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Lockdown has fueled growth of data centers, say market research firms

“Data is the new oil,” Finance Minister Nirmala Sitharaman said as she announced the Indian government was rolling out a data center policy enabling the private sector to establish data center parks in the country.  She seems to have hit the nail on the head.

The meteoric rise in digital adoption, the swift adaptation to telecommuting, and the use of remote working tools has created an unprecedented demand for technology-based solutions, post the 2020 lockdown. And that’s what makes data centers vital in supporting this incredible transformation.

In other words, the lockdown may have hit some businesses hard, but for data center service providers, it’s exciting times ahead.

The 2 Cs driving demand for data centers: COVID-19 and Communication

 According to market research firm Omdia, which recently put out its assessment on what the data center industry should expect post the lockdown, the COVID-19 crisis is likely to drive up demand for IT hardware and software as well as infrastructure gear for cloud service provider data centers.

The data is staggering: Omdia says data center Capex by cloud and colocation service providers is expected to reach $180 billion in four years at a compounded annual growth rate (CAGR) of 15.7%.

IT equipment including servers, storage, networking, and other devices will account for the largest portion of data center Capex — 71.5% of the total spending — followed by physical infrastructure equipment (around 20%), and land and building (9%), says their Cloud & Colocation Data Center Capex Market Tracker report.

What does this lightning speed growth mean for data center service providers? Well, simply that the market is going to explode. With the pandemic necessitating remote working and educating, cloud and colocation service providers will reap the benefits.

With more Indian companies having embarked on their digital transformation journeys in 2020, India, the second fastest-growing digital economy, will see further growth in the data center segment. The IT and communications sector, as well as healthcare (on account of the pandemic), is projected to double in size in the next five years, which will clearly accelerate the usage of data resulting in increased demand for bandwidth and storage capacities.

Owing to high upfront costs, real estate prices and power tariffs, maintenance-related issues, and security, post lockdown, more companies are investing in the development of data centers in India. Additionally, major cloud service providers are also exploring setting up their own data centers.

What 5G means for data centers

The impending 5G technology launch will likely fuel the adoption of IoT-enabled products in the Indian market. And that heralds a whole new era of data center investments in the Indian market. With digital adoption, there will be increased demand for CDN and mobile-network capacity, surveillance, remote operations, remote workforce, edge infrastructure, and automated operations. This would mean accelerated spend on servers, storage, multi-tenant server software and more.

5 trends you are likely to see post lockdown

  1. Omdia has forecasted that post lockdown, 25% of enterprise computing capacity will remain on premises, in companies’ own data centers, with cloud providers serving the remainder.

  2. Investment in storage capacity by cloud providers is expected to accelerate this year, said the firm.

  3. Also look out for an increased number of data hubs post the lockdown. At present, the data center industry is clustered in the metros of Mumbai, Chennai, Bangalore, NCR, Hyderabad, and Pune, but reports cite immense potential in the tier-2 cities.

  4. Private players are stepping into the space. For instance, a Mumbai-based leading real estate developer is set to establish data centers across India. Equinox, one of the world’s largest data center and colocation providers, announced expansion into India.

  5. New business models are emerging post lockdown, including colocation services, pay-per-use utility model, built to suit, etc. To cater to this burgeoning market, post lockdown, data center providers will have to increase focus on location and design, easy scalability, security, infrastructure, and sustainable practices.

In the new era, cloud providers will invest more in facilities infrastructure, predicts Omdia. This would mean that providers need to accelerate spending on UPS, racks, and rack PDUs this year and next to be prepared to take on the demands of the post Covid world. Having a reliable partner in the space also helps. Allow Hardy Racks to assist you in setting up efficient data centers with quality products and optimized and customized solutions.

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