India Data Center Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

India Data Center Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The India Data Center Market is expected to grow at a CAGR of 11.4 % over the forecast period. The rapid adoption of cloud-based business operations has encouraged businesses to acquire data management capacities to handle huge volumes of data that are being generated. Increased proliferation of online shopping due to the availability of user-friendly interfaces, high-speed internet, and smart devices such as smartphones, tablets, laptops, etc. is expected to drive the market in the future.

Key Highlights

• India is among the major players in the data center sector in the APAC region. Data centers are critical for national security, internet infrastructure, and economic output. In India, data center infrastructure is growing exponentially, with a growing preference for the Cloud and increased data consumption and generation by more than half a billion digital users.
• Moreover, The migration of businesses to the cloud has increased recently as they shift into more flexible digital workplaces to deal with the increase in online demand and remote working. Although the cloud is the foundation of digital transformation, cloud services are built on data centers. Due to this, the cloud migration of businesses is driving the growth of the data centers market in India.
• The Government of India and various state governments are revising their data center policies to support the infrastructural growth of data centers in India through tax subsidies. Under a national policy framework for data centers, the IT ministry intends to provide up to INR 15,000 crore as incentives. The government plans to invest up to Rs 3 lakh crore in the data center ecosystem, over the next five years, as per the policy.
• Data centerestablishment in India is cost-intensive, which is a strong barrier to entering the industry for many data centercompanies. Prevalent norms for commercial buildings applied to data centerslead to wastage of space and increased cost. Besides, factors such as high real estate costs, expenses on improving wide area network connectivity, and increased equipment costs have also resulted in augmenting the already heavy CapExin the sector.
• The COVID - 19 pandemic led to a new wave of digital transformation in various sectors across the country. Businesses rapidly turn to third-party colocation facilities for data centeroperations, further complemented by an increased shift toward a hybrid IT approach that leverages the combined capabilities of hosted data centersand multi-cloud setups.

Key Market TrendsIncreased Migration to Cloud-based Business Operations

• For companies that undertake the process of cloud migration, the cloud can have a huge impact. This includes a reduction in the total cost of ownership (TCO), quicker delivery, and better prospects for innovation. Agility and flexibility, two qualities that are essential to satisfy changing consumer and industry demands, come with access to the cloud.
• The data centers that host the cloud servers have high-speed internet that gives users seamless access to the cloud service. Data centers are built across different areas to address the latency issue. Datacenter providers in India offer a wide range of services to cater to the different needs of users. For instance, several of them provide enterprise cloud, a collection of data center resources set aside for a specific user or business. The public cloud, on the other hand, enables multiple users to share the same cloud resources.
• In March 2022, Microsoft announced that Hyderabad, Telangana, would be the site of its latest data center area. This strategic investment is in line with Microsoft's commitment to assisting clients in thriving in a cloud- and AI-enabled digital economy. In India, there are now three regions distributed over Pune, Mumbai, and Chennai for Microsoft's data centers. The data center in Hyderabad will be a new addition to this network. It will provide the entire Microsoft portfolio across the cloud, data solutions, artificial intelligence (AI), productivity tools, and customer relationship management (CRM) with data security for businesses, start-ups, developers, educational institutions, and governmental organizations.
• Moreover, Indian data center providers have made investments in technology that provide their customers with maximum services. Businesses that have access to scalable cloud services can compete successfully without worrying about the decreasing returns brought on by growth. The data center provider makes sure there are sufficient resources to manage a surge in resource demand. The scalability options of data center services are generating demand for data centers in India.

Government Support in the Form of Tax Incentives for Development of Data Centers is Expected to Drive the Market

• The state government of India is supporting it in the form of tax incentives such as The Government of Maharashtra announced the GST refund for a maximum period of 10 years for the companies that participate in developing integrated facilities. Similarly, the Andhra Pradesh government announced providing 50% reimbursement of SGST on purchasing raw materials and equipment for three years from the approval date of the project.
• Tamil Nadu government announced a data center policy that allows the data centers to avail of an Electricity TAX waiver. For five years following the start of commercial operation, there is a 100% electricity tax subsidy on power obtained from the Tamil Nadu Generation and Distribution Corporation Ltd. or generated and consumed using captive sources.
• Moreover, the Odisha government announced a data center policy that offers a 100% reimbursement of net SGST. Net SGST paid in will be fully reimbursed to eligible units, relying on its exports of goods and services for funding limited to 100% of fixed capital investment for a maximum of seven years.
• For Instance, In June 2022, the Haryana cabinet approved a data center policy to make Haryana a popular location for constructing these facilities and assist the state in becoming a hub for global data centers. The Haryana government would categorize the data center sector as an energy-intensive and infrastructure industry. By the Haryana Essential Services Maintenance Act of 1974, the government would deem data centers to be essential services. This policy consists of various tax incentives, such as reimbursement of SGST and a land tax rebate.

Competitive Landscape

The India Data Center Market is highly concentrated due to higher initial investments and low availability of resources. It is dominated by a few major players like Atos, Amazon Inc., Cisco Systems Inc., Dell Software Inc., and Hewlett-Packard Enterprise. These major players, with a prominent share in the market, are focusing on expanding their customer base across foreign countries. These companies are leveraging strategic collaborative initiatives to increase their market share and increase their profitability. However, with technological advancements and product innovations, mid-size to smaller companies are increasing their market presence by securing new contracts and by tapping new markets.

• May 2022 - A strategic partnership between Cyxtera, a collocation service provider, and SifyTechnologies Limited has been signed, and it would enable it to start providing colocation solutions in India. Customers in five more markets in India can now use colocation services from Cyxtera.

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• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

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