The Indian Data Center (DC) services market has tremendous potential to grow by leveraging multi-tenancy, scalability, and reduced CapEx (capital expenditure), among other things. The market is expected to grow at a compound annual growth rate (CAGR) of more than 26% in the next five years.

Due to the market potential and growth prospects, DC services are not only lucrative but also fiercely competitive. In such a scenario, by selling 25% of its DC arm Nxtra to Carlyle, Airtel is trying to gain the upper hand with a strategic focus on its DC portfolio.

Currently, the market is dominated by STT GDC and Netmagic, among others. But we have seen a steady flow of new entrants in this space over the past couple of years and many global majors are closely monitoring the Indian DC market.

The DC business is capital-intensive and only suitable for those who are in it for the long haul. When choosing a DC provider, some of the key considerations usually include the location of the facility, scalability, reliability, resiliency, experience, and financial stability. Given the recent market volatility that the telecom sector has witnessed, an investment from a private equity firm like Carlyle is a step in the right direction.

Drivers of Data Center Success

While there are several drivers behind this growth story, two drivers stand out given the current market context. First, cloud computing is the future of every organization. Hence, hyper-scale providers such as Google and Amazon are emerging as critical customers that will need to scale in local geographies for data residency needs and sheer capacity needs. Second, various regulations on data residency and data sovereignty are enabling the enterprises to host their data within the geography; hence, the demand for co-location is increasing.

This is a great time to be in the DC space, and we expect this market to witness more growth in the near term. The market is in an enviable position with DC facilities selling out as soon as they are offered to their customers, auguring a bright future for all of the key stakeholders.

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