Client Background

A leading investment management firm with over seven decades of experience sought to expand its portfolio into the Indian data center market, leveraging its established expertise in urban infrastructure, EPC, and power solutions. The firm aimed to capitalize on the rapidly growing India data center market, projected to grow at a CAGR of 13.37% over the next five years, driven by increasing cloud adoption, digital transformation, and surging data storage demand.

The firm set an ambitious goal of achieving 3x growth in its digital SBU by the third year and evaluated two approaches for market entry:

1. Greenfield Strategy: Building a 10 MW data center from scratch.
2. Brownfield Strategy: Acquiring and scaling an existing 10 MW data center facility.

Complication

Market entry posed several challenges:

1. Strategic Dilemma:

• Should the firm prioritize the Greenfield strategy with high CAPEX but long-term scalability?
• Or pursue the Brownfield strategy, offering faster time-to-market and leveraging existing infrastructure but with potential scalability constraints?

2. Technical and Operational Risks:

• Greenfield Strategy: High upfront costs, regulatory delays, and extended timelines.
• Brownfield Strategy: Infrastructure limitations, hidden compliance risks, and additional costs for scalability.

3. Market Pressures:

• The need to capture double-digit market share within the first year to compete with Tier 1 players.
• Rising customer demand for colocation, cloud, and managed IT services required agility and quick operational readiness.

Solution and Value Delivered

Ken Research used a structured, multi-phase methodology to deliver actionable insights. The evaluation incorporated secondary research, primary validations, financial modeling, and industry benchmarking.

1. Greenfield Strategy: Building a New Data Center

Findings

• CAPEX & OPEX Analysis:
• Initial investment grew by approximately 100% over five years.
• IT equipment accounted for ~50% of total costs, making energy efficiency (PUE) critical for cost optimization.
• Tier 1 cities were 25-40% costlier than Tier 2 cities but offered better connectivity and access to demand-heavy markets.
• Risk Factors:
• Regulatory delays and long construction timelines deferred market entry by 2-3 years, increasing competitive pressures.

Insights

• The Greenfield strategy aligns with long-term scalability and energy efficiency goals.
• Tier 1 cities are recommended for their strong connectivity and high client demand.

2. Brownfield Strategy: Acquiring an Existing Facility of 10 MW DC and an EPC Player

Findings

Infrastructure Assessment:

• Existing facilities operated at 65-75% capacity, leaving sufficient headroom for growth.
• Cooling and power upgrades were estimated at 15-20% of the total investment.

Operational Efficiency:

• PUE values ranged from 1.7 to 2.0, above industry benchmarks, indicating inefficiencies in energy usage.
• Disaster recovery and network redundancy required enhancements to meet Tier 1 client expectations.

Cost & Time Advantages:

• Upfront investment was 30-40% lower than the Greenfield approach. 
• Time-to-market was faster, achievable within 12-18 months compared to 2-3 years for Greenfield.
  • Existing facilities were at 65-75% capacity, allowing for immediate operations with room for growth.
  • Cooling and power upgrades were estimated at 15-20% of CAPEX.

Insights

• The Brownfield approach enables rapid market entry with lower initial costs but requires strategic upgrades for long-term efficiency.
• Ideal for clients needing immediate market presence while maintaining flexibility for phased improvements.

3. Comparative Analysis

Ken Research’s Recommended Strategy – Brownfield Approach

Ken Research recommended the Brownfield strategy for its lower costs and faster market readiness, backed by:

Key Findings Supporting the Brownfield Strategy

1. Infrastructure Assessment:

• Existing facilities operated at 65-75% capacity, leaving sufficient headroom for growth.
• Cooling and power upgrades were estimated at 15-20% of the total investment.

2. Operational Efficiency:

• PUE values of 1.7-2.0 required improvements to approach industry benchmarks.

3. Cost Advantage:

• Investment was 30-40% lower than Greenfield, enabling CAPEX optimization.

4. Time-to-Market:

• Faster operational readiness within 12-18 months, facilitating quick market capture.

Results Achieved

1. Rapid Market Entry:

• By adopting the Brownfield Strategy, the client successfully operationalized the acquired facility within 12 months, significantly faster than the 2-3 years required for a Greenfield approach.
• This enabled the client to quickly penetrate the market and capture 15% market share within the first year, establishing a strong position in the competitive Indian data center landscape.

2. Cost Optimization:

• The Brownfield approach reduced initial capital expenditure by approximately 30% compared to Greenfield, primarily due to leveraging existing infrastructure and minimizing land acquisition and construction costs.
• Upgrades to cooling and power systems were completed at a 15-20% cost of total CAPEX, further enhancing energy efficiency without compromising scalability.

3. Revenue Growth Potential:

• By focusing on high-demand services such as colocation, cloud hosting, and managed IT solutions, the client attracted key enterprise customers and secured steady revenue streams.
• Facility utilization reached 75% by the second year, ensuring consistent growth and profitability while maintaining capacity for future demand.
• The scalable nature of the facility supports the client’s long-term goal of 3x growth in the digital SBU within three years.

4. Sustainability and Scalability:

• With a Power Usage Effectiveness (PUE) improvement from 1.7 to 1.5 through targeted upgrades, the facility achieved significant energy efficiency gains, aligning with industry benchmarks.
• Disaster recovery and network redundancy enhancements met Tier 1 client expectations, ensuring the facility’s operational resilience and compliance with evolving regulatory requirements.

5. Competitive Advantage:

• The strategic combination of rapid market entry, optimized costs, and enhanced operational efficiency positioned the client as a preferred provider for enterprises in the Indian data center market.
• This early foothold allowed the client to differentiate itself from competitors and build a reputation for reliability and scalability.

Client Testimonial

"Ken Research provided us with a clear roadmap to navigate the complexities of entering the data center market. Their data-driven approach and actionable insights helped us confidently choose a dual strategy that balances immediate market entry with long-term scalability. Their expertise has been invaluable in ensuring our investments align with our growth goals."
– Chief Strategy Officer

Conclusion

Ken Research's advisory enabled the client to confidently adopt the Brownfield Strategy, ensuring rapid market entry, cost efficiency, and operational scalability. The strategy balanced immediate market needs with the client’s long-term growth vision, establishing a strong foothold in the Indian data center market.

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