Given the significant increase in generative AI spending, the demand for hyper scale data centres is projected to increase substantially. According to a report by Synergy Research Group, the capacity for hyperscale data centres will almost triple in six years.

India, too, is witnessing a growth in the hyperscaler landscape. Yotta Data Services, which is a part of the Hiranandani Group, plans to install 16,384 Graphics Processing Units (GPUs) by mid-2024 and 32,768 GPUs by the end of 2025. Older players, like the NSE-listed E2E Networks, have also been expanding their presence in the country.

Moreover, heavyweights like Adani, Tata and Reliance too are swiftly moving ahead in this space. Last year, Tata Communications entered into a partnership with NVIDIA, the largest GPU maker, to develop a hyperscale infrastructure. Reliance and Adani, too, are rapidly expanding their presence in the data centre space. 

The market in itself is growing rapidly, presenting an opportunity for a new hyperscaler to emerge from India. However, the hyperscaler market is still dominated by the big three – AWS, Microsoft Azure and Google Cloud – holding over 60% market share. 

India has a data advantage

Today, India is one of the largest consumer markets in the world. It has overtaken China as the most populous country and the data generated in India is humongous. 

With India is generating terabytes of data monthly due to increased 5G penetration, OTT services, social media usage and the rise of generative AI, the demand for hyperscale cloud providers is skyrocketing, according to Dr Sayed Peerzade, EVP & chief cloud officer at Yotta Data Services. “The emergence of the next major hyperscaler from India is not merely speculative; it will be a reality soon,” he told AIM. 

The anticipated growth of India’s data centre market, projected to increase from USD 5.45 billion in 2023 to USD 7.02 billion by 2029, serves as a testament to the escalating prominence of this sector.

Hasit Trivedi, CTO, digital technologies, and global head – AI at Tech Mahindra, feels the next big hyperscaler with a global scale could emerge out of India in the next 7-10 years. “India boasts a substantial and growing consumer base, and historically, domestic companies have outperformed global counterparts in sectors like banking and automotive on home turf,” he told AIM. 

He expects the trend to extend to the AI space, with many firms diversifying into other business lines due to their established consumer bases. “For instance, Reliance dominates telco and retail businesses with access to consumer data, whereas Adani has a similar consumer base through its airport, retail, power, and other businesses. They can leverage their extensive consumer data to expand into diverse sectors, creating robust ecosystems that offer a significant competitive advantage.”

Consumption of AI to increase

India also ranks fourth globally in the number of startups, following the US, China, and the UK, and we are witnessing a rising trend where an increasing number of these startups are seeking to leverage generative AI capabilities, and most of these models still run on the cloud. 

“The outlook for hyperscalers emerging from India, particularly in the AI decade, is highly optimistic. Indian hyperscalers have a deep understanding of local market dynamics and are closely intertwined with the ecosystem of innovative startups emerging in the region,” Kesava Reddy, chief revenue officer, E2E Networks, told AIM.

Moreover, the ‘AI for All’ strategy of the Indian government further enhances the potential significantly. According to a recent EY report, generative AI will contribute to substantial growth in India’s GDP, with an estimated increase ranging from USD 359-438 billion by 2030, constituting a growth rate of 5.9-7.2%.

“Across a span of seven years, its cumulative effect might contribute USD 1.2-1.5 trillion. This comprehensive approach to kickstarting the AI ecosystem aligns with the vision to make AI work effectively across various sectors in India. By aligning with this vision, India-born hyperscalers are set to play a pivotal role in both the national and global hyperscale landscape,” Reddy added.

De-globalisation and regulations to work in India’s favour 

Notably, most of the IT services are delivered from India and the same will be the case of AI services, Trivedi said. Also, in terms of regulations, India is very open. The regulatory aspect stands out as a crucial factor that could greatly enhance the overall situation. 

Presently, our data is dispersed globally, and only a limited set is stored within India. This scenario is likely to shift with upcoming developments, and there is an expectation for a shift towards more local data storage regulations. 

“Globally, there is a trend towards increased de-globalisation and under the present government, this trend is likely to intensify. Hence, the regulatory aspect holds the potential to be a significant game-changer, and these changes will play in favour of Indian hyperscalers,” Trivedi said.

Moreover, global hyperscalers have been eyeing India as a key market for their expansion plans. “However, indigenous and domestic players such as Yotta are securing a significant competitive advantage over other hyperscalers, buoyed by the enactment of the Digital Personal Data Protection Act of 2023. In fact, Yntraa, Yotta’s indigenously developed hyperscale cloud platform, will be launched in Q1 2024,” Peerzade said.

Why Indian corporate houses have an advantage

Trivedi feels Indian corporate houses like Reliance, Adani, and Tata stand at an advantage. This is because it’s a deep-pocket business, and break-even will take time to come in, notably in 10 to 20 years. Hence, not many can afford to do it. 

“Establishing infrastructure, acquiring thousands of GPUs, and setting up a server room may seem straightforward. There is no entry barrier there. However, the true challenge lies in software, sustaining and scaling these operations. Although numerous Indian startups may enter this domain, not all will thrive in the long run. Some are likely to face the heat and eventually be acquired by major players such as Tata, Reliance and Adani,” Trivedi predicts.

These corporate entities also possess the influence to shape policies and regulations, allowing them to align such regulations to their advantage.

Moreover, Trivedi predicts a government-backed hyperscaler could also emerge and make it big. “A public sector undertaking in hyperscale data centres could happen, but historically they haven’t worked,” he noted.

Over the years, the government has privatised many of the PSUs. However, a public-private partnership model could work. The government has announced a 25,000 GPU cluster to help Indian startups access AI. Going forward, such a setting could emerge as something big.

Disclaimer: The opinions of the individuals may or may not necessarily align with the organisation they represent.