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Tuesday, July 07, 2020

How India’s data centre market is scrambling to catch up with rising Internet users

At 10 GB per month per phone, Indians use the most data in the world. As that graph shoots up and govt introduces a Bill supporting its push for localisation, The Indian Express takes stock of the country’s data centre market that is scrambling to catch up

Written by Karishma Mehrotra | Updated: January 7, 2020 5:34:27 pm
Data Protection Bill, mobile data use, mobile data, mobile data use in India, data use in India, data localisation, localisation of data, mobile phone data, indian express Construction on to build the country’s largest-ever data centre in Panvel, Navi Mumbai. The Rs 1,000-crore, 12-storey NM1 tower will hold 7,200 ‘data racks’. (Express Photo: Pradip Das)

Patalganga, a Maharashtra Industrial Development Corporation area in Panvel near Mumbai, is home to a Reliance petrochemical plant and textile processor, a Hyundai Mobis engineering facility, and a Cipla pharmaceuticals factory. Just off it, lie rice fields.

Now, this industrial belt is entering the Information Age. In April, the Hiranandani Group began gutting the inside of one of its 8.2 lakh sq ft commercial towers to build the country’s largest-ever data centre. The Rs 1,000-crore tower called NM1 (Navi Mumbai 1) is part of the Mumbai-based real-estate developer’s Rs 15,000 crore investment plans, to raise five such buildings. The 12-storey NM1 tower will hold 7,200 ‘data racks’ — shaped like tall computer servers — with plans to go live on the last day of this year. Altogether, the five buildings will have 30,000 data racks covering 30 lakh sq ft.

Compared to some of the world’s data centres, including the 63 lakh sq ft facility in China that is right at the top, NM1 is minuscule. But for the sunrise data economy in India — which now holds more than 10% of the world’s Internet users, but only 1.8% of its data centre infrastructure — it marks a milestone.

Explained

Localisation: growth vs ethics

the DATA Protection Bill, making its way through a Joint Select Committee in Parliament, signals a clear mandate to store sensitive data within the country. But the data localisation signals have been long in the making, spurring exponential growth in the country’s sunrise data centre economy. However, as the market forces grow, there are still many roadblocks and ethical arguments against localisation.

Apart from growing Net usage, the major factor driving the surge are clear signals by the Modi government that global giants would be mandated to store more of Indian citizens’ data within the country. The Personal Data Protection Bill, introduced in the Parliament session that just ended, gives the government the power to decide if sensitive personal data can be transferred to outside countries.

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At almost 10 GB per month, Indians now use the most data in the world per smartphone, according to Nokia and Ericsson — a figure that will go up as the number of Internet devices continue to mount. The country is estimated to have 500 million Web users, behind just China (850 million users), and far ahead of the US (300 million).

When it comes to data centre storage though, India lags behind not just the developed world but even Asia-Pacific. With roughly 40 million less Internet users, Europe has more than 12 times its capacity to store data — 8,600 MW, compared to India’s 700 MW. And while India comprises 25% of Asia-Pacific’s Internet users, in 2017, it accounted for only 8.6% of its data centre growth, as per a 2018 research of the Data Center Advisory Group.

Data Protection Bill, mobile data use, mobile data, mobile data use in India, data use in India, data localisation, localisation of data, mobile phone data, indian express Illustration: Suvajit Dey

The government runs only 30 government data centres, through the National Informatics Centre. Even as it is expanding them, in July, the Information & Technology Ministry held confidential consultations with stakeholders to assess prospects for a “cloud economic zone” — or government-supported areas devoted to data storage. However, there has not been much movement on that.

If the data centre growth doesn’t keep up, the gap is set to widen. The new surge in India is in over-the-top content, sending data numbers for the country skyrocketing. The streaming market now includes Hotstar, MX Player, JioTV, and Amazon Prime Video. By 2024, streaming videos will account for three-quarters of all mobile traffic in India, according to Ericsson.

Tapping into this, Netflix recently announced an India-only Rs 199 per month mobile plan. At the event, Ajay Arora, Director of Product Innovation at Netflix, said, “Our members in India watch more on their mobiles than members anywhere else in the world, and they love to download our shows and films.”

Says a Microsoft spokesperson, “We have crossed the tipping point. It’s no longer about whether to move to the cloud, but when and how.”

Amidst this comes the government push for data localisation. Prime Minister Narendra Modi has been talking about “data sovereignty”, saying storage in India means more control over data. China, for example, steadfastly demands localisation, while the US remains sector-specific when it comes to data.

Speaking at the World Economic Forum in January 2018, Modi said, “Today, data is real wealth and whoever acquires and controls data will have hegemony in the future.” He has also positioned data revolution as India’s chance to play “catch up”, noting that “India lost its chance during the Industrial Revolution”.

Calling the Indian market “under-served”, Rajesh Tapadia, CEO of Airtel’s cloud subsidiary Nxtra Data, says, “Capacities are getting sold before they are built now. The market is booming.”

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The Hiranandani Group is building data centres under the brand name Yotta, led by CEO Sunil Gupta, who in an earlier stint with Reliance Communications earned himself the moniker “India’s data centre man”. Sitting in his office in Powai, the 47-year-old says, “The day you have the government saying you have to store in India, that is humongous… The government is helping create the demand.”

Among “anchor customers” that Yotta aims to attract are the likes of Google, Netflix, Facebook, Microsoft, Amazon Web Services, Chinese behemoth Tencent, and Apple, as well as major banks, retail lines and media companies. Remarking at the rapid changes, Gupta says, “We don’t even remember that the Internet just came into our lives 20 years back.”

Data Protection Bill, mobile data use, mobile data, mobile data use in India, data use in India, data localisation, localisation of data, mobile phone data, indian express The Hiranandani Group is building data centres under the brand name Yotta. (Express Photo: Pradip Das)

It was around the same time that the country saw its first conversations on data centres, with telecom providers like VSNL (Videsh Sanchar Nigam Limited), now Tata Communications, creating own verticals for “co-location” — in which multiple companies keep their hardware together on the premises of a third party. While medium-sized customers spent Rs 10-15 lakh per year on this, the larger ones invested around

Rs 50 lakh. Besides, several Indian firms built piecemeal captive data centres to manage operations internally.

However, as most of them remained sceptical of cloud technology, it was roughly a decade after its ascent elsewhere that the cloud model came to India. While mounting data was one factor behind adoption of cloud, the other was the flexibility of storage and cost options it offered.

Around 2009, global players such as Amazon Web Services, Microsoft’s Azure, and Tencent and Alibaba began to trickle in. “They started building mega data centres to cater to the hyperscale, cloud, and over-the-top customer requirements,” says Tapadia.

In 2015, spearheading Microsoft’s push to expand its cloud services in India, CEO Satya Nadella told a conference of business heads and developers in Mumbai that with computing growing exponentially, cloud technology was essential for a seamless experience.

Still, in India, the market remained largely cornered by little-known names such as Singaporian ST Telemedia and Indian firms Sify, CtrlS, and NetMagic Solutions, even as global companies largely opted for Singapore or Hong Kong to build data centres.

Now, apart from Hiranandani, big US players like Oracle and Amazon have shown interest in India. In January, Adani Enterprises signed a memorandum of understanding with the Andhra Pradesh government to invest Rs 70,000 crore over the next 20 years to develop the state as “the east coast data centre hub for India and South East Asia”. Announcing the tie-up, then Andhra chief minister Chandrababu Naidu said, “From agriculture to financial markets to smart cities to healthcare, digitisation is the future.”

Airtel operates 10 large data centres and is building four more. Space can be rented at its existing centres in Tier II and III cities by parties seeking to store data as close to the end user as possible to save costs.

Projections from investment consultants and industry associations are grand and wide-ranging. A 2019 NASSCOM report says cloud spending amounted to $2.5 billion, or 6% of all IT spending in India, last year, compared to the global average of 7.9%. It puts India’s cloud spending at $7.2 billion by 2022.

Yotta’s Gupta expects the cloud services market to be $4 billion by 2020, while the Data Center Advisory Group projected a $7 billion market by then. A report by Research and Markets is more modest, expecting the overall data centre market to reach $4 billion by 2024.

Says NASSCOM Senior Vice-President Sangeeta Gupta, “It makes perfect sense for players that have deep pockets and real estate and can reach economies of scale to capture the market.”

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However, there are other factors that can’t be ignored, says Manoj Paul, India’s Managing Director of US-based cloud company GPX. Since 2012, GPX has had a 30,000 sq ft centre in India that stores data of not only companies like Facebook and Netflix but also connects them to Internet service providers at the facility. They are building another 60,000 sq ft centre now.

Data Protection Bill, mobile data use, mobile data, mobile data use in India, data use in India, data localisation, localisation of data, mobile phone data, indian express Yotta CEO Sunil Gupta expects the cloud services market to be $4 billion by 2020, while the Data Center Advisory Group projected a $7 billion market by then. (Express Photo: Pradip Das)

Paul, who as Airtel COO between 2002 and 2013 saw India’s mobile boom, gives the example of social media giant Facebook, which is building a data centre in Singapore. “The company is setting up a data centre of 150 MW with $1.4 billion, in a country of 5 million people (Singapore), to cater to the Indian market. Naturally, Facebook should have set up in India. The power charges here are cheaper, the land is cheaper. So what could have been the reason?… It’s just not easy to set up a data centre in India. Acquiring land, infrastructure issues, bottlenecks, ease of doing business, connectivity to other markets….”

One of the biggest constraints is power supply. Data centres are gigantic electricity guzzlers, forcing their construction in India to be limited to areas around metropolises like Delhi, Mumbai, Chennai, Hyderabad and Bengaluru, where power connections are more reliable.

With immense heat generation, the centres additionally require high investment in cooling systems. In many European countries, where power-cooling efficiency is higher, Yotta’s Gupta says, “you can turn off your chillers for much of the year and just open the windows”.

Indian-made data centres are hence not able to attract foreign clients, says Paul.

Rahul Dhar, who has had two decades of working on centres for Microsoft, Tata Communications and COLT Technology Services, too strikes a word of caution. “Whatever (infrastructure) was available till a few years back has been consumed by three major hyperscale cloud providers (Microsoft, Amazon and Google),” he says. “Since this technology domain is deeply connected to real estate, high-volume initial capital investment is needed, which allows only a few new players to enter.”

That is why, says Yotta CEO Sunil Gupta, Hiranandani is the right fit for the market, with its land bank and its supply of power, oil, and gas through Hiranandani Energy. He says he knew had a “gold mine” the moment he saw the Panvel buildings. “At a data centre, you need two main things: one is power, the other is fibre. If these two things become possible in bulk, your data centre is a hit,” he says. While Hiranandani’s TUCO energy distributor owns a power sub-station nearby, two fibre optic cables of all the major telecom operators run in close proximity.

Data Protection Bill, mobile data use, mobile data, mobile data use in India, data use in India, data localisation, localisation of data, mobile phone data, indian express The NM1 tower has been reinforced using extra concrete while steel is being attached to every column and every floor. (Express Photo: Pradip Das)

Since a data centre must have loading capacity four times a commercial building due to the weight of the data racks, the NM1 tower has been reinforced using extra concrete while steel is being attached to every column and every floor. Back-up power will be provided by 32 diesel generator sets of 2 MW each, while a pit is being created to hold a fuel steel tank of 6 lakh litres capacity. That is equivalent to 30 petrol pumps. There will be seven layers of security, with 400 cameras and biometrics, to guard the facility.

With cyber leaks, such as at eBay, J P Morgan Chase, Yahoo and the US Office of Personnel Management, exposing critical information like addresses, credit card numbers, and passwords, Gupta says he is also factoring in contingencies like flood or fire. A data centre can’t “go down”, at any cost, he points out. “These are national assets and as critical as military installations. If you bring down a centre, you can bring the economy of the country down.”

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Under the Opposition’s objections, the Data Protection Bill was sent to a Joint Select Committee on December 12, even as IT Minister Ravi Shankar Prasad underlined the government’s intentions to make India “a big centre of data processing”.

Most of the objections rest on uneasiness over the government’s push for data localisation, especially given the Modi government’s strident nationalist narrative. Many civil society and industry groups fear it will lead to increased State surveillance, unconvinced by arguments such as encryption keys making hacking difficult.

At an Indian Express event, Facebook’s Vice-President for Global Affairs and Communications Nick Clegg had also cautioned against “this very overused analogy about data being oil”, saying using it to justify “segmenting, fragmenting and hoarding data in different jurisdictions” did not make sense for India. “Globally, if we were to follow that model, China today, India tomorrow, then Vietnam, then Brazil, then the United States, everybody will start erecting data barriers and before you know it, the extraordinary ingenuity and innovation of a borderless Internet would have given way to a highly fragmented Internet.”

However, as NASSCOM Senior Vice-President Sangeeta Gupta points out, for customers, where their data is stored is not likely to be an issue. “For them, as long as I get something affordable and my safety and security are not compromised,” says Gupta, “it’s not a storage question.”

The Numbers

481 million
Internet users in India (second in world after China; US has 300 million)
Internet and Mobile Association of India’s 2018 report

10 GB
Data use per smartphone per month (highest in world)
Nokia-Ericsson study

970 million
Smartphone subscribers in India by 2023
COAI

700 MW
Data capacity in India
Data Center Advisory Group

Personal Data Bill, 2019: Key Points

Personal data can go abroad, with individual consent

Sensitive personal data has to be stored in India, can be processed abroad with government approval

Critical personal data (defined by government) has to be stored and processed in India

Entire exemptions can be made by the State for specified reasons

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