Express Computer engages in a conversation with Kalyan Muppaneni, Founder and CEO, Pi Datacenters, a trailblazer in the digital infrastructure domain. With a decade-long commitment to fostering India’s growth, Muppaneni shares insights into the company’s remarkable journey, emphasizing the strategic importance of tier two and tier three cities in shaping the nation’s digital future. From establishing the country’s first Greenfield and Uptime Institute Tier IV Certified data center in 2017 to the recent announcement of investments in the Hyderabad data center, Muppaneni provides a comprehensive overview of the company’s growth story and sheds light on the challenges and strategic decisions behind the company’s expansion into tier two cities.
Please take us through the overall growth journey of Pi Datacenters?
Being an early believer in the growth story of India, particularly in the digital and digitisation space, my journey began over a decade ago. Around 2012-2013, while observing the tremendous growth in India’s GDP and IT services, I noticed a significant gap in the digital infrastructure domain. Despite the surge in technology adoption, the digital infrastructure, especially data center infrastructure, was substandard.
Considering the critical role played by digital infrastructure in fostering economic growth, I decided to leverage my two decades of experience, including a decade with Intel, to make a difference. Recognising the need for equitable growth beyond the top metros, I envisioned tier two and three cities as vital contributors to India’s development. This belief aligned with global examples where numerous cities outside the top ones played significant roles in their respective economies.
Given the challenges of establishing data centers in different cities like Vijayawada, Vizag, Lucknow, Bhopal, Jaipur, Jammu and Kashmir, Himachal Pradesh, etc., I decided to take a different approach. The cost and complexities associated with building in cities like Mumbai or Bengaluru were substantial. Instead, I focused on tier two cities, selecting a strategic location on the golden quadrilateral connecting Chennai to Mumbai. This decision allowed us to tap into major fiber lines, dedicated power sources, and ample resources.
In 2017, we went live with the first-ever Uptime Institute Tier IV Certified data center in the country. Since then, our journey has expanded to Kochi, Hyderabad, and future plans for Mumbai. This pioneering initiative in tier two cities aimed not only at data centers but also at catalysing the growth of the entire digital ecosystem.
Today, as we approach a decade since the inception of this vision, the conversation about tier two cities is gaining traction. However, there is still much work to be done. While progress has been made, the entire industry needs to collectively prioritise and invest in the growth of tier two and tier three cities. This extends beyond data centers to encompass IT services, education, and holistic development, ensuring that the benefits of economic growth reach every corner of the country.
Through platforms like yours, we have the opportunity to amplify this message. It requires a conscious effort from all stakeholders, including government bodies, ministries, and industry leaders, to steer the growth of GDP towards multiple cities, fostering a more inclusive and comprehensive economic development landscape. The time is ripe for a coordinated effort that can bring about transformative change within the next two years, much like the recent green revolution in electric vehicles. Let us collectively shape a future where growth is not confined to a few urban hubs but permeates across the entire nation.
Your Vijayawada facility was the first Uptime Institute Tier IV Certified data center in India. And together with the Cochin DR site, today you serve more than 300 customers. Was this a strategic move? If yes, then how did you capitalize on it?
In the initial years of Pi’s establishment, we held a distinct advantage as a startup that was relatively unknown. However, the strategic profile we meticulously designed and swiftly executed in the first two years catapulted us into the market spotlight. This was attributed to Pi being a Tier IV data center, a rarity globally. Our presence resonated not only within India but across the data center landscape worldwide, spanning Asia Pacific, Europe, and the US. The recognition we garnered within a short period, even for a company at our developmental stage, was exceptional and rare.
The primary purpose behind shaping Pi as a Tier IV data center was unequivocally fulfilled. This strategic move not only earned us rapid global recognition but also facilitated the construction of a top-tier data center. Even today, upon close inspection of our data center, its construction and operation standards remain unparalleled in the country. The quality of our infrastructure is unmatched, positioning us as one of the premier data centers nationwide.
While we may be situated in tier two cities, and competitors in tier one locations may have certain advantages, our market recognition and commitment to quality continue to distinguish us. As we embark on expansion, maintaining this credibility becomes crucial for our continued success. The reputation we’ve built, coupled with our unwavering commitment to quality, positions us as a formidable player in the market, poised for sustained growth and success.
In September this year, the company announced expansion plans and investments in the Hyderabad data center. Why did it take the company 6 years to make such a move?
Over the past six years, my primary focus has been on creating a sustainable company. Approximately two and a half of those years were significantly impacted by the challenges brought on by the COVID-19 pandemic. As I mentioned earlier, establishing our data center was no easy feat, and it was crucial for us to ensure its sustainability once operational. Building a profitable and cash-flow positive company is a formidable task that demands unwavering dedication.
Despite the buzz surrounding the growth of cloud services, the reality for many companies, especially during uncertain times like the onset of COVID-19, was a cautious approach to IT investments. While there was a surge in the usage of tools like video conferencing and productivity tools, enterprise cloud adoption for running critical applications was influenced by budget constraints and the need for certainty.
During this period, the key focus shifted from aggressive growth to sustainability. We weathered the storm, with nearly three challenging years where the emphasis was on staying afloat and maintaining financial stability. The strategy of prioritising sustainability paid off, and we successfully navigated through those tough times.
Now, with a solid foundation and a keen eye on the future, we are expanding our operations into Hyderabad and exploring opportunities in other locations. Our expansion into tier two cities aligns with our long-term vision of creating a sustainable growth company. In the data center industry, often seen as a gold rush, our approach has been deliberate and organic. We believe in meaningful investments that contribute to the long-term health of our company.
It is important to note that in any industry, following trends blindly without a deep understanding can lead to pitfalls. Our commitment is to create a platform for sustainable growth, looking beyond the short term and focusing on the next decade. Our goal extends beyond organic growth; we plan to build a robust presence in the digital space in India and expand our operations internationally. This approach encompasses both the data center and cloud space, ensuring a holistic and enduring contribution to the digital landscape.
Could you further elaborate your plans to acquire new customers in this region?
We are excited to announce that we are now open for business and ready to welcome customers, with a specific emphasis on colocation services. Our immediate focus is on the burgeoning market in Hyderabad. Whether you are a financial services entity, a banking institution, a product-oriented company, an e-commerce giant, or a hyper-scale player, we have tailored solutions for your needs. We offer both retail and enterprise solutions, but our primary emphasis in Hyderabad is on building colocation facilities in the financial district.
Furthermore, our attention extends to the field of artificial intelligence (AI). We are geared towards hosting AI customers and are set to launch our AI cloud services. For those looking to host an AI cloud, our Vijayawada data center is a strategic choice. The cost efficiency, particularly in terms of power consumption, makes it an optimal location, offering up to 30-40% cost savings compared to Mumbai. This is especially relevant for resource-intensive tasks like large language model training, where the backend processes take significant time.
Hyderabad remains a key hub in our expansion strategy, and we are committed to providing cutting-edge solutions. We are also unveiling plans for Mumbai in the coming months, along with the announcement of additional tier two cities. Stay tuned for updates on our expansion into these markets, including Kochi, and two more cities, one in the southern region and one in the northern region. We are dedicated to offering state-of-the-art services in strategic locations to meet the evolving needs of our diverse clientele.
Do you believe that AI has matured sufficiently for widespread adoption at this point, or do you see it more as a buzzword with various entities attempting to develop solutions without a fully matured landscape?
AI is no longer a mere buzzword; it has transitioned into a concrete reality. Although the full spectrum of use cases is still evolving, AI is already extensively employed in consumer applications such as e-commerce and various consumer-oriented services. The maturation of AI applications is especially underway in large-scale enterprise applications and other sectors. While the learning models are currently in the early stages, the trajectory indicates a steady progression.
We find ourselves at the initial 25% of the AI adoption curve, and this phase is expected to persist for the next year or so. Subsequently, we anticipate reaching the 50% mark within the following couple of years and reaching 75% after that. In approximately five years, AI is poised to become the norm, much like the widespread acceptance and integration of cloud technologies, which were once considered novel but are now taken for granted.
The journey of AI adoption mirrors the trajectory of cloud technologies, especially considering the accelerated pace catalysed by recent global events such as COVID-19. As AI becomes deeply ingrained in various technological applications, spanning HRMS, healthcare, finance, education, and more, significant transformative changes are on the horizon. The flight of AI has already commenced, and it is set to reshape every facet of technology applications.
The shift towards AI is not confined to software and applications; even major semiconductor companies like Nvidia, Intel, and AMD are steering their focus towards AI. For data centers, adaptation is imperative, necessitating fine-tuning of current and future capacities to efficiently host AI workloads. The density per rack will experience a substantial increase, potentially reaching levels ten times higher than the current standards. The AI revolution is underway, and its impact is set to redefine the technological landscape across various industries.
Talking about the broader landscape of the data center industry, India was widely regarded as a hub in the region up until 2021-22. Do you still see this happening?
India is poised to emerge as the data center hub in the Asia-Pacific (APAC) region, and there is no room for doubt in this regard. Anticipating a significant surge in the number of data centers and the overall data center capacity, the key consideration lies in understanding the composition of this capacity. It is crucial to differentiate between capacity built by hyperscalers for their internal operations and the capacity designated for third-party data centers catering to enterprise customers.
The data center industry demands commitment from serious investors and dedicated entrepreneurs with a long-term vision. Unlike industries with faster turnaround dynamics, such as e-commerce, FinTech, or certain service sectors, the data center domain necessitates focused companies and teams. It is not an arena for those seeking a casual entry or experimenting with the “let’s see how it goes” approach. Serious players, deeply rooted in technology, particularly the intricacies of cloud and data center operations, are the ones poised for success.
There is a concept of building data center parks instead of standalone buildings. Do you vouch for this approach, and if so, what advantages do you see in adopting this strategy?
When it comes to the concept of Data Center Parks, it seems to be more aligned with government initiatives. These parks operate at the state government level, where efforts are made to attract investments and data center companies to the region. From this standpoint, it appears acceptable, similar to how the government designates specific zones for various industries, like pharmaceutical companies or special economic zones. This zoning strategy seems to have a significant impact, especially evident in the surge of new data center capacity.
Over the past few years, Hyderabad has emerged as a key city, surpassing other cities like Chennai and Bangalore. This growth can be attributed to the state’s proactive approach in creating attractive and sustainable policies for data centers. Such policies encompass factors like providing reasonable power pricing, offering CapEx subsidies for the initial high capital expenditure, and other incentives such as land and construction support. The success of these initiatives is crucial at the state level, where having the right mindset and local governance policies play a pivotal role. Telangana, in particular, has exemplified this approach, transforming from a relatively unknown player six years ago to now ranking as the second-largest market for data centers after Mumbai.