Third Party Data Center Market in India

The Indian data center market is forecasted to be around US$ 2bn by end of 2011 and third party data center is estimated to be around 25% to 30%. According to IDC, third party Data Center space in 2009 was 2 Mn sq. f.t and is estimated to grow at a CAGR of more than 30% and reach around 9 Mn sq. f.t. by 2014. Brokerage Analysts forecast 6-7 mm sq ft of new data center space requirement by 2014, of which over 90% will be used to hosted / outsourced data centers. Springboard Research (Forrester Acquired) estimated third part data centers market to reach US$1.1 billion by 2015 (CAGR 29% 2010-15).

Source: IDC & Springboard Research

Key Growth Factors

Third party data centers are expected to drive growth in Indian Data center market and expected to grow faster than the Captive data centers. This growth is driven by enterprises that are looking to reduce IT infrastructure costs (CAPEX Costs) and reduce management focus on IT and focus on core processes. Other pressures like increasing productivity, requirement of highly skilled technical consultants, huge maintenance costs are also forcing the enterprises to depend on third party data centers. Third Party data centers offer superior expertise that are critical for reliably running the data center, end to end processes and solutions and scale of operations also help in reducing the cost.

Dropping International bandwidth cost is another growth driver that led to growth. Compliance to clauses of the Indian IT Act (maintaining records for 7 years and messages for 5 years) or ISO certification is another major trigger for rise in demand for data centers. Adoption by Small and Medium Business is fast increasing which is another factor. Third Party data centers are moving from co-location services, which presently contribute more than 55 percent of revenue, to managed services and cloud based services like Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS).

Key Concerns

One of the major concerns of third party data center are reliability in terms quality, server downtimes, network connectivity, maintenance , security-both physical and virtual like hacking, spam, viruses, data theft, natural calamities, corporate espionage, and intellectual property. Security has emerged as the most crucial concern of potential customers. There are more concerns like reliability-respect for SLAs and during events like server downtime, network connectivity, and expertise to take up L3 & L4 services. Comprehensive Service level Agreements (SLAs), regulatory compliances, security audits, uptimes, disaster recovery plans, latency issues, energy efficiency and quality in terms of capacity, availability and security requirements have to be clear between the customers and the third party data centers to avoid the migration concerns.

Key Vertical Adoption

BFSI, Manufacturing, Public Sector, Telecom, Retail and other verticals are the drivers of growth. Improved reliability, lower capex, technology skills and expertise, disaster recovery plans, data storage and security, comprehensive SLAs and bundled services offered by third party data center service providers have led to increased adoption of third party data centers.