CyberMedia Research India Data Center Services Market Review 2011 India Data Center Services Market To Grow At A 23% CAGR Over The Three Years To 2012 To Touch Rs. 11,800 Crore

• •  Third Party Data Center Services slated to grow at 34%; Hosting services to cost less
  • Financial sector regulations, and government projects to open up market
    To fuel adoption of innovative delivery models like Cloud Computing amongst mid-size enterprises, increase propensity to adopt new technologies like Virtualization and Green IT

Bangalore/Gurgaon: The India Data Center Services market is expected to grow at a 23% CAGR over the three years to 2012 to touch Rs. 11,800 crore; Third Party Data Center Services are slated to grow at 34% to touch INR 2,800 crore during the same period. These key findings have emerged from a new CyberMedia Research (CMR) study titled India Data Center Services Market Review 2011.

While 80% of data center services business was still driven by captive data centers in 2010, it is the growth story for third-party data center services, which would show greater promise going forward. In the three years to 2012, the India third-party data center services market would grow at a CAGR of 34% as compared to a more moderate CAGR of 23% for overall India data center services.

The current penetration of data centers amongst the India enterprise segment is 63%, with nearly 85% of large enterprises having set up a data center by end of 2010. The BFSI sector leads the way with maximum penetration of data centers. Going forward, penetration levels amongst large enterprises are expected to reach almost 100%. As a natural progression, vendors would be well advised to develop their offerings for SMB enterprises.

“As more and more enterprises look to outsource the management of their IT infrastructure, third-party data centers will find increased adoption over the next 2-3 years”, said Apalak Ghosh, Lead Analyst, India Emerging Technologies Research, CMR.

“There are exciting opportunities that lie ahead in the third-party data center services space; however, this sector faces issues like high power and real estate costs, lack of adequate infrastructure and skilled workforce, amongst others”, said Kamal Vohra, Lead Analyst, India Software and Services Research, CMR.

Third Party Data Center hosting services to cost less due to falling computing and bandwidth costs and economies of scale due to increasing adoption levels amongst enterprises: Over the next couple of years, the India Data Center services market would shift from being a margin-based business to a volumes-based industry. The cost of hosting is expected to drop significantly over this period due to rapidly decreasing bandwidth cost, and a greater choice of options becoming available to enterprise customers. This trend is expected to increase data center adoption levels in the India enterprise segment, and in turn greatly enhance the business opportunities for third- party data center services providers.

Convergence of high speed 3G and WiMax data services, financial sector regulations, and government data center projects to open up new market opportunities: With the gradual roll out of 3G and WiMax services by telecom service providers through 2011, and launch of data intensive services such as video calls, Live TV, video-conferencing, high speed online gaming and so on, the need to store and launch various application-based services is expected to fuel greater spending on building storage infrastructure. At the same time these factors would contribute to a direct increase in the overall size of the opportunity in the India Data Center services market.

Another factor, which would lead to an increase in the demand for enterprise storage solutions, and as a corollary, the demand for data center services in the country is the expected revival in the fortunes of the BFSI sector. Although the India BFSI sector was largely unscathed by the global recessionary trends, demand for financial services was tepid during 2009 but has started showing a healthy revival in the last year. Banking, in particular, is expected to show a healthy growth trend in 2011 as the housing and commercial real estate sectors show greater confidence across most key urban centres.
“Government schemes and initiatives to increase financial inclusion would also add up to the demand for such data center services in the country, as designated banks appoint banking correspondents (BCs) in rural areas to enroll and verify hitherto unbanked ‘bottom-of-the-pyramid’ customers. These programmes are expected to further provide an impetus to demand for storage, and in turn data center services by the banking sector”, added Apalak Ghosh, Lead Analyst, India Emerging Technologies Research, CMR.

Further, the Government of India is focusing on building and consolidating IT infrastructure both at the central as well as state levels. Both the Central Government and various state governments have launched a host of projects to make government services more easily available to individuals and business organisations through citizen service centers, online passport application monitoring, e-filing of income and service tax returns and so on. Specific projects such as the State Data Centers (SDCs) are expected to present very attractive opportunities for data center services players in providing consulting and system integration (SI) services over the next few years.

Data Centers fuel adoption of innovative delivery models like Cloud Computing amongst mid-size enterprises, and increase propensity to experiment with new technologies like Virtualization and Green IT amongst large enterprises: The India market is currently witnessing experimentation and adoption of new technologies in order to help enterprises optimize utilisation of resources and maximize benefits.

“As cost and competitive pressures increase, enterprise managements are keen to evaluate new technologies and deploy contemporary techniques in order to derive the maximum business benefit from IT resources. When connected with business priorities, the picture becomes much clearer. Enterprises are driven to experiment with a wide array of solutions, which may be classified as Virtualization, Green IT or Cloud, particularly at the Data Center level”, added Kamal Vohra, Lead Analyst, India Software and Services Research, CMR.

Cloud Computing and Virtualization will lead the technology evolution and continue to trigger growth in the data center services market. Server consolidation, optimizing operational expenses (OPEX) and Total Cost of Ownership (TCO), as opposed to an earlier focus on CAPEX, will be top priority in the mind of CIOs.