Digital Transformation to Accelerate Adoption of Colocation Industry in India

The Coronavirus pandemic shifted the attention from offline to the digital needs of many businesses. These shifts are likely to stay in place impacting many industries especially IT and data centre in a positive manner. In 2020, the explosive growth of data was felt like never before. As more businesses have begun to migrate their IT infrastructure to Cloud, the demand for colo or colocation facilities seems to have exponentially increased.

A colocation facility is primarily a data centre wherein an organization rents space for servers and other hardware that they purchase. The colocation firm provides the building and other necessary infrastructure for the organization’s functioning, such as cooling facility, power, bandwidth, and physical security. A preferred alternative to traditional hosting, colocation facilities may house multiple businesses depending on the requirements of each.

Talking about how will the shape of the colocation industry change in 2021, let’s just say that one of the outcomes of the pandemic was digitization. A recent report by Crisil pointed that India’s data consumption has seen a sharp 38% rise during this period expecting it to be a whopping $4.5-5 billion by the financial year 2025. Once 5G is launched, it will enable new applications requiring low latency. Data centres will then have to be upgraded to the latest technology. The expansion is likely to be colo across all major cities like Mumbai, Chennai, Delhi NCR, and Hyderabad.

As more businesses adopt smart technologies in their homes and businesses, the demand for edge computing is bound to grow, and so will edge data centres. Due to the demand for better reliability and speed in the edge market, major colocation and hyperscale providers like Amazon are likely to enter the market during 2021. This kind of investment from a major player suggests there’s a lot of expansion expected in the colocation sector in India, and abroad.

“With the initiatives taken by the government, such as Digital India and emphasis on self-reliance and data protection through data localization, the IT and communication infrastructure are likely to grow double in size in the coming years. In such a scenario, many private organizations are moving from captive data centres to colocation services to minimize operations and maintenance expenditure,” quoted Mr. Ravi Raj, Director, Netrack India. Colocation facilities offer uninterrupted power supplies via several service providers. As of November 2020, there are 126 colocation facilities in India spanning 7.5+ million sq. ft., and an average IT power capacity of 590+ MW.

The COVID-19 after-effect has created a shift towards the adaptation of cloud services that are more secure and scalable. According to NASSCOM, cloud spending in India is estimated to grow at a CAGR of 30% to reach $7.1 billion in 2022. One of the world’s largest colocation providers, Equinox announced expansion into India. With so much rise and growth expected in the data and colocation industry, an escalated demand for IT and server racks and enclosures is nothing but obvious. In India, a single data centre may have the highest market share, however, colocation service is witnessing tremendous growth and is expected to be on the same level as captives.