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Data Localization, the reason behind the sudden surge in demand for Data Centers?

05-Nov-2020   Mr. A.S. Rajgopal, Designation: CEO, NxtGen Infinite Data Center   Author: Prahaladh Hariharan

The Data Center Market in India is highly underserved at present. The existing gap between demand and supply presents an opportunity for domestic and international players to enter the market. India is expected to become the fastest growing data center hub in the world, mainly driven by data localization and data security policies, cheaper real estate costs, growing customer base, increase in digital services and growing digital consumption of services such as e-learning, e-government services, e-commerce and online streaming. Also, real estate developers and investors are showing interest in the Data center industry as they view it as an alternate lucrative investment opportunity.

In conversation with Mr. A.S. Rajgopal, CEO, NxtGen Infinite Data Center, we attempted to seek his opinion and understand his side of story to the changing fortunes of the data center Industry and how NxtGen is gearing up for it.

Q1. How did the Idea of NxtGen come up? How has your journey been so far?

I was working for Dell managing server & storage business, had an opportunity to set up a data center for internal purpose. I was intrigued by it and ventured more into data centers. Data Center was part of my portfolio when I moved to Reliance.  I realized that the market was highly underserved and I still believe that the market is underserved. I wanted to bridge this gap, and this is the broad thought process behind starting NxtGen. Data center is a heavy capital intensive business. I borrowed around INR 13 Crores from friends and family to start the data center. Karnataka government had a scheme called Udhyog Mitra, through which we were allotted 10 Acre land and that was the beginning of NxtGen.

Q2. Who was your first investor who believed in your idea and funded your venture?

Our first investor in the company was Intel. They invested around USD 10 Million in the first round. After that, World Bank participated; a Spanish company Axon Partners and Intel again funded us. As the investments started kicking, we began building our data center.

Q3. What is your take on the government’s proposal of bringing data localization policy?

At present, we import most of the content that we consume. So the market is underserved. Having said this, data localization is a good thing to happen, but it cannot be enforced, since the country lacks the required infrastructure in terms of Internet speed and capacity presently. In future, 5-6 years down the line, I believe we would increase our capacity and improve our infrastructure, thereby being ready for implementation of data localization effectively.

Q4. Mumbai is an established data center hub, with global connectivity and underground sea cables. Is there any particular reason of starting in Bangalore and not Mumbai?

I could not afford Mumbai. We were one of the only players with no financial backing. We built in Bangalore, since everyone was going to Mumbai and Bangalore was the second largest market. Secondly, since land was available and we thought we could prove our worth in Bangalore and then expand further. Once we started achieving things we wanted to, we went ahead and acquired the business of Dimension Data, and took over 6 DC’s.

Q5. Most of the data centers offer Managed services or co location services. It can be termed as the traditional revenue generating streams. So how is it for NxtGen?

At NxtGen, we wanted to solve the infrastructure problem for the customer. When we approach an enterprise, we tell them that we will host their entire infrastructure and aid them, while the enterprise has to just focus on their applications. For example: We run Book My Show’s entire infrastructure on our data center. So we know their patterns, how they would grow, what happens when a movie gets released and Book my show has to just focus on their application. That actually works for our customer, and that’s our pitch.

Q6. Lot of focus with regards to data centers have always been on Data storage and lesser emphasis was given on Data Recovery services. We see the trend changing slowly, but it’s still has to come a long way. What is your take on the same?

Lot of customers in India have been hit by Ransom ware and other such malicious virus. It is something that nobody comments on or agrees to that their services have been breached, because it is not something that you advertise. The necessity that is coming in is not because of disasters but as technological innovations continue, there are various ways in which your data is under threat.Hence there is a greater need to protect data, as technological innovations increase in the future. Hence the focus will shift towards Data Recovery Services and Disaster Management services in the next 3-4 years.

Q7. Lot of companies use Tier Classification from an advertising stand point. How important is the Tier Classification? 

Higher the tier classification, higher is the Uptime. A Tier III classified data centers gives you an uptime of about 99.985%, whereas a Tier IV data center gives you an uptime of about 99.999%. Advantage with Tier III is that, it is concurrently maintainable, whereas with Tier IV, you have everything twice. So in a tier IV data center when the UPS, AC and all other equipments are double, you have to keep both of them active. Traditionally Tier IV was designed for a military applications and not for a business applications. Tier III is good enough for most of the business applications and big companies like Google, Microsoft, and Amazon do not prefer Tier IV, since it’s not required. Hence, creating a Tier III infrastructure is more than enough to run a sustainable data center business.

Q8. So what differentiates NxtGen from its competitors?

I think the first differentiating factor, is the spread of data center and the network to connect all the data centers together. Our plan is to be in 14 cities in India, which are considered major cities for data centers. Second, we have stopped dependency and reduced human intervention in security. Everything is automated in our data center right from access control. Our compliance levels are higher, since it is largely machine driven than people driven. This gives a competitive edge in the market for us.

Q9. How do you think the data center landscape is going to change in the future? What is the future for NxtGen going to be?

There are only two serious players in the market in India, which are NTT and STT. There are no other serious players; hence the 3rd spot is always open. That’s the spot everyone is eyeing for. Setting up good data centers, and being at the top is expensive and needs a minimum of USD 700 – USD 800 million dollars in Investment. So we are working with a global strategic player who has the capability to bring in such an investment. Inorganic growth by purchasing other data centers may not be a feasible option, since it is difficult to meet the design philosophy and the credibility that as an organisation has been built over a period of time. There are so many regulations and compliances that also need to be completed, before acquiring another company, thereby making inorganic growth opportunities extremely low. 

To know more information on the publication,

https://www.kenresearch.com/technology-and-telecom/it-and-ites/india-data-center-and-cloud-services-market/335269-105.html

For any queries or feedback, reach out at namit@kenresearch.com

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