Data Centres Market in India 2015
Contents Executive Summary Industry Overview o Market Size o Comparison with Global Markets o Growth trend and forecasts Demand-side analysis o Demand drivers across major sectors o Emerging demand from public sector schemes (Digital India Programme) o Outlook of data requirements from major sectors Supply-side analysis o Types of players: captive vs. third party o Major players o Comparison of major players across select KPIs Location analysis o Comparative analyses of major sub-markets o Recent developments in top three sub-markets Trends and outlook o Technology trends o Industry outlook 2
Executive Summary Market size and growth Data centre infrastructure market, in terms of revenue, is estimated at $2.03 billion for 2015 enterprise networking contributes the maximum share (47%) to this, followed by servers (33%) Growth of Indian data centre market is forecast to reach 20% YoY, against the 11% globally for the period 2013-18 Cloud service adoption is driving much of the data centre market. The Indian market in this regard is unique due to the rapid growth in all cloud segments such as IaaS, PaaS, etc. Demand Drivers BFSI, telecom and IT&ITES are the major sectors driving demand for data centres in India. Adding to the momentum is the rising IT penetration and social media consumption in the country A bigger demand potential in Indian data centres market is being generated by public investments in large scale digitisation christened as the Digital India Scheme Data Centre Providers Software-led business model Captive data centres have a dominant share of the market. But they are gradually ceding ground to third-party service providers they account for about 40% share, compared to 20% five years ago Most of the data centres are Tier III based, though increasingly suppliers are enhancing their standards with higher availability and redundancy An investment worth $1.6 billion is underway in the Indian data centre market Based on projects under construction, 2.38 million sq ft. expected before 2017 Software-defined infrastructure is setting the case for next generation data centres. These are part of ongoing steps towards technology integration and automation in data centre processes Analytics platforms increasingly playing a key role, to manage data centres growing complexities as well as demanding requirements of development costs, network availability, security, etc. Open source architecture is finding greater preference due to its amenability in integrating legacy systems as well as maintaining vendor neutrality 3
Demand 4
Major Sectors Driving Demand for Data Centres BFSI Indian financial services sector is the predominant demand driver. It already has the highest penetration in the data centres market, and will be maintaining its leadership The industry as a whole is projected to grow at CAGR 12-15% in next five years New banking licences (payment banks and full-service commercial banks) involve technology play as entrants seek to reduce costs through cloud-based services In about a year, Government s payment gateway RuPay accounted for about a third of total debit cards operational in the country. By March 2016, RuPay credit cards are expected Telecom Driven by increasing mobile penetration and usage, telecom service providers are augmenting infrastructure not only to meet demand (mainly data) but also quality The top three players (over 90% revenue market share) reported 70% YoY growth in data revenues for the quarter ended June 2015 Shift to 4G as a key differentiator network rollout will necessitate significant investments. Reliance Jio is working on 14 data centres to complement its 4G rollout by end-2015 M-Governance a government initiative about mobile-based public services involves State owned Data Centres for cloud-based offerings IT and IT-enabled services The demand in IT and IT-enabled services is creating the need for new data centres. Third-party provision is increasingly attractive for the costs and efficiencies involved IBM recently announced its plans to set up a second data centre in India. Microsoft plans to get its data centre operational by end-2015 Enterprises network solutions is the focus area. Airtel partnered with Amazon Web Services (AWS) to offer private network solutions. AWS is planning data centres in India to scale up Source: Ministry of External Affairs, India Mobile Broadband Index 2015, NASSCOM, Times of India, Data.gov.in 5
Rs million per annum $ million Key Enabling Factors Contributing to Data Centre Demand Technology Virtualisation Virtualisation across server, desktop or storage, helps reduce the hardware cost and enables greater flexibility and efficiency in data centres As per IDC, server virtualisation market in India will reach $3.89 billion by 2020 Projected Growth in Indian Cloud Services Market 2,000 1,500 1,000 1,900 Cloudcomputing Advent of cloud-computing has increasingly led to a service-based model of data centre The exponential growth in cloud services market is shaping data centre demand 500 0 632 2014 2018 Operational costs Lately, broadband costs have declined. In July 2014, TRAI reduced the ceiling rates for domestic bandwidth by 60% - this contributes towards the operational costs of data centres 20 Rationalisation in Cost of Leased Line Existing tariff Revised tariff 16.5 Increasingly, IT managers are seeking converged infrastructure to reduce complexity and overall costs of managing data centres Hyperscale IT (such as those of Amazon and Facebook) is being sought for lowering costs and higher efficiency Automation in processes, especially in software-defined environments help service providers cut costs Source: Dazeinfo, StorageServers, Express Computer, The Hindu BusinessLine 15 10 5 0 6.2 7.0 0.9 0.3 2.7 2 Mbps 45 Mbps 155 Mbps 6
Anticipated Demand from the Digital India Scheme Digital India Scheme salient features 100 Mbps rural broadband through common service centres at capex of $5 billion by December 2016 Virtual Network Operators for urban broadband Mobile services to 55,669 unpenetrated villages and upgradation of 150,000 post offices Electronic delivery of public services (e-governance), electronic databases and workflow automation in government department Digital locker a sharable private space on public cloud system to safely store e-documents and certificates Aadhaar DBT PMJDY Key projects in focus World s largest unique ID project so far generated 903 million IDs Outlay of $2.13 billion for 2009-17 Almost 90% of subsidy beneficiaries data being digitised To be integrated with unique IDs World s largest financial inclusion project 177 million accounts till August, 2015 Universal access to financial services Infrastructure demand generated National information infrastructure, at an estimated cost of $5 billion to integrate networks like SWAN,NKN and NOFN with cloud-enabled national and state data centres Third-party cloud data centres planned to manage costs. Government s cloud-service Meghraj seeks to provide high-speed connectivity to various departments Recent Major Investment Announcements Company Planned initiative Proposed investment ($ billion) Reliance Industries Ltd (RIL) Infrastructure for broadband network 39.06 Bharti Enterprises Digital infrastructure 15.63 Reliance ADAG Digital, Cloud and Telecom infrastructure 1.56 Source: Financial Express, Economic Times, Forbes India, PMJDY website, Mint 7
Supply 8
million sq. ft. Captive centres dominate. But third-party providers on the rise 2010 2013 2015 20% 25% 30-40 % Captive 3rd party 80% 75% 60-70 % Projected growth in third-party data centre capacity 9.14 Over 70% of the projected growth in third-party data centres to be driven by verticals of BFSI, media and entertainment, telecom and retail among others 3.15 2012 2018 E Source: Frost & Sullivan, CyberMedia Research, NetMagic Solutions, Financial Express High opportunity cost of reliable power supply as well as real estate is increasingly tipping the scale in favour of third party Third party data centres are increasingly consolidating their position through steps in technology and value added services Outsourcing requirements of BFSI and government services fuelling the multi-tenanted data centre segment Telcos transition to 4G/LTE technology another key driver 9
000 sq ft Service providers augmenting capacities Market share across DC players Major players- by size of data centres *Netmagic 7% * As of 2012 Others 14% Tata IDC 31% Reliance IDC 48% 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 0 2 4 6 8 10 12 Planned capacity addition by 2017 Reliance Tata Pi ESDS Netmagic CtrlS - 500,000 Size (sq ft) About 80% of the market appears to be concentrated between the data centres of Reliance and Tata With Tata group scouting for buyers for its data centres, the market shares are set to change significantly in the near future As with Tata group, a consolidation can be expected in the market for other players as well. Airtel and BSNL for instance are operational in both captive and third party segments Based on plans, an estimated $1.6 billion worth of investment is being committed for upcoming data centre capacity during the period 2015-18 Reliance is in the process of establishing its 10 th data centre in Mumbai with a capacity of 650,000 sq. ft Source: Rcom, The Economic Times, Business Standard, NDTV Profit, The Indian Express, The Hindu Business Line 10
Presence across segments Captive Third party Storage Server DR* Security Managed service Netmagic Solutions Sify Technologies CtrlS Datacentres Trimax Net4 India ESDS Software Solutions Reliance Tata Communications BSNL Bharti Airtel (Nxtra Data) Spectra Solutions Cyfuture DataGalaxy Aride Ocean * DR- Disaster Recovery Most of the data centre providers operate in the service segments of third party, storage and server due to demand for consolidation and virtualization Tata Communications is reportedly in talks for hiving off its data centre business. Key players reported to be in discussion for acquiring the capacity are Google and Amazon Web Services BFSI and telecom verticals are predominant in the captive data centre segment Source: Company Website 11
Trends and Outlook 12
$ million Virtualisation to manage costs and scalability SMBs Disaster Recovery SMB enterprises are driving the adoption of virtualization to slash operational costs Servers offer the maximum scope Pure-play service providers are tailoring solutions for SMBs Incremental data centre investments are relying on virtualisation for disaster recovery centres It is expected that upcoming data centres for Digital India scheme will significantly deploy virtual servers for disaster recovery mechanisms Potential $3.8 billion Impact of Virtualization by 2020 Power/cooling 17% Server administration 21% Floor space 1% Servers 61% VMware RoI calculator of total cost of ownership 10 8 6 4 2-29% 149% 218% Investment Saving RoI 368% 331% 280% 252% 413% 382% 430% 500% 400% 300% 200% 100% 0% 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022-100% Source: ResearchGate Report, StorageServers, CXOtoday.com 13
$ million Cloud services shaping the data centre market Gartner s Cloud Adoption Survey in January 2015 revealed 53% of organisations were using cloud services. Another 43% in the same survey indicated planned adoption by end of year Key segments driving the growth in cloud services include: Cloud infrastructure as a service Cloud management and security service Cloud application infrastructure platform as a service The Indian market is witnessing growth in all segments of cloud services 2,000 1,500 1,000 500 0 Growth in Public Cloud Service Market 1,900 838 632 477 2013 2014 2015 2018 Planned investment Microsoft IBM Amazon Web Services NTT Communications ESDS Software NxtGen Datacenter & Cloud Technologies $22.7 million for setting up three cloud service data centres in Mumbai, Pune and Chennai Planning to set up second data centre in India, to add to the one operating in Mumbai presently Multiple data centres planned by 2016. In the fray to acquire Tata Communications data centre $100 million through Netmagic Solutions (NTT s Indian subsidiary) to set up ninth data centre in Mumbai About $53 million to set up data centres in Navi Mumbai, Bengaluru and Nashik Raised $13.5 million from IFC, Axon Partners Group and Intel Capital for data centre in Bangalore and enhanced cloud service offerings Source: IBM India, Times of India, Gartner, International Business Times 14
Ongoing transition to a next generation data centre Traditional data centre Workloads assigned manually to server, storage and networking Manual IT optimisation Reactive approach to scenarios of threats and opportunities Software-defined data centre Automatic workload assignment to best-fit resources Software-defined optimisation Proactive approach to threats and opportunities Next-generation data centre Workload assignment based on infrastructure pattern analysis Dynamic optimisation with cognitive learning Proactive approach to threats and opportunities Stages in transforming data centre from traditional to next-generation Consolidation and Integration Standardisation and Optimization Automation and Simplification Dynamic Optimization Better asset utilisation by removing redundant systems and applications Virtualisation to enable greater flexibility in IT resources Deploy analytics to get accurate estimates of system redundancies and efficiencies Define and prioritise the operational services in data centre Standardising the common IT services for consistent delivery Service optimisation to re-orient IT spending from routine activities to innovative practices Managing IT services with the minimum of human intervention Automated workflow Self-service portals and standardised catalogue of services for users Determine effective price points of several cloudprocessed services Extension of cloud and automation to a software defined environment Infrastructure to dynamically respond to changes in workload Enhanced security and compliance Big data analytics assumes a critical role Source: Alchemy Research Analysis 15
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