India Third Party /Hosting Data Center Market - Major Challenges

Bandwidth cost has come down, but it is higher compared to western countries and today it constitutes 30% to 35% of operational costs of a data center. Three years back bandwidth price was $2000 - $2500 per Mbps per month and presently it is around $500-$700 per Mbps per month but it has to come down to $150 - $200 per Mbps per month to become a viable data center destination. In US band width rates presently are at $100 per Mbps per month. There has been an increase in bandwidth with speeds progressing from 1G to 10G. With the band width pricing falling down in India compared to US many e commerce companies and travel sites have shifted to Indian Data Centers. Several service providers with bandwidth and/or data centre space are entering into the business. Most telecom companies now offer hosting services.

Cooling systems affect the power consumption in the data centers. Dual core and quad core processors in the servers generate hit and directly affects the power required per square feet. Higher-density cabinets and racks in the data centers are expected to increase in the coming years which will affect the density of both power and cooling required to support them. Row and rack-based cooling are the best for higher-density equipments as it helps in reduce energy consumption by 15%. Cooling cost can also be reduced by air conditioning wands that pinpoint critical hotspots in server arrays to a specific temperature and also free cooling wherein external cold air is used to cool the data center. Proper airflow, temperature and humidity in the data centers help reduce the power cost as the power tariffs in India are raising by 10-15% every year. Availability of uninterrupted power supply is one of the major problems that Indian Data Centers are facing. The Government of India estimated the country will require an installed capacity of over 200,000MW by 2012 to meet electricity demand. Its current total installed capacity is about 160,000MW.

Rising real estate costs are another challenge. Real estate costs are higher because most of the data centers are set up near to the metropolitan and major cities and most of the clients are not keen in having their data centers far away near to smaller cities and town where the cost will be less. Most of the data center clients in India are BFSI, Manufacturing. Mumbai is the financial hub; Delhi has most government and public sector establishments and real estate prices in IT cities such as Bangalore and Hyderabad are also rising. Government can help the data center industry in India by providing the network connectivity and improving the power supply to the cities and towns near to the metros and IT hubs.

Virtualization is the key for making data center more efficient and lower costs. It optimizes the usage of critical underlined compute resources, reduces low equipment utilization rates, enables infrastructure consolidation and helps reducing heat and power consumption. Also Green IT practices such as data center virtualization, better data center design and layout and asset lifecycle management, which reduce the need for CAPEX, are becoming increasingly important. Tools are being developed that help in power efficiency and usage calculators, Building management systems, infrastructure management, that help in improving efficiency and reduce costs.

Other challenges for the industry are lack of qualified and skilled professionals who are needed at mid level and higher levels of management of data centers. India has lot of IT professionals experience in other fields but people with data center experience are hard to find. Data centers in India are running at 80-90% capacity and with rising demand Vendors have to look for ways at increasing their capacities fast and at low cost. Setting up full fledged data center takes a minimum of three years to complete and become operational. Data security concerns is another issue as India in the BPO sector has experienced pilferage of data by employees. With rising cost and competition there has also been pressure on the margins of the data center vendors. Cost of adoption and integration of new technologies in hardware, software and facilities management is a concern and vendors have to realign their pricing strategies and business models to maintain the profitability.

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