India Data Center Market 2012 – Significant growth forecasted, Future Outlook 2017

India Data Center market is expected to see significant growth in the next five years as there has been increased adoption by Indian companies of the third party data center services and the government has also increased its cloud computing initiatives where it is directly setting up data centers and also using the services of the third party data center service providers. Reliance Communications has announced the multiple orders bagged from Central and State Government of India as the company has signed long term contract with The Department of Post, Municipal Corporation of Greater Mumbai (BMC), Madhya Pradesh Border Checkpost Development Company Limited along with Karnataka DISCOM and Chattisgarh DISCOM. McKinsey has estimated that the third party outsourced data centre market in India is expected to grow at a CAGR of 32% to Rs 5,500 crore by the year 2017 with verticals such as banking and financial services, media and entertainment service, manufacturing, international telecom providers and retail accounting for 70% of this growth. TechNavio's analysts forecast the Data Center Equipment market in India to grow at a CAGR of 10.4% over the period 2011-2015.

The Indian IT infrastructure market comprising of servers, storage and networking equipment will reach US$2.05 billion in 2012, a 10.3% increase over 2011, according to Gartner, Inc. The IT infrastructure market is expected to reach $3.01 billion by 2016. Revenue growth will be primarily driven by ongoing data center modernization, as well as new data center build outs. Servers are the largest segment of the Indian IT infrastructure market, with revenue forecast to reach $754.5 million in 2012, and grow to $967.2 million in 2016. The external controller-based storage disk market in India is expected to grow from $439.4 million in end-user spending to $842 million in 2016. The enterprise network equipment market in India, which includes enterprise LAN and WAN equipment, is expected to grow from $861 million in 2012 to $1.2 billion in 2016. Gartner Analysts predict that Indian businesses are looking to focus on optimizing the IT Infrastructure and strategy by implementing virtualization and ongoing investment in large captive data centers mixed with the capacity growth initiated by the data center service providers are the key drivers for growth. Mobility, social media and cloud computing adoption will have significant influence on the way data centers are designed, operated and managed their by the data center services providers.

Dimension Data estimates data centre market in India is growing at a CAGR of 22% and will touch Rs 6,500 crore by 2016. BSNL offers managed co-location, managed hosting and cloud services through the Internet Data Centers (IDC), which have been built by Dimension Data for BSNL. This public-private initiative will leverage the strength of BSNL in telecom infrastructure and vacant buildings and that of Dimension Data in providing data center and cloud computing," Communications and IT Minister Kapil Sibal said while inaugurating BSNL IDC services. Dimension Data operates and manages IDC centers, which are located in Mumbai, Faridabad, Ahmedabad, Jaipur, Ludhiana and Ghaziabad. Each of these is run at a Tier III level and all make use of vacant space BSNL has at its telephone exchanges. According to Reji Thomas Cherian, VP, Telecom, Media & Entertainment, Capgemini India, the Cloud Computing market including PaaS, IaaS and SaaS was worth $400 mn for India alone. Data center services revenue is projected to touch $2.6bn in 2012. The managed security market in India was worth $321 mn in 2011 and is expected to see rapid growth. Moreover, managed third party data center services generated revenues to the tune of $662 mn in 2011 and this too is on a high growth trajectory.

India Data Center Market 2012 – Cost Savings & Various Service Offerings

The Indian Data Center market is seeing significant growth in demand as there is not only significant increase in adoption by governments both at the center and state levels where they are aggressively building data centers to utilize cloud computing to store data and provide services to citizens more efficiently but also from the business organizations who have realized that there are significant benefits for them in terms of cost savings and increased focus on their core businesses as hosting a company’s IT infrastructure in a managed data center by a third party service provider and in a centralized rather than distributed manner, works out to be more cost-effective in the long run. In case of captive data centers, huge costs associated with real estate, IT infrastructure, and the manpower to manage it will have a direct impact on the company profitability. Data centers services providers invest hugely (in Crores of rupees) in power and cooling infrastructure such as chiller units, generators, batteries and UPS units, power distribution units (PDUs) and specialized computer room air conditioning units (CRAC) and businesses that are looking to use the data centers services providers can benefit from the economies of scale and shared services model. Data center providers are currently offering infrastructure services along with specialized services (over the cloud) such as security, digital video surveillance and storage and data centers are partnering with vendors and solution providers for offering such services.

Managed hosting services is another key driver of growth in India in which data center provider will lease an entire server to one customer who has full control over the leased server and administration (monitoring, updates, application management, etc.) are offered as add-on services. This is cheaper when compared to deploying a server in-house, as it is costly in terms of power and cooling costs and IT staff costs. Managed services, which include cloud computing solutions, managed ATM services and video conference solutions and Network leases are usually a 12-month contract renewed every year. But for managed service contracts, customers prefer a three or a five-year contract, as they want certainty. Collocation (colo or coloc) is a data center service in which customers can place their own server in a data center and use shared and redundant resources like power and HVAC which is very attractive for the customers as they need not have invest upfront  for such resources. Data centers also offer locked cages for customer servers, monitored by IP cameras at the customer’s end and customers can also visit the site and do server administration from a cubicle. The data center colocation and hosting market in India is estimated to reach $609.1 million in 2012, according to Gartner, Inc. The market will experience consistent growth through 2016 when the market is forecast to total $1.3 billion.

Data center-in- Data center (DiD in which data centers host a major IT service provider like HP, IBM or Dell and the service provider will in turn host infrastructure for its own customers which helps  service provider to focus on its core expertise (applications and services) without making upfront and expensive investments in power and cooling. India players are already hosting some of the major IT service providers and are also opening data centers overseas and are actively looking to go global. Small and Medium businesses are also increasing the adoption and they have significant cost and resource savings by hosting their IT on third party data centers and which is further fuelling demand in India market. The various service offerings by the data centers services providers and the significant cost benefits and increased focus on core business processes are expected to fuel the data center market in India in the next five years and large players are investing heavily in setting up new data centers and increasing capacities. 

Global Social Media Advertising Revenues 2012 – Forecast 2016, Strong growth expected

Social Media had impacted the business world where businesses across the world have been forced to improve their presence on the various social networking sites that had grown significantly in the recent few years by adding millions of users every year. There are more than billion social media users and most of the social networking sites like Facebook, Twitter, YouTube, etc. claim majority of their users to be active which forced businesses to invest in social media content, improve their presence on various social networking platforms and also increase their ad spends focusing on social networking advertising targeting their customers who are also active social media users. According to MDG Advertising, Social Networking sites including blogs is where online users spend most of their time (22.5%) and this is a significant change from earlier where most of the time was spent on email and games. According to research by Nielsen and NM Incite, Consumers utilize Social media to discover, research, and share information about brands and products and 60% of consumers learned about a specific brand or retailer through social networking sites. Most of the active social media users usually read product reviews online, and also 3 out of 5 create their own reviews of products and services which also highlight the fact that consumer-generated reviews and product ratings are the preferred sources of product information among social media users. NM Incite research also highlights that consumers actively use social networking sites to express their loyalty to their favorite brands and products, users are likely to trust the recommendations of their friends and family most and at least 41% say they share their brand experiences through social media to receive discounts.

eMarketer forecasts advertisers will spend $7.72 billion on social network advertising in 2012, including paid advertising on social sites and in social games and applications which is 48.5% YoY growth compared to 2011. But the YoY growth is expected to fall from 2013 and by 2014 the market is expected to reach nearly $12 billion in annual revenues worldwide. United States contribute more than half of the revenues and advertisers are expected to spend $3.63 billion advertising on social networks in the US, up from $2.54 billion in 2011 and continuing to climb to $5.59 billion by 2014. Facebook is expected to garner most of these social network ad revenues, taking in around seven in 10 of all US social networking ad dollars throughout the forecast period. Twitter’s share, by comparison, will rise from 5% to 8% between 2011 and 2014. According a study into Facebook advertising by TBG Digital, in conjunction with the University of Cambridge that analyzed over 406 billion ad impressions in over 190 countries, the average cost per thousand impressions (CPM) of a Facebook advert has increased by 58% in the second quarter of this year. This rise was not consistent across the world however. America saw a rise of 25%, Canada saw a rise of 21%, but the UK saw ad prices go up by just 7%.

Gartner forecasts Global social media revenue which is in early stages in terms of revenue perspective to reach $16.9 billion in 2012, up 43.1% from 2011 revenue of $11.8 billion. Advertising is expected to continue being the largest contributor to overall social media revenue and is expected to total $8.8 billion in 2012. Social gaming revenue which saw significant growth recently and more than doubled in the last two years is expected to reach $6.2 billion in 2012, while revenue from subscriptions is expected to total $278 million in 2012. As social networking sites have a significant number of engaged users who spend considerable time on these sites — this increases the potential click-through rates (CTRs), most of the marketers are allocating a higher percentage of their advertising budget to social networking sites. Another crucial factor is that since social networking sites are reducing their dependence on the subscriptions and are focusing more on alternative sources of revenue predominantly advertising revenues. Social media advertising revenues in the United States will grow from $3.8 billion in 2011 to $9.8 billion in 2016 (CAGR 21%) and also forecast a $4.8 billion social media ad spend in 2012, according to BIA/Kelsey’s U.S. Local Media Forecast (2011-2016).

Gartner further predicts a moderate growth in the number of social media users as growth in developed countries has almost reached maturity levels and further growth in users will be more from emerging markets. With more users coming from emerging markets social networking sites have to customize the existing platforms and develop new forms of media and entertainment to attract new users and keep existing users engaged on their sites. Competition among social media players is also on the rise, as the key players are competing for consumers' leisure time and attention which will also lead to the development of new forms of social media (Web based and mobile). Also social networking sites should focus on developing innovative advertising options and formats for the marketers. They need to develop and deploy data analytic technologies and integrate them into their networks so that marketers have a more accurate picture of trends, consumers' needs, preferences and return on investment statistics. Gartner also highlights that through Social media sites marketers can target ads to discrete consumer segments by unlocking the interconnected data structures of users that include lists of friends, their comments and messages, photos and all their social connections, contact information and associated media. Most of the marketers particularly in the Fortune 500 companies are not convinced about the social network advertising and its impact on their revenues. They are still looking at social networking sites as brand promotion and customer influence tools but not as revenue generating tool. The data clearly highlights the fact that social networking advertising is going to see significant growth this year and coming couple of years and the businesses of all sizes should allocate significant portions of their advertising budgets to this and also has to engage experts and professional ad agencies who have the necessary expertise to generate the necessary content and also make effective ads for the various social networking sites targeting the customers on these sites. 

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