Internet Data Centres bounce back

Most of the players in the Internet Data Centre market burned their fingers during the dotcom meltdown. Today, some of them are taking advantage of the outsourcing wave to resurrect themselves, says SRIKANTH RP

SANJAY MASHRUWALA believes that with India getting more international bandwidth, a lot of global content will shift to India from destinations such as the US and Singapore

PLENTIFUL bandwidth on tap from players such as VSNL, Reliance and Bharti, and a growing trend of outsourcing in the domestic market, have given a fillip to the dreams of Indian Internet Data Centres (IDCs). India holds the traditional advantage of low-cost manpower, and Indian IDCs are optimistic that the cost of bandwidth will come down. As market forces spread through the country, Indian players will be able to offer value-added services at the same rates that international players charge for plain-vanilla hosting services.

Outsourcing has helped trigger the market for Indian IDCs. Says Sanjay Mashruwala, president, Reliance Infocomm, “The emergence of serious players with sound business models, solid brick-and-mortar and logistics support at the back-end is driving the demand for IDCs. The need for third-party IDCs is more than before since all players are into serious e-business and want to have the best infrastructure, connectivity, expertise and managed services for their applications.” He believes that the biggest positive factor for IDCs now is that today’s major adopters are not dotcoms but enterprises, banks and financial institutions which want to outsource the hosting and management of their mission-critical applications to specialised providers.

Restructuring the model

Indian IDCs have restructured their business model to survive. For instance, earlier the business model was based on the assumption that as the number of Internet subscribers in India increased, the number of dotcom sites focusing on India would also increase. This model collapsed because the Internet base did not grow as quickly as expected. The other problem was that a host of players—ISPs, ASPs and even non-IT companies—had believed in the same dream and invested in building up capacity. As the dotcom model collapsed, this led to non-serious players exiting the race. The few players who survived stayed on and started focusing on core sectors such as finance and manufacturing. Data centres without adaptive capabilities which were unable to restructure or realign their services and product offerings to suit modified market requirements were wiped out.

Says Sharad Sanghi, chief executive officer, NetMagic, “In addition to the adoption of newer technologies and processes over the years, perhaps the biggest evolution in data centres is the restructuring of service offerings. While data centres of the early nineties offered inflexible services, data centres today have streamlined and restructured their services. In the current approach, customers can pick and choose from various service components as per their requirements.”

Sanghi says that Indian data centres are redefining their offerings to ensure that they are well placed to offer more than plain-vanilla hosting and rudimentary infrastructure services which have become a commodity in today’s markets. Currently, most Indian data centre players offer managed backup, managed firewalls, managed security services (managed firewalls, intrusion detection and prevention, security audits, penetration testing, vulnerability assessment and remote log analysis) and remote infrastructure management, in addition to basic hosting services.

Services on demand

With the confidence levels vested in Indian data centres rising, enterprise customers are now looking at value-added managed services in the spheres of security, storage and system administration. Says Sanghi of NetMagic, “Our security service suite comprising end-to-end security services and solutions is in great demand in the ITES sector.” Disaster recovery is also another popular option. The fact that enterprises are finally ready to outsource security-related requirements is a measure of the increased confidence being vested in Indian data centre players.

Comments Mashruwala, “Until three years back, it was unthinkable for banks or government bodies to think of outsourcing services to third-party IDCs for reasons varying from the psychological to concerns over security and the perceived loss of control. Today, with the range and quality of services increasing, third party IDCs have become a default choice.”

AVINASH J sees a clear trend in corporates looking at data centres to host mission-critical applications such as ERP, CRM or SCM

While most Indian IDCs derive the bigger chunk of their revenues from providing hosting services, the revenues from value-added services such as security and infrastructure management are also growing at a fast clip. Better still, there is an increased awareness and willingness among corporates to host their mission-critical applications at data centres. Observes Avinash J, president, Sify Hosting, “We see a clear trend in corporates looking at data centres to host mission-critical applications such as ERP, CRM or SCM.” He gives the example of United Phosphorous, which shifted its ERP application to Sify’s data centre. Another client, NIIT, shifted its online learning portal, netvarsity.com, from the US to Sify’s data centre.

With the advantage of lower costs, Indian players are also looking at tapping the global market. Many Indian IDC players have started looking to benefit from the trend of global companies outsourcing night-shift remote management. If a US-based company wants to outsource management of its networks only in the night, Indian companies can offer 12-hour monitoring. This approach is beneficial since a US company can have its staff monitoring networks during the day and Indian players remotely managing the same networks at night. This approach lets the American company save money as it can get its network monitored and managed during the lowest-usage period at a significantly lower cost.

Wanna-be global data centres

When a rush of players started entering the Indian data centre market, it was predicted that players with the familiar advantage of cost and time difference could repeat the success of the software services space in the global IDC space. While this dream has collapsed, local players are still optimistic about their chances abroad.

Says Mashruwala, “The time has come. The only factor holding Indian IDCs back was the non-availability of Internet bandwidth at a cost as low as it was available globally. With India getting more international bandwidth, it will be quite economical to access content hosted in the country. This will lead to a lot of global content shifting to India from destinations such as the US and Singapore.”

Before this dream is realised, India has to match its infrastructure with that of the rest of the world. Almost all the players Express Computer spoke to said that current infrastructure levels in India are nowhere near those in Europe or the US. Says Sudipta Sen of Comsat Max, “The absence of regulatory norms and bandwidth pricing dent the ability of Indian companies to make their presence felt in the global IDC space.” Adds Edward Desouza, head, network operations, GTL, “Servers will be co-located as close to the end-user population as possible. An international corporate will most probably look at India as a DR site instead of considering it for a primary site. Having the primary site in India when the majority of the user population is out of India does not seem very feasible.”

Indian IDC players also need an association such as Nasscom to champion their rights for tackling issues like bandwidth pricing. If these issues are tackled, the increasing trend towards outsourcing could make India the global data centre of the world.

srikanth@expresscomputeronline.com