Outlook on the growing Indian data center market

India is a land of opportunity for global data center providers, but it has its own unique challenges. In this edition of Voices of the Industry, Michael Goh, Senior Director and General Manager of Iron Mountain’s Data Centers for APAC, discusses the state of the Indian data center market. Iron Mountain recently formed a joint venture with Web Werks, one of India’s top colocation data center providers.

The Indian data center market is heading for a big boom over the next five years. The country has a population of 1.35 billion, the second largest after China, and they are digitally hungry.

India has one of the youngest, tech-savvy populations in the world. Today, they have the second-largest telecommunications market, with the highest number of mobile phones on the planet.

Demand for digital services is great. A recent report by JLL found that India’s colocation data center market size is expected to grow from 375MW in H1 2020 to 1,078MW by 2025, registering a CAGR of 21%.

According to the December 2020, Global Data Centre Colocation & Interconnection report by Structure Research (SR), the Asia Pacific region will account for half of the global colocation market by 2025 driven by large emerging markets like India. Mumbai and Pune were named as key opportunity markets in India with combined projected MW of built-out critical IT load capacity growth to reach over 470MW by 2025.

Need for capacity

Today, India is one of the most capacity-hungry data center markets in the world, yet they are desperately short of their needs. Currently, capacity in all of India is only 400 megawatts. That’s less than Singapore and just 10 percent of the capacity of Northern Virginia, the largest data center market in the world.

There is no way this capacity can support a country of 1.35 billion people when more than half of them are internet users. India needs more data center capacity now.

At the same time, India is still an underdeveloped country when it comes to digital infrastructure. They currently draw much of their IT infrastructure from other countries in Europe and Asia, but new data sovereignty laws in India will soon change that. Last year, the Indian government passed data sovereignty laws stating certain kinds of data must be stored in physical data centers in India. This will certainly increase domestic demand.

In addition to the growing domestic demand, global brands and organizations are hoping to reach India’s large population. We have seen increased demand from our global data center customers who are looking to enter India’s market. After all, if you want to reach India’s 1.35 billion population, you must be near your customers to provide a good experience, and the only way to be near them is to put a data center in India.

In India, the biggest market is Mumbai in the south, then New Delhi in the north. The next hot spot will be Chennai, while other markets like Pune are also growing due to domestic and international demand.

There is very real potential in India for data center providers. The need for capacity is growing, and the demand is great.

Challenges in India

Yet for all its potential, there are very real challenges to entering the Indian data center market.

India is a complex market. It’s a large country, and every state has its own policies. It’s important to understand each region’s culture and regulations, as well as how to navigate the domestic authorities. It’s almost impossible for a global provider to just go in and do things on their own.

There have already been a few global data center providers who have entered the market and tried to do it on their own but with the end result and delivery timelines postponed beyond their original expectations.

To succeed in the Indian data center market, you need to go with a local partner who knows and understands the landscape and can navigate local restrictions. A local colocation partner can help to develop a sound strategy for entering the market because they know how to operate, navigate and build locally.

A partnership with a local company can also garner a lot of local excitement in India. Currently, there is not much foreign investment, and the presence of a global player in a field dominated by local firms is generating strong expectations of higher standards and new international customers.

In India you can advance your commitment to sustainability. Barriers to entry for securing renewable energy in India are generally low, so it makes economic sense to use clean energy.

Looking ahead

It’s clear that India has the demand for more data centers. There are opportunities for early movers in the Indian market, and the growth potential is there.

If you look at India and you look at the U.S., India is where America was 10 or 15 years ago. In North America, the data center market was concentrated in just a few regions, but over time, it has grown to more regions and they have captured local markets. I believe India will follow that same trajectory.

India needs more global players. There are currently very few global providers with a presence in the country. Iron Mountain is only the second American data center company to move into the data center market in India. Right now, the demand is great, but the supply is low. Providing data center capacity in India will not only help our global customers, but the digitally hungry domestic markets too.