rate (CAGR) of around 40 percent and is expected to cross 1GW mark by 2024. This significant growth is driven by the increasing digitalization of businesses, the proliferation of internet-enabled devices, and the government’s push towards a digital economy. Further, with the rising demands of the IT sector and Global Capability Centers (GCCs), businesses are turning to colocation services as a strategic and financially advantageous approach to manage their IT infrastructure.
Understanding colocation services
Colocation services involve multiple businesses sharing a common data center infrastructure, combining the benefits of cost-effectiveness, scalability, and operational efficiency. The model is prevalent globally, with approx. 75 percent of data center service providers adopting this approach. In India, most new entrants into the data center sector are embracing the colocation business model and providing carrier-neutral colocation solutions.
Various ICT (Information and Communication Technology) companies are offering state-of-the-art facilities equipped with advanced security measures, redundant power and cooling systems and high-speed connectivity. This shared infrastructure model enables businesses to focus on their core competencies while leveraging the expertise and resources of renowned colocation providers. By embracing the latest advancements, ICT companies ensure that businesses opting for colocation services, benefit not only from cost efficiency but also from the most robust and secure IT infrastructure.
Factors driving the colocation demand
Cost efficiency: By opting for colocation services, businesses can sidestep the substantial upfront capital investments associated with building and maintaining private data centers. The shared infrastructure model helps companies avail end-to-end services from a single vendor, offering a cost-effective solution for housing their IT infrastructure. In terms of real estate leases, shifting to a colocation data center can result in a more predictable cost structure with long-term Capex (capital expenditures) and Opex (operational expenditures) savings of around 30 and 50%. This in turn also helps companies to redirect their capital towards core business activities and strategic initiatives.
Global Capability Centers: The establishment and growth of GCCs in India is amplifying the need for scalable and secure data infrastructure. ICT companies offering colocation services need to address the advanced digital requirements of GCCs and provide them with the necessary flexibility and reliability to support their expanding functions within India. Further, relaxation in FDI (Foreign Direct Investment) norms has attracted significant investments from global players into India. This influx of capital is paving the way for the establishment of world-class colocation facilities, further fueling the growth of the industry.
Digital transformation: As more businesses rapidly transition towards digital models, the need for secure, scalable, and efficient data storage solutions has become paramount. ICT companies offer a strategic response to this growing demand by providing businesses with cutting-edge multi-location solutions to host their IT infrastructure. These centers have high-performance computing capabilities, robust security measures with continuous video surveillance, and the flexibility to scale IT resources as needed.
Scalability and flexibility: Colocation provides companies with the flexibility to expand their data storage and processing capabilities without the constraints of building and maintaining a private data center. This scalability is particularly beneficial for businesses with fluctuating workloads or those experiencing rapid growth. Whether a startup or an established enterprise, the ease of scaling within a colocation facility ensures that businesses can efficiently match their IT resources with evolving demands, fostering adaptability and future-proofing their operations without incurring substantial upfront costs.
Operational efficiency: By leveraging shared resources in colocation facilities, businesses can tap into optimized data center operations. Colocation providers specialize in efficiently managing power, cooling systems, carrier-neutral MMR, and Service Level Agreement Management (SLA) leading to enhanced performance and reliability. The streamlined and expertly managed operations in these centers allow companies to focus on their core competencies, driving productivity, innovation and effectiveness.
MD and Chairman
Ishan Technologies
Government Impetus
In a strategic effort to attract investments and expedite the growth of data centers in India, the government is actively crafting a comprehensive data center policy. This multifaceted approach includes pivotal initiatives such as integrating data centers within the Essential Services Maintenance Act (ESMA), the establishment of Data Center Facilitation Units (DCFU), the creation of Data Center Economic Zones, and the introduction of a specialized category code for data centers within the National Building Code of India. This comprehensive plan aims to provide a conducive environment for data center expansion, fostering economic development, and promoting a robust digital infrastructure landscape in the country. Furthermore, the government has also released detailed guidelines over ‘place of supply’ rules for colocation services in India, thereby pushing a clear narrative for this emerging space.
As businesses recognize the financial benefits, scalability, long-term viability, and access to cutting-edge technologies offered by colocation, it is emerging as a catalyst for economic growth in India’s journey towards a technologically advanced future. In the coming years, the collaborative approach of shared infrastructure should align seamlessly with the evolving needs of businesses, positioning colocation not just as a service but as a transformative force shaping India’s data center industry.
