In 2019, Amazon Web Services was faced with a difficult decision. The cloud computing platform, which relies on third-party data centres in India, had to take a call on where it would lease its next tranche of data centre capacity. The choice was between two south Indian cities—Chennai or Hyderabad.

AWS decided to go with the latter, but it wanted to make contingencies in line with its impressive growth. According to an executive working closely with AWS, its cloud computing inventory is growing between 55-85%, and is expected to see similar growth over the coming three years. To cater to this, AWS wanted a whopping 450-500 MW MW Megawatt As data centres consume more power, electricity—usually measured in megawatts—rather than square footage is the benchmark that matters most. Megawatts are usually reserved for wholesale colocation customers that require enough power for thousands of servers and related IT hardware of data centre capacity in Hyderabad.

This new innings would entail building more than 2.5X its current capacity of almost 180MW—all rented in Mumbai. There was just one small hitch in AWS’ data centre needs. Never mind Hyderabad, India as a whole only has a data centre capacity of 375-600MW, according to multiple market reports.

Without a data centre operator to meet its needs, AWS took a major call. It would enter India’s relatively nascent data centre sector. With support from the Telangana government, AWS procured 150 acres of land, where it plans to build three data centres. While it isn’t averse to building data centres in other countries, regulatory and land acquisition challenges have proved too much of a hassle in the past. The Indian opportunity on offer, though, has become too good to pass up.

With increased digitisation, low data tariffs, and a population with an insatiable appetite for video streaming, India’s burgeoning cloud computing market is expected to grow at a compound annual growth rate of ~15% over the next two years. In line with this, the next five to seven years are expected to see India’s data centre capacity requirements double or triple.

If its plans come to fruition, AWS would become the largest data centre operator in the country. But while AWS is primarily looking to cater to its own needs, others are throwing their hats into the ring to bridge the gap between demand and supply of data centre capacity.

According to a November report November report Mace Group Navigating the India data centre lifecycle Read more by real estate consultancy and services firms Mace and ANAROCK, over a third of the US$977 million in private equity (PE) and strategic investments in Indian data centres since 2008 came in the first three quarters of 2020.

AUTHOR

Pratap Vikram Singh

Pratap is based out of Delhi and covers policy and myriad intersections with the other sectors, most notably technology. He has worked with Governance Now for seven years, reporting on technology, telecom policy, and the social sector.

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