It is the potential of the Indian market that attracts global companies. This is an opportunity for the local ecosystem to change its outlook from services to products
Data localisation or the mandate by a sovereign government for collection, processing and storage of all data that originate first within its own national boundaries is gaining significant momentum in India. Recently, four key pronouncements in quick succession have positioned data localisation as a potential solution for protection of Indian consumers’ privacy and securing the nation’s economic interests. These include recommendations by the Reserve Bank of India (RBI), the committee of experts led by Justice BN Srikrishna, the draft e-commerce policy and the draft report of the cloud policy panel.
Data localisation is a topic discussed globally. Many countries have implemented or are in the process of implementing data localisation laws, including the top four populous nations — China, India, the United States and Indonesia. Europe has recently banned restrictions by its individual states to create a single market for data storage and processing services for its entire region.
The need for data localisation
We have evolved from the industrial era, have passed through the information age and are now entering the intelligence era. In this era, data is the oxygen for powering new-age solutions and adding value to every organisation’s existence and growth. Going forward, every company will be a data company — it will either collect, use or generate data. Here, digital technologies, primarily led by advanced analytics, machine learning (ML), artificial intelligence (AI) and Internet of Things (IoT) can generate tremendous value out of various data attributes. Also, like all other technologies, these too can go overboard and turn disastrous if not contained within certain boundaries.
In such a scenario, where collation, quantum and processing of data is leading to new, improved and differentiated offerings — along with giving birth to new monetisation and business models capable of re-writing the existing playbooks for many industries — the State wants to secure the data of its citizens. Locally hosting and processing of such data is a step in that direction, enabling data privacy and regulation.
What does it mean for businesses?
There is a reason why countries with large populations are thinking ahead on data localisation. These countries are already big markets or getting there, and global companies are focusing of them. Mining the data of citizens in these countries provides the extra edge for these companies to sell their products and services and improve their businesses. This is what makes data in these countries valuable. Many global companies operating in India and catering to Indian consumers including Amazon, Google, Facebook, IBM, etc. have announced building local data centres. This is likely to increase the cost of operations for these companies, but the Indian market dynamics and potential more than compensate for such investments.
Cloud computing and data centre industries are expected to witness a spike due to the data localisation mandate. This move is also likely to help IT and telecom infrastructure players grow.
In Europe, we witnessed global technology companies setup their data centres in big cities and then partner with domestic players to establish smaller centres deep within the countries to cater to tier-2 and tier-3 markets. A similar model is expected to evolve in India as well, thereby creating an opportunity for local data centres to mushroom all over the country.
Apart from this, there exist opportunities for analytics companies to start and cater to the Indian market. They also have the opportunity to partner with global companies with an eye on the Indian market.
This is an opportunity for Indian technology companies to evolve an outlook from services to products. International companies will also be eyeing the Indian market, and this will benefit the growth of the local ecosystem.
Despite the opportunity and potential the Indian market offers, not many young Indian companies have risen to the occasion. This is because the product mindset and business capabilities of such companies are yet to be proven.
However, one big issue with the current data localisation mandate is the number of different agencies (RBI, MeITY, TRAI, UIDAI, CCI, etc.) that are driving various aspects of these recommendations. Some of these are overlapping and competing.
As data mining and processing cuts across and adds value to almost every industry, there is an urgent need to have an integrated, long-term strategy for policy creation, especially for data localisation.
The vision, intent and objective of the government of India is on the right track, but thus far, its execution is wanting. One can only hope that the proposed Data Protection Authority will be able to play that centralised role in an all-encompassing manner.(Jayanth Kolla is partner, Convergence Catalyst. Views expressed are personal.)