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India data centre services market to grow at 23pc

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CIOL Bureau
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NEW DELHI, INDIA: The India data centre services market is expected to grow at a CAGR of 23 per cent over the three years till 2012 to touch Rs 11,800 crore, according to findings of CyberMedia Research (CMR) study, ‘India Data Center Services Market Review 2011’.

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The third party data centre services market, which makes-up for 20 per cent of the market, is slated to grow at a CAGR of 34 per cent to touch Rs 2,800 crore during this period.

The captive data centres that make-up for four-fifths of the market will record slower growth compared to the overall data centre services market.

The current penetration of data centers amongst the India enterprise segment is 63 per cent. However among large enterprises nearly 85 per cent had a captive data centre in 2010. The BFSI sector leads the way with the highest penetration of data centres.

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Going forward, penetration levels amongst large enterprises are expected to reach almost 100 per cent. As a natural progression, vendors would be well advised to develop their offerings for SMB enterprises, says the analyst firm.

“As more and more enterprises look to outsource the management of their IT infrastructure, third-party data centres will find increased adoption over the next two-three years”, said Apalak Ghosh, lead analyst, India Emerging Technologies Research, CyberMedia Research.

“Exciting opportunities lie ahead in the third-party data centre services space even though this sector faces issues like high real estate and power costs, lack of adequate infrastructure and skilled workforce”, said Kamal Vohra, lead analyst, India Software and Services Research, CyberMedia Research.

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CyberMedia expects third party data centre hosting services to cost less.

The cost of hosting is expected to drop significantly over this period due to rapidly decreasing bandwidth cost, and a greater choice of options becoming available to enterprise customers.

This trend is expected to increase data centre adoption levels in the India enterprise segment, and in turn greatly enhance the business opportunities for third- party data centre services providers.

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Over the next couple of years, the India data centre services market would shift from being a margin-based business to a volumes-based industry.

The analyst firm also finds that convergence of 3G and WiMax data services, regulations and government data centres to enhance opportunities.

With the gradual roll out of 3G and WiMax services by telecom service providers through 2011, and launch of data intensive services such as video calls, Live TV, video-conferencing, high speed online gaming and so on, the need to store and launch various application-based services is expected to fuel greater spending on building storage infrastructure.

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At the same time these factors would contribute to a direct increase in the overall size of the opportunity in the India data centre services market.

Another factor, leading to an increase in the demand for enterprise storage solutions, and as a corollary, the demand for data center services in the country is the revival of the BFSI sector.

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Although the India BFSI sector was largely unscathed by the global recessionary trends, demand for financial services was tepid during 2009 but has started showing a healthy revival in the last year. Banking, in particular, is expected to show a healthy growth trend in 2011 as the housing and commercial real estate sectors show greater confidence across most key urban centres.

Government initiatives to increase financial inclusion would also contribute to the demand for such data center services as designated banks appoint banking correspondents (BCs) in rural areas to enroll and verify hitherto unbanked 'bottom-of-the-pyramid' customers.

“Government’s financial inclusion programmes are expected to further provide an impetus to demand for storage, and in turn data center services by the banking sector”, added Apalak Ghosh, Lead Analyst, India Emerging Technologies Research, CyberMedia Research.

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The Central and State Governments have launched a host of projects to make government services more easily available to individuals and business organisations through citizen service centers, online passport application monitoring, e-filing of income and service tax returns and so on.

Specific projects such as the State Data Centers (SDCs) are expected to present attractive opportunities for data center services players in providing consulting and system integration (SI) services over the next few years.

Data centres fuel adoption of innovative delivery models such as cloud computing amongst mid-size enterprises, and increase propensity to experiment with new technologies such as virtualization and Green IT amongst large enterprises:

The India market is currently witnessing experimentation and adoption of new technologies in order to help enterprises optimize utilisation of resources and maximize benefits.

"As cost and competitive pressures increase, enterprise managements will evaluate new technologies and deploy contemporary techniques to maximise benefit from IT resources. We expect enterprises to experiment with a wide array of solutions like virtualization, green IT or cloud, particularly at the data centre level," added Kamal Vohra, lead analyst, India Software and Services Research, CyberMedia Research.

Cloud computing and virtualization will lead the technology evolution and continue to trigger growth in the data centre services market. Server consolidation, optimizing operational expenses (OPEX) and Total Cost of Ownership (TCO), as opposed to an earlier focus on CAPEX, will be top priority in the mind of CIOs.

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