MNCs put Indian data centres on cloud nine

In a move that should worry local providers, large multinationals, including Amazon Web Services (AWS), Microsoft and IBM, have announced the launch of data centre facilities in India over the last year to capture the thriving local cloud computing demand.

Amazon has threatened the survival of traditional retailers in many countries, including in India, and thus a move by its cloud computing division to eye the Indian market must be seen as a threat to Indian cloud providers as AWS is also known to constantly drop prices, forcing others to cut their margins.

However, in this case, it is the Indian providers who seem to be gaining from the MNCs’ move. Why? Because the data centres launched by these large multinationals, including AWS and Microsoft, are all owned by Indian providers such as Tata Communications and CtrlS Datacenters. In some cases, Indian providers are also the ones managing the operations.

Capital-intensive business Setting up a data centre not only requires constructing a building where all the servers are kept, it also includes managing multiple internet connectivity pipes (to ensure uninterrupted connection), large power and cooling infrastructure (to support the requirements of power guzzling servers, which can take as much as 1 MW of power within a single data centre) and physical security of these servers.

Managing operations Amazon, IBM and Microsoft in this case have leased out space within these data centres wherein all they have to do is put up their servers and power them up. Managing these servers is also taken care of by players such as Tata Communications and CtrlS.

“Global cloud providers are just testing the waters right now in India by partnering with Indian data centre providers instead of investing in their own infrastructure so that they get quicker time-to-market and access to local talent without worrying about local regulations,” says Sanchit Gogia, CEO, Greyhound Research.

While none of the providers openly talk about hosting these companies’ data centres due to stringent non-disclosure agreements, sources within these entities told BusinessLine that Indian providers are growing faster than ever on the back of these deals, which even customers of AWS, Microsoft and IBM are unaware of.

When contacted by BusinessLine , IBM declined to comment, while Microsoft and AWS conceded they partner with Indian providers, without getting into specific details on who actually owns the data centres.

Different business models Shane Owenby, Managing Director-APAC, AWS, said AWS follows different models in different countries, which includes leasing space, as well. This basically means many AWS global data centres are actually hosted by many local players.

Hyderabad-based CtrlS is one of the largest data centre providers in the country and also hosts some of the largest global names. “We are working with almost all global cloud providers in India,” said Sridhar Pinnapureddy, Founder and CEO, CtrlS Datacenters, without naming the companies. The deals with international providers have helped CtrlS grow 30 per cent year-on-year and, according to Pinnapureddy, the demand is so high that the company is forced to expand its facilities as well.

CtrlS has already invested $100 million in building its data centres in India and is now investing another $100 million to expand further and even venture into other countries, mimicking the AWS model in smaller countries where AWS is not that strong.

Tata Communications, which confirmed that it partners with most global cloud providers, says there is enough room for growth for both Indian and global players. “We are actively pursuing partnerships with global cloud providers. We already work with several global cloud companies wherein we enable their services. In some cases, they take our services to the market as well,” said Srinivasan CR, Senior Vice President, Global Product Management & Data Centre Services, Tata Communications

Growing cloud market “The entry of multiple players has only strengthened the cloud computing market. Because of this, earlier concerns over security in the cloud don’t exist any more,” said Srinivasan. This is helping Tata Communications’ cloud business grow in ‘high double digits’.

Cloud growth has been phenomenal in India compared to traditional IT. According to Gartner, public cloud services in India are projected to grow at 30.4 per cent this year, while overall IT spending in the country is expected to grow a mere 6 percent.

Add to that, the cloud computing market in India is expected to be only $1.26 billion by the end of 2016 compared to the $71 billion overall IT market.

“In India, Microsoft reaches out to its customers with the help of a strong partner network that comprises cloud service vendors and ISVs. These partners will continue to play an instrumental role in taking commercial cloud services from the local data centres to customers in their respective markets,” said Peter Gartenberg, General Manager, enterprise partner group, Microsoft India.

Cautionary note Analysts, however, caution that the growth seen by the Indian players may not continue for long unless they find their niche.

“Cloud is a capital-intensive business and globally dominated by few global providers. We often hear about the closing down of cloud services by providers who couldn’t compete with the likes of AWS and Microsoft,” says Pareekh Jain, Research Vice-President at HfS Research.

“For example, HP closed its Helion public cloud service last year. So Indian cloud providers will have to carefully identify their niche and go for it,” he added.

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