Sudden Explosion of Data Centers in India

 

Something very interesting is happening in the Indian telecom space these days.

The Indian government is considering a new data localisation law that would require all data around Indian citizens to be stored locally, i.e., within Indian borders. It starts with the fintech companies first, and would then bring in the social media and other IOT companies storing data in its ambit. The Reserve Bank of India (RBI) has cheerfully given a deadline to all fintech companies to ensure that the entire data operated by them, is stored in data centers only in India. Ouch.

RBI so far has refused to accept the representations made by the fintech companies to relax the norms. It’s ruled out the option of data mirroring while addressing the arguments of technological hurdles raised by the fintech companies. It’s instead suggested that companies opt for cloud services or private clouds in order to ensure data localization.

So, what’s data localisation? Data localisation is the process localising the citizen’s data to one’s home country for its processing, storage and collection before it goes through the process of being transferred to an international level. It’s done to ensure the country’s data protection and privacy laws. It is based on the concept of data sovereignty that was inspired by Snowden’s revelations that that the US was collecting vast swaths of data not only from American citizens, but from around the world.

This move by India is not unprecedented. Nigeria, Russia, Germany and China already have strict regulations around storing their citizens data locally.

Given the fintech and the digital currency boom in India (largely supported by the Indian government) we are looking at a prodigious amount of very sensitive financial data that would be generated and stored in India. Master card and other payment gateways have already started moving the data to the servers within Indian borders . WhatsApp Pay is unable to launch in India because it’s still not compliant with the Indian data localisation policies. Not surprisingly WhatsApp Pay has agreed, and it will take off as soon as they move all the Indian users data inside the Indian borders.

And to make things more lively, the Government of India is also working on a draft e-commerce law that requires firms to locally store “community data collected by Internet of Things devices in public space” and “data generated by users in India from various sources including e-commerce platforms, social media, search engines, etc.”

The direct consequence of this is a frenzied interest in building massive data centers in India. The chairman of Adani Group in an interview with Bloomberg said that he would invest over $10 billion to set up data centres in India. Meanwhile in Mumbai, Hiranandani real estate group too has thrown its hat in the ring and has not very surprisingly, announced ambitious plans to build — guess what — data centres in India.

Group CEO Darshan Hiranandani sagely says that “It is like building a school or hospital”.

The only difference being that Hiranandani gets a bigger bang for its buck when it builds a data center vis-a-vis building, say, a school or a hospital. The real estate market in India has seen unprecedentedly low returns and many indian real estate developers are at risk of going belly-up as mounting stress in the nation’s credit market dries up funding even for those willing to pay decade-high rates. All reports seem to indicate a moribund growth rate in the housing market.

So, what does Hiranandani, one of India’s biggest real estate company do?

They decide to invest heavily in building data centers. All done under the brand name Yotta. Adani and Hiranandani want to set up Indian data centers in order to prevent what Mukesh Ambani in December last year said, “Data colonization is as bad as the previous forms of colonization. India’s data must be controlled and owned by Indian people — and not by corporates, especially global corporations.”

Dr Niranjan Hiranandani – Founder & Managing Director – Hiranandani Group says, “The Digital India program is one of the key pillars of Prime Minister’s vision of India becoming a 5-trillion Dollar economy by 2025. We envision a huge opportunity with data localization and protection act to be announced soon by the Government of India in order to regulate the data management business.  This will give a big impetus to the data storage business to grow domestically at an exponential pace bringing the paradigm shift to the Indian Economy”.

Somebody clearly has his priorities set right.

There’s a massive explosion in data being generated by connected internet users in India. According to a report by real estate and infrastructure consultancy Cushman and Wakefield, the size of the digital population in India presents a huge potential demand for data centre infrastructure.

 

Digital data in India was around 40,000 petabytes in 2010; it is likely to shoot up to 2.3 million petabytes by 2020 — twice as fast as the global rate. If India houses all this data, it will become the second-largest investor in the data centre market and the fifth-largest data centre market by 2050, the consultancy has forecast.

And its just not the fintech companies that are rushing to store Indian data locally, the other social media and IOT companies are following suit. China’s ByteDance has announced that they would be building data centers in India. All the data around Indian users was currently stored in third-party data centers in the US and Singapore. It will now be moved to India. It’s only a matter of time, and other social media companies will cave in, and open their data centers in India. The market size and business potential in India is too huge to be risked.

I came up with this partial list of planned and ongoing investments in data centers in India:

• Microsoft continuing to manage and expand three Azure cloud service data centers in Mumbai, Pune and Chennai
• IBM’s plans to set up its second data center in India in addition an existing one in Mumbai
• Google Cloud Platform recently entered India
• Alibaba Cloud launched in Mumbai in January 2018
• Amazon Web Services has seen a 60% increase in customers across Mumbai since launch
• CtrlS has launched a $73 million project in Bangalore and will be adding new centers in Hyderabad and Mumbai within three years
• GPX Global Systems planning a 16 MW center in Mumbai to be finished Q1 2019
• The state of Tamil Nadu has completed a $9 million center in Tiruchirappalli to back up government data
• Netmagic Solutions is spending $175 million to complete centers in Mumbai and Bangalore by the end of April
• ESDS Software & Nxt Gen Data Center & Cloud Technologies have announced funding & expansion plans in the near to medium term.
• Ascendas-Singbridge is investing $1 billion on new construction in Chennai, Mumbai, and Hyderabad

So far, no definitive decision around the data localisation policy has been taken and a draft Personal Data Protection Bill has been submitted that recommends setting up a data protection authority and placing restrictions on cross-border data flows. The bill mandates storing one serving copy of all personal data within India. It empowers the central government to classify any sensitive personal data as critical personal data and mandates its storage and processing exclusively in India.

The bill is yet to be cleared by the cabinet but is listed to be tabled in Parliament during the ongoing budget session. Many people believe that the bill will claw through the opposition since there is a very strong lobby behind this.

Independent of what happens with the bill in this particular parliament session, we will, one way or the other, see a massive growth in data centers in India. The amount of data being generated in India is too valuable to be lost, and the Indian government will not want to lose that “oil”.

Unlike the Dilbert strip above, one needn’t try too hard to make building data centers look like a good investment. Look around, and you’ll see the winds of changing blowing.

Smells like an opportunity to me.

And for anybody else who is in networking and the data center space.