Kishore Poreddy Column :Zooming Data Center ecosystem in India

The launch of Amazon Web Services’ Cloud Data Center in Hyderabad this week finally puts Hyderabad on the map of India’s Hyperscale Data Center Hubs.The news that Amazon (AWS) would be investing 4.4 billion US dollars over the next eight years in its Hyderabad Availability Zone (a cluster of data centres) is great news for Hyderabad, Telangana and India. The recent boom in building Data Centres across India is a testimony to India’s fast-growing digital economy, thanks to the steps taken by the Modi government to fulfil its “1 Trillion Dollar Digital Economy” vision.

Access to high-speed internet and mobiles, fast-paced digitisation of India’s economy, and the exponential growth of technology startups in India – making it the third largest hub in the world for Startup Unicorns, coupled with the Indian government’s thrust to provide citizen services through the digital medium (Digital India), have raised the need for hyperscale computing, storage, and transfer of digital data. But the progress in building data centers has been slow. The very nature of Cloud Data Centers makes their geographic location almost irrelevant. Indians and Indian companies were happy to leverage the Cloud, without much stress on their geographic location. That has been the story until very recent times.

All that changed with the Reserve Bank of India issuing a directive in April 2018 on the ‘Storage of Payment System Data’ that mandated all payment system providers registered with the RBI to store entire data related to payment systems and their transactions within India. India was in the throes of a FinTech (financial technology) revolution by that time.

Demonetization and Universal Payment Interface (UPI) have queered the pitch for FinTech services to bloom. Soon after the RBI directive, the Modi government introduced the Personal Data Protection Bill 2019 in Parliament. Although the 2019 Bill was replaced recently with the Personal Data Protection Bill 2022, the Government of India continued with its stress on “Data Sovereignty” and “Privacy”. Both Bills mandate companies to store Indians’ private data within India. The 2022 version, taking compliance and cost concerns raised by the internet enterprises, struck a balance by allowing for the transfer and storage of Indians’ private data in certain “trusted geographies” beyond India.

These moves by the RBI and the GOI, along with the rising data storage and transfer demands within India mentioned earlier, coupled with the Finance Ministry’s categorisation of Data Centres as Infrastructure, and the Modi government’s thrust to build out an ‘India Cloud’ have given the much-needed impetus for global Cloud operators like Amazon Web Services (AWS), Google Cloud Platform (GCP), and Microsoft Azure to open Cloud Data Centres in India. The IT Ministry foresees an investment of Rs 5 lakh crore by Cloud operators into building data centres in India over the next five years.

Telangana becomes the latest entrant into the Hyperscale Data Center club, which already has Maharashtra, Uttar Pradesh, Karnataka and Delhi, where Amazon, Google, Microsoft, NTT, CtrlS and a score of other multi-national and Indian cloud providers have already established and started their Cloud Services.

Hyderabad, where land is plenty, where floods are rare unlike in coastal areas, where the weather neither supports high humidity nor fires, located in a Seismic Zone II category geography, makes it an ideal location for a Data Center Hub. I am surprised it took so long.

Building and running Data Centres bring many advantages for Hyderabad. The most significant benefit will be the transfer of knowledge and skills in cooling technologies to constructing fireproof, flood-proof, and earthquake-proof buildings to upgradation of our Electricity and Internet infrastructures. Although most of the expertise and materials in building a Data Center and equipping it with tens of thousands of computers will be imported, the local businesses too will see benefits, especially those which are in the business of construction and building materials.

As one news report states, and I quote, “AWS is planning to invest an estimated $4.4 billion in India by 2030 through the new Hyderabad Region, which includes CAPEX on the construction of data centers, operational expenses related to ongoing utilities and facility costs, and purchases of goods and services from regional businesses”, the major expense is in building out the facility and paying the utility costs to run it.

Unlike Software Services companies where the capital costs are low and the recurring payroll costs are high because of the large number of high-paying jobs they create, a typical Data Center requires humongous capital costs to build, equip and run, but creates only a few dozens of technology jobs. Of course, it also creates a few hundred support jobs like Security, Administration etc, but the high-paying technology jobs are few.

In a document, titled: ‘Data Centres: Jobs and Opportunities in Communities Nationwide’, the US Chamber of Commerce, mentioned that a typical large data centre can generate 157 local jobs annually during the operational phase. Being a technologist myself, and having worked in Silicon Valley for over a decade, I have closely observed Data Centres and their (in)ability to generate high-paying technology jobs. It is good that Amazon is setting up Data Centres in Hyderabad with a long-term plan. In spite of not creating many local jobs as projected, their benefits are numerous. Unfortunately, some politicians, for reasons known to them, claim the credit for the one benefit that does not exist.

(The author is BJP TS spokesperson)