What is driving data center market growth in India?

Intel data centerData center market in India was the second fastest growing in APAC region last year. The impressive growth is expected to continue through this year.

According to the Internet and Mobile Association of India, the current data center market in the country is valued at $2.2 billion, and is expected to touch $4.5 billion mark by 2018.

This increase will be propelled by growth in data and digital intelligent devices, digitalization and also the government’s Digital India campaign.

Over the past few years, multiple countries have enacted data localization laws. Also, due to regulatory and security reasons, many organizations in India, especially from the banking financial services and insurance (BFSI) sector, are not willing to host their data in a data center that is out of the country.

As a result, the data center providers are forced to set up local data centers in India. Recently, U.S. tech giant Oracle said it will set up a local data center to expand its cloud services.

IBM already has two data centers in India (Mumbai and Chennai) and NTT Communications has three (Mumbai, Bangalore and Noida).

Microsoft was the first large cloud operator to launch its data centres in India. In 2015, the IT major announced 3 new data centres in the country, followed by Amazon in 2016.  Google is due to set up an Indian data centre this year.

Meanwhile, Alibaba Cloud has announced plans to set up its first data center in the country in early 2018 in Mumbai.

According to Frost & Sullivan Asia Pacific Data Center 2017 report, while there is a greater adoption of managed hosting services (outsourced model), colocation services (captive data center) continue to dominate data center revenue.

This will continue to be driven by large enterprises and highly regulated verticals such as BFSI, which require strict data confidentiality and complete management control of their operations.


According to Gartner, India will see Infrastructure-as-a-Service (IaaS) eclipse traditional data center outsourcing by the end of this year.

In India, traditional data center outsourcing spending is forecast to reach $559 million in 2017, while cloud spending will total $677 million.

Gartner analysts also predicted that by 2021, cloud computing and storage as-a-service will be nearly three times more common than traditional data center outsourcing.

A bigger focus on cloud, mobility and analytics has made many organizations rethink their data center strategies. Organizations in India are evaluating data center architectures that would provide them the agility, flexibility and the scale desired for new application workloads.

Subho Ray, president of IAMAI, believes that India has the potential to capture a big share of the global data center market. But this will only be possible when the country addresses the risks and barriers to data center operations, and creates the right incentives for businesses to build efficient data center infrastructure.

A recent research by Oracle also goes in the same line. It says Indian businesses are rapidly embracing cloud infrastructure to boost performances and innovation levels. A survey it conducted as part of the research revealed that 79 percent of businesses in the country that are already using IaaS to some extent, say it makes it easier to innovate.

Moreover, the same proportion said moving to IaaS has significantly cut their time to deploy new applications or services.

While negative perceptions around security, complexity and loss of control still present barriers to adoption, these factors are fast becoming outdated myths.

By Praveen Nair, general manager for DCD, Mumbai, India