Top Indian companies join red-hot sovereign cloud race

“Sovereign cloud is an area of major demand across the country. Today, it’s not just government bodies that are showing up as customers—demand is rising from regulated sectors such as financial services, while other areas such as healthcare and telecommunications have major clients because these are sectors that require data localization," said Seema Ambastha, chief executive of Vyoma, L&T’s cloud and data centre business. “Overall, as we build our sovereign cloud offerings, we expect 50% of our net cloud business to be served by sovereign cloud customers."

The sovereign cloud opportunity–or data centres storing and processing information within the confines of a country’s geographical borders–is expected to explode. Horizon Research predicts this market to surge nearly tenfold from about $2.3 billion in 2024 to $21 billion by 2033, growing at an annualized rate of 28%.

Indian companies join giants Microsoft and Google, which are also looking to create sovereign cloud offerings for enterprises in India. On 3 August, Bharti Airtel launched Airtel Cloud for businesses. On 24 April, Tata Consultancy Services launched SovereignSecure.

“TCS is not a rival for us—in fact, we have a strong, long-term partnership. We have a number of announcements in the pipeline, where we will be expanding our Azure cloud offerings within India," said Puneet Chandok, president of Microsoft India and South Asia.

“We do not break down the exact percentage of our public sector clients. But, with TCS, we are working on a partnership in sovereign cloud where we collaboratively bring the service to more customers in India," Chandok told Mint in an interview. “In the long run, we expect this to account for a significant chunk of India’s AI-driven cloud demand for Microsoft Azure."

It’s unclear whether the announcements will be made during Microsoft’s global chief executive and chairman Satya Nadella’s India trip this week.

Microsoft’s Big Tech rival Google already offers sovereign cloud to its clients in India.

“We've had Gemini models in India for a while, where the entire end-to-end data processing happens inside of Google's data centres in India," said Mitesh Agarwal, managing director and chief technology officer for Asia-Pacific at Google Cloud, told Mint. “We're also seeing demand for a second, extremely sensitive use case where customers do not even want the data to go out of their on-premise data centres. For this, we have a solution called Google distributed cloud, where Gemini models are provided within this hybrid secluded cloud itself."

In India, the adoption of sovereign cloud is also increasing because of the Digital Personal Data Protection (DPDP) Act, 2023 and sector-specific rules, such as the Reserve Bank (RBI)’s June 2019 data localization diktat to all financial services firms.

“Companies are ready to pour in big money in data centre and cloud operations to future-proof their businesses against regulatory sovereignty," said Sanchit Vir Gogia, founder and chief analyst at tech consulting firm at Greyhound Research. “The shift toward sovereign cloud infrastructure is permanent, because it aligns with both policy and profit: sovereignty rules mandate local storage, energy costs dictate local sourcing, and investors reward those who can monetize long-term utility returns."

While the companies did not name clients citing non-disclosure agreements, two industry executives said that key customers for sovereign cloud in India right now include all of India’s top public and private-sector banks, healthcare firms such as Apollo Hospitals and Manipal Education and Medical Group, and government agencies such as Aadhaar and the Income Tax department.

On 6 October, Airtel won a deal with the security operations centre (SOC) of Indian Railways to manage its data processing, cybersecurity and transactions on the cloud.

“The demand for cloud as critical infrastructure is rising because even if you cut it off from the outside, the data processing and services will continue to operate. This is helping de-risk businesses," Sharath Sinha, chief executive of Airtel Business, said in an interview with Mint.

Kashyap Kompella, veteran AI and cloud analyst, said air-gapped digital infrastructure–a system isolated from the internet for security reasons–will rise on demand from enterprises across industries as more companies handle personal data extensively, and India’s privacy and data localization laws ramp up.