Hyperscale Data Centers and Data Localization paving way for growth of Data Center Industry in India

Sep 11, 2020 - Ken Research

India holds enormous potential to become the ‘next destination’ for data centers propelled by policy initiatives, widening customer base and increasing corporate requirements for data storage. With growing digital consumption patterns such as online gaming, online education, streaming, e-commerce, total internet hits etc., DC operators are expected to see a huge demand for data center space.

In conversation with Mr. Manish Israni, Executive Vice President & CIO of Yotta we attempted to seek his opinion and understand his side of story to the changing fortunes of the data center Industry and how are companies gearing up for it.

Q1: How did Yotta come up with a world class data center, being a debutant in the data center industry?

India’s datacenter needs are growing exponentially because of growing data consumption and creation by both end users and businesses. Access to cheaper mobile phones and data plans have accelerated this trend leading to rapid adoption of OTT platforms, e-commerce, social media etc. On the other hand, enterprises are fast adopting public clouds for various workloads resulting in all hyperscale cloud providers setting up their availability zones in India, leading to massive demand for Indian DCs. And the trend will continue for the foreseeable future.

Unfortunately, the supply of data centers in India was very low in comparison to the demand and that’s where we saw the opportunity to introduce Datacenter parks with multiple DC buildings in the same campus, instead of individual, siloed DC buildings.

Building and operating data center is an expensive affair. Space, Power and Network – these are building foundation for a data center. And as a Hiranandani Group company, we could utilise our group’s strengths such as land ownership, power and construction. Data center operations require expertise. Our CEO – Mr. Sunil Gupta is known as the data center man of India and has built more than 20 data centers in India. This is a perfect combination that existing operators don’t have.

Hence, we conceptualised a vision of delivering world-class Hyperscale data center park and were successful to deliver the same. Our Tier IV certification by Uptime Institute validates this.

Q2: How has your journey been so far in building the data center? How many racks are there at present in your data center?

Our first building that we constructed has a capacity of 7200 racks; modularly designed giving you about 1200 racks in each floor. The next building is going to have 8400 racks. Apart from that we worked with Uptime Institute, USA for more than year to get our data center certified as a Tier IV data center. We have been very innovative with our design, offering the best services to the customers and have ensured our infrastructure meets the design perspective as well as the build perspective.

Q3: We also heard that there are going to be 5 such buildings in the data center park. Is the capacity for each building going to remain the same?

Yotta’s Panvel data center park will feature 5 buildings. As of today, we are live with the first data center building that has a capacity of 7200 racks, which is also Asia’s largest and World’s second-largest Uptime Institute Tier IV design certified building. Our second building is also ready in core & shell and in combination we will have 15000+ rack capacity. We have plans to build 3 more data center buildings in the same campus, depending on the customer demand and can be built as per their requirement or specification. Overall we are estimating the 5 buildings combined to provide 30,000 racks capacity.

Q4: Given the current scenario in the market, the total gross space that is available in India is approximately 10 mn sq ft, out of which nearly 50% is available just in Mumbai. Hence, after Mumbai, which location do you see which will emerge as data centre hub

Mumbai is a major fiber landing station that connects India to the west of the world and being the financial capital of India, almost all hyperscale cloud operators have their base here to serve this market. That has resulted in most datacenter capacity being located in and around Mumbai. However, emerging regions such as Chennai and NCR have good potential. As per our 5-year plan, we have already taken the required permissions and approval forour Chennai and NCR campuses. We have around 20000 racks coming up in Chennai and another 20000 racks in NCR. Currently why we have focused on Mumbai, because there are lot of players old and new looking to enter into the data center market in Mumbai and since we have vast experience in construction and have the required land bank along with the right set of expertise, we thought it is best to seize the opportunity and build a world class facility in Mumbai.

Q5: What is your take on the demand supply gap in Mumbai, due to multiple companies planning to enter Mumbai?

There is a huge demand for data centers in India, but there is a classified need. Companies want their specification and want to customise the data center according to their requirements. Mumbai is leading the demand for data centers due to the fact there is more demand and also is the commercial capital of India. At the same time, many OTT and cloud players are setting up their base here. Mumbai also has an advantage of cable landing stations, stable power supply and state incentives. Coming up next is Chennai, where we are witnessing surge in data center investments as it offers good connectivity Internationally via subsea landing stations.

With Mumbai, the real-estate cost is high, hence many players are waiting for their anchor customers before they build their next data center building. Mumbai, being limited with land capacity and high costs is making DC operators move towards Navi-Mumbai, which is a satellite city of Mumbai that offers land parcels which are comparatively cheaper than Mumbai city. This region will see more development in terms of DC. Besides this, the interest by international players who are planning to enter or announced to enter the colocation market in India are eyeing Mumbai as base, this would make things interesting for this sector.

Q6: Out of the total whitespace available in Mumbai, only 70%-75% of it is occupied, while the rest largely remains unoccupied. Are big Hyperscale Tier IV data centers the way forward?

A data center customer is either a retail customer (Enterprises) or wholesale customer (Hyperscalers, CSP, OTT players). While the retail customers would not buy racks in large numbers as compared to a wholesale customer, but would consume other services like Cloud, security, IT management and so on. Hence, we are catering to both of these verticals and offer value for both of them. For instance, a large player would look at a server floor with lower Power charges and scalability option in future at the same site.

With Mumbai having the largest share of cloud players and with many more is eyeing to set their base, the demand will continue to grow. Mumbai offers good Infrastructure and connectivity; this is driving the market for Mumbai as a data center hub.  Besides this, Enterprises needs to look for long term scalability. For instance, if tomorrow a business wants to scale from 50 racks to 100 racks, they should be able to do so at the same site. This is where Hyperscale data centers address their concern. At the same time, large International hyperscalers or cloud players are evaluating build v. buy model.  For them, buying space or leasing colocation facility makes more sense than to invest huge capital upfront.

As you said, most of these facilities in terms of racks, let’s say around 5000 racks are designed in such a way that they have 3KW load capacity per rack and these data centers were constructed at least 5-6 years ago. Now when we compare hyperscalers, we need an operating load of close to 10 KW, so that we can offer 8KW of power to the consumer. We have designed our data center in such a way that we can offer 5-6+ KW of consumer load plus customisable on demand based on the requirement from the consumer.

Speaking on the Tier IV certification, as of now Yotta is the only player in India that has an active Uptime Institute Tier IV designed data center certification. Unlike other certifications, Uptime Institute certification is based on operational performance and not based on a prescribed list. Thus, offering customers a fail-safe and redundant digital infrastructure. And it is up to data center providers to go in for this certification as this involves smart engineering and expertise. Not to mention, Uptime Institutes Tier IV certification is a gruelling process where a lot of parameters are to be taken care of and is capital intensive process, considering all this many DC players skip this certification.

Q7: We have seen a lot of companies entering the space, with nearly 8-9 mn sq ft of whitespace in pipeline, would there be enough demand that can consume the overall supply that will be generated?

See, if we go by the internal research that we have done, if you compare Europe with India, with a population of 130 crore, Data center consumes about 300-400 MW of Power whereas Europe with nearly half our population, has a consumption of about 800-900 MW of power. And also, if you see, there are around 4-5 OTT players across the globe, but in India there are about 12-13 OTT players, with different regional players also entering the market. So, the data consumption is expected to grow. Besides, for enterprises being cloud native is become a must; all these factors coupled with data localisation, digital initiatives by the government, we will see the demand for DCs growing.

Q8: What kind of operating model is usually followed by companies in the data center business?

The usual model followed is build to operate model, where I build the data center and operate it for them, but I do not transfer the ownership of the data center, since the land and the equipments belong to us. So we will build it based on the design that the customer seeks and operate it for them, and it can be done even on a partial basis. We operate with the client on a pure cash flow basis, depending on the appetite of the customer. Due to data localisation, lot of foreign companies want to have their design and build, and also have an opportunity to scale up in the future. So we have different mechanisms for different companies based on their preference and understanding.

Q9. What are the important components in being a successful company in this Industry? What makes Yotta different from other companies?

I would say, there are 4 important aspects to data center. Any company which is able to manage these aspects, should do exceedingly well in the Industry. The 4 important aspects are Land, Domain Expertise, Fiber and Power. In India, land acquisition itself takes about 6-9 months, and there are so many approvals that one has to go through, it is a tedious and lengthy process. Our promoters, the Hiranandani group, have large land banks, with approvals already in place, making it easier for us to build data centers as compared to others. Second, domain expertise in this Industry is essential. Both Sunil Gupta and I, each have domain experience of close to 20 years in the data center industry and we understand the nuances and nitty-gritty challenges impacting the space. Another factor is connectivity, at Yotta we have our captive redundant fiber connections, 4 numbers in total that terminate into the data center building from diverse paths. This ensures low latency network to our customers and multiple choice in terms of carriers.

Lastly, one of the most important aspects is power. The power distribution arm of Hiranandani
(H-Energy) is one of the leading power generation and distribution company in India.
H-energy has the domain expertise in building renewable source of power as well, making it extremely easy for us to get access to a green power. Now an advantage from a cost perspective considering the land and the power belongs to us, is huge which will get transferred to our customers thereby enabling us to offer quality solutions at competitive prices

Q10. Since you have just begun your operations, how much occupancy do you expect in the first 6 months to a year?

As of today, we are in conversation with about 200+ clients. Our basic philosophy is transparency. We are ready to offer the customer 100% of the solutions, as and when they require. It is up to the customer, whether they want to entirely rely on us or try other DC for other services. We don’t want to do 100% of the business, but we want to give 100% of the solutions that exist in the market. The advantage of greenfield buildings is that we can get it built in 9 months as per the customer’s requirement. Although I have the capacity, occupancy will grow in a phased manner. We want customers to stay with us for a longer-term, and we are ready to wait, to prove our efficiency and effectiveness.

Q11. Traditional data center players such as Sify, CtrlS use developers to just build the data centers and they operate it by themselves. Is there a possibility that they would approach a developer cum operator such as Yotta, for getting rack space?

Customers can be anyone right, including your potential competitors. But as far as what I know, they won’t come. Companies usually follow a different business model and we have a completely different business model, when it comes to selling the rack space. If a company has a big client, needing 1000+ racks, they will try to expand it in house rather than reaching out to a competitor and hosting it through them, as it will bring down the potential margin and future business opportunity.

Q12. An average industry price for a 3KVA rack is around Rs. 50,000 per month. Under the developer – operator model, how does the pricing usually work? Is the model cheaper than the traditional ones?

Big customers usually want their employees also to be there when they use it as a disaster recovery service. We offer them the seating space and the living space, which is right next to the data center. We have offered a straight cut of about 25% including seating space for a 5KVA rack, as compared to the industry standards.

Q13. Where do you see the future of this Industry? Is it towards Edge data centers or Hyperscale data centers?

I think both will complement each other. It depends on the consumer’s demand. You cannot ignore Edge data centers; likewise, you cannot ignore Hyperscale data centers. Not everything can be run on the Edge data center. The cloud adoption is also increasing, and the overall data center market is expected to grow at a CAGR of 24%-25%. In future, probably there will be lesser use of edge data centers, since there will be some other disruption that will come up.  Technological changes will impact the data center market like any other industry. So for the near future, both are important.

Manish Israni
Executive Vice President & CIO