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Rush into India data centers gathers steam

Following increased MNC activity in India data centers, others including local firms smell a good opportunity

Microsoft, IBM and Amazon Web Services have opened, or plan to open, new data centers in India. In early October, IBM opened a SoftLayer cloud data center in Chennai. A few weeks earlier Microsoft announced three new Azure cloud data center regions in Pune, Hyderabad, and Chennai. In June AWS announced plans to open an Indian data center in 2016.

Local company Reliance Communications smelled an opportunity. RCOM and its subsidiary Global Cloud Xchange (GCX) plan to set up four data centres in India by the end of 2016, investing $80 million (around Rs 5 billion), as part of their strategy to increase capacity by 40 per cent, according to Bill Barney, Chief Executive of Reliance Communications (Enterprise) and GCX. This is part of the company's major expansion of its cloud platform, where it sees significant business opportunity. It expects that in the next five years, 25 per cent of its business would come from cloud services.

RCOM-GCX claims to be the largest provider of cloud computing facilities in India with 11 data centres. Around 3,210 Indian enterprises, 14,505 global enterprises and 231 Fortune 500 companies in Mumbai have connected through the RCOM/GCX network, the company says. RCOM has connected with Amazon, Microsoft, SoftLayer and Google to enable its customers to leverage their services.

Netmagic Solutions, a local subsidiary of NTT Communications, plans to build 3 more data centres in Mumbai, Bengaluru and Noida. The company plans to double its data centre capacity as it sees huge growth opportunity in this business. In October, it launched its 9th data center in Mumbai. With this launch, Netmagic now has 9 data centers across India and will have more than 600,000 sq. ft (55,000 sq. mt.) of floor space. NTT Communications expects to spend about Rs 1,000 crore over the next three years in India as the company is applying for a national long-distance licence and expanding its data centre business, President and Chief Executive Tetsuya Shoji said.

Meanwhile, Singapore Technologies Telemedia, an investment unit of Temasek Holdings, has emerged as a strong contender to buy Tata Communications' data centre business in a deal estimated at about $700 million (Rs 4,421 crore), people with the knowledge of the matter said.

A deal to acquire the business, which has 44 data centres globally, is being worked out, said the people, adding that the process, however, remains competitive as one more party is aggressively pursuing the business.

Tata Communications is selling the data centre business as the unit requires huge capital and the returns on investment have a long payback period. Moreover, the telecommunications arm, part of the country's largest conglomerate, the Tata Group, wants to bring down its debt of $1.4 billion (Rs 8,844 crore).

The data centre business of Tata Communications, in which the Indian government is a strategic investor with a 26% stake, has revenues of over $150 million (Rs 948 crore). A significant number of the company's data centres are based in India, which clocked Rs 436 crore in revenue and had an operating profit of 27% in fiscal 2015.

Big "Digital India" plans of the Government and growing enterprise interest in cloud computing have sparket the rush to set up data centers. Besides, Barb Darrow, writing in Fortune magazine, quotes Evans Data Corp. estimates that there are 2.75 million developers in India, making it the second-largest country (after the U.S.) in that regard. Evans expects the Indian developer population to soar 90% to 5.2 million in the next three years. As Darrow comments "in cloud computing, as in terrestrial real estate, location is key. The further the computing is from the person who computes, the longer the lag times"

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