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Calculating the Cost of a Server Move to India

Multinational organizations that are beginning to establish a larger foothold in the Indian subcontinent may want to consider a server move in order to have an on-the-ground IT presence in the region. However, unless proximity to customers is central to operational efficiency, these companies may be better off utilizing cloud-hosted offerings based in the United States versus a total data center relocation to India.

On the surface, a server move to India can at first seem like a wise decision. As the country’s economy grows, companies would want to make sure their solutions are able to effectively meet rising demand in South Asia. In addition, many corporations have already outsourced parts of their IT operations to India due to cost considerations, as the lower price of owning a data center in this region versus other markets such as North America and Western Europe could prove tempting to organizations looking to quickly reduce annual expenditures. Of the 30 countries listed in real estate firm Cushman & Wakefield’s 2013 report on data centers, India was noted as having one of the lowest labor costs and corporate tax rates.

Why you might want to wait to move your servers to India
However, considerations such as labor costs and tax rates form only a small part of the return on investment calculation of a server move, and other crucial variables reveal that India may not be an ideal country for a data center relocation. Cushman & Wakefield ranked India as the 29th riskiest place in the world to have a data center, as a relative lack of fresh water supplies, government management concerns and poor energy security scores help make the country a potentially problematic location to do business.

“The opportunities for growth are substantial but the ease of doing business is still a barrier,” the report said. “Power security still remains a significant risk stemming from the lack of diversity of energy imports and increasing reliance on imported oil making it still the highest risk country in the APAC region. However despite these challenges, the perspective remains that long-term India will be an attractive investment opportunity.”

While companies may want to one day go through with such a server move, in the short term the risks inherent to conducting business in the region help to increase the odds that an immediate data center relocation would likely be a bad choice. Instead, these MNCs may want to consider setting up a data center in the U.S. or the United Kingdom – according to the report they are the two least risky places in the world to operate a data center – and then using these facilities as a hub for their private cloud, through which they can remotely provision teams located in South Asia.

If you have to move servers, then choose colocation
While cloud computing can work for firms with a comparatively limited presence in India, companies that need to more directly provision clients and internal teams in the region may find that closing the geographic distance between servers and end users is the best possible option.

Businesses faced with this situation then have to consider whether it is best to build out a new data center or to use a colocation provider. According to a recent Forrester report, the key variable in this decision is time. While a 15-year Indian colocation investment has a net present value of approximately $30.5 million, a traditional build-out will cost a firm about $56 million over the same period.

“CIOs and business leaders in India do not fully understand the true costs and risks associated with building and operating a data center,” Forrester analyst Manish Bahl wrote in a recent blog post. “It is utterly critical for organizations to understand the cost and risk implications of build versus colocate and justify the business case to the executive team.”

Unless a company’s server move involves hundreds of hardware components, colocation is the most cost-effective option for businesses that must have an on-premises IT infrastructure setup in India.

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