As data is growing at leaps and bound pace fueled by various factors, the data center industry is witnessing a massive surge in the demand. The data center landscape is undergoing a substantial transformation, with significant advancements in scalability and density. These emerging infrastructure trends are poised to elevate the country's potential as a leading data center hub. According to a JLL report, the Indian data center market, which stood at 850 MW by the end of 2023, is projected to grow to 1,645 MW by 2026.
The rapid adoption of digital services, cloud computing, and the Internet of Things (IoT) is driving the demand for robust data storage and processing infrastructure. The government's Digital India initiative, aimed at fostering a digitally empowered society, is further accelerating this demand.
A notable trend is the rise of AI and Generative AI technologies, which require extensive computational power and storage capabilities. As businesses across various sectors increasingly integrate AI-driven applications, such as natural language processing, image recognition, and personalized recommendations, the need for data centers to support these workloads is growing.
Additionally, the anticipated rollout of 5G networks will lead to a surge in data generation, necessitating advanced and scalable data center facilities. The expanding startup ecosystem and the growth of small and medium enterprises (SMEs) are also contributing to this trend, as these businesses increasingly rely on cloud-based services and AI-driven solutions.
Tier-I cities benefit from strong infrastructure and connectivity, making them ideal for hyperscale data center construction. Meanwhile, Tier-II cities are expected to see more Edge Data Center expansion as companies prioritize proximity to their business operations.
Increasing Demand for Data Center
The data center market in India is expected to surge and grow at 15.07% CAGR from 2022 to 2027. The factors behind this surge include industries going increasingly digital, the expansion of the nation's economy, government spending on infrastructure, 5G technology etc.
Elaborating on the factors driving demand in the data center segment, Piyush Somani, Founder, CMD & CEO, ESDS Software Solution says, “India's data center market is set to expand big time. It's expected to jump from $4.35 billion in 2021 to $10.09 billion by 2027, growing at a 15.07% CAGR from 2022 to 2027. What's behind this boom? Well, more and more industries are going digital. Banks, healthcare providers, and online shops are leading the charge. These sectors need data systems that can grow with them and keep their information safe.
The nation's economic expansion, backed by strong foreign exchange reserves of over $622.5 billion (as of February 2024) and hefty government spending on infrastructure, has resulted in a record-breaking Gross Fixed Capital Formation (GFCF) of 34.1% of GDP in FY2024. Government programs like "Digital India" and rules about keeping data local are pushing companies to invest in data centers within the country, as they need to store information inside national borders.”
He adds, “The arrival of 5G technology will increase data use and the need for better data processing. Also, more companies are moving to the cloud often using a mix of private and public clouds and online shopping is booming. These changes are making advanced data centers more important. More industries are using data to make choices and study trends, which adds to this need. All these factors together make India one of the fastest-growing data center markets, with lots of changes happening.”
India's digital landscape is evolving at a breakneck pace, and a few key trends are fueling the demand for data centers. The most important factor is growing data consumption. Businesses also comprehended the significance of interconnection. OTT subscriptions and rising data demands from latest technologies are critical factors for data center growth.
Manoj Paul, MD, Equinix India explains, “First and foremost is the explosive growth in data consumption - with over 700 million internet users and counting, businesses need robust infrastructure to keep up with consumer demands.
According to the Global Interconnection Index (GXI) 2024, global interconnection bandwidth (includes internet and direct connection between businesses and service providers over cross-connect or services like Equinix fabric) is growing twice the rate of the Internet, which shows that more and more businesses realize the importance of interconnection and are increasing adopting it for data exchange. Use of cloud and multi-cloud along with pricing policies of the CSPs which benefit connection over cloud on ramp (like AWS Direct Connect instead of Internet) and the proliferation of Internet Exchanges is also driving growth of direct peering. Growth in OTT subscription and more viewership of live sports on OTT channels along with the increased data-dense demands from emerging technologies such as AI, 5G, and edge computing are creating a scenario where enterprises are seeking dynamic access to the most powerful computer resources with high efficiency.”
Another significant driver is the rapid adoption of cloud services, especially by small and medium enterprises. Adding further he says, “Amongst the growing appetite for advanced technologies like AI and machine learning, the south Indian data center market led by Chennai, Bangalore, and Hyderabad is observing a major growth surge. According to an industry report, this surge is supported by the government's forward data center policy, which is creating an environment for strategic infrastructure investments along with an intense demand for digital services. The region will play a crucial role in the global data center landscape, with capacity projected to grow 65 percent by 2030. These cities have a combined installed data center capacity of approximately 200 MW and 190 MW currently under construction.
Data-intensive applications require significant computing power, and that's where state-of-the-art data centers come into play.”
Though India witnesses a rapid digital adoption irrespective of industries and it generates a striking 20% of global data but the share of data center capacity is very insignificant. This indicates the requirement of data center advancement in the country. AI is also a driver in the growth of the industry.
Rohan Sheth, Vice President, Colocation & DC Build, Yotta views, “India has been seeing a significant surge in digital adoption across industries, leading to massive data consumption. Despite generating 20% of global data, India’s share of data center capacity is only 3%. This disparity highlights the urgent need for data center development in the country. According to real estate consultancy JLL, data center capacity in India is projected to increase by 791 megawatts (MW) by 2026.
The advent of AI is another major factor driving data center growth today. The adoption and widespread use of emerging technologies such as AI and Generative AI have made faster data processing critical, transforming data centers from traditional storage facilities to high-power data computing hubs. In March 2024, the Indian government approved over Rs 10,300 crore for the IndiaAI Mission, aiming to empower AI startups and expand compute infrastructure access, further fuelling demand. In 2024, the spotlight is firmly on AI as it integrates into data centers to enable optimised operations, heightened security, and proactive issue prediction. Picture AI-powered cooling systems that dynamically adapt to real-time server loads, ensuring optimal performance and energy efficiency. Intelligent software to continuously scan network traffic, pre-emptively detect and isolate cyber threats, providing defence measures before they escalate.”
Incorporating latest technologies
In data center operations, the role of AI and ML is important. These tools help in predictive analytics, automation and enhanced resource management. Integrating AI and ML into data center operations requires robust data collection, powerful computational capabilities, and skilled personnel to develop, train, and deploy these models effectively. Once implemented, these technologies significantly enhance the efficiency, reliability, and security of data center operations.
Prashant Pereira, Vice President, Data Center service, Sify Technologies expounds, “Here's are some ways AI and ML benefit data center operations:
Predictive Maintenance: AI and ML models can predict equipment failures by analyzing historical data, thereby allowing for proactive maintenance. This reduces downtime and helps in scheduling maintenance during off-peak hours, optimizing overall performance.
Resource Allocation: ML algorithms can analyze workload patterns and dynamically allocate resources such as CPU, memory, and storage to different applications or servers based on demand.
Energy Efficiency: AI optimizes energy consumption by analyzing data center cooling systems, server loads, and environmental factors to adjust power usage. By learning patterns, ML can suggest energy-saving strategies without compromising on performance.
Security: AI-powered algorithms can identify anomalies in network traffic, detect potential security threats and provide real-time responses to mitigate risks, thus ensuring security of data centers.
As AI advances, the demand for computation and storage capacity grows, causing considerable development in the data center business. AI applications, ranging from processing natural languages to deep learning, necessitate massive computer resources to handle and analyze data efficiently. Furthermore, the necessity to store massive datasets for training and inference increases the demand for storage capacity.
As a result, data center operators are seeing an increase in demand as organizations seek to adapt to the rising needs of AI technologies. The synergy between AI and data centers highlights the importance of infrastructure in promoting innovation and propelling technological growth.
As AI and Machine Intelligence penetrate several sectors in India, the resulting data explosion increases the requirement of data center expansion. These centers serve as the foundation for processing and storing massive amounts of data, enabling AI-driven advancements across industries ranging from e-commerce to healthcare, and driving the critical expansion of data center infrastructure across the country.”
Reiterating the same, Amit Agrawal, Chief Business Officer, Web Werks - Iron Mountain Data Center says, “AI and machine learning are being utilized to optimize energy consumption, predict maintenance needs, and enhance overall operational efficiency. These technologies allow us to analyze vast amounts of data in real-time, enabling proactive management of our infrastructure. Additionally, we are embracing edge computing to support the growing demand for low-latency data processing. By deploying micro data centers closer to end-users, we can provide faster and more efficient services, particularly for applications requiring real-time processing, such as autonomous vehicles and IoT devices. These innovations are not only enhancing our service offerings but also positioning Web Werks – Iron Mountain Data Centers as a leader in the evolving data center landscape.”
Security
Security of data is a concern for every organization as it is the new oil to run any company. So, for the data center companies, data security and cybersecurity form the bedrock. Not only security of data but physical security of the data center premises is also vital.
Rohan Sheth of Yotta comments, “Data security and cybersecurity are foundational elements in the operation and management of data centers. At Yotta, we recognize the critical importance of these elements and have implemented a comprehensive range of measures to safeguard both physical and digital aspects of our data center operations.
We offer a 100% uptime guarantee in our data centers are accredited by Uptime Institute Tier Certification which is the leading data center certification authority and ensures our customers of fault-tolerant operations, always.
Additionally, we provide our own cybersecurity solutions called Suraksha which is Yotta’s smart cybersecurity suite. Suraksha is an a-la-carte service, allowing customers to pick and choose the cybersecurity offerings they need. Suraksha is also powered by IBM QRadar, which ensures that customers get industry leading services with Yotta.”
STT GDC follows a multi-layered security measure to ensure security and protection of its client’s data and infrastructure.
Jatinder Singh Pabla, Chief Sales & Marketing Officer (CSMO) India, ST Telemedia, Global Delivery Centres India (STT GDC) describes, “At STT GDC India, we employ multi-layered security measures to ensure the highest level of protection:
Certifications: Our data centers are certified by global standards such as ISO 27001 for Information Security Management.
Physical security: We implement stringent physical access controls and surveillance systems across our facilities.
Cybersecurity: We utilize advanced digital security measures to protect against cyber threats.
Compliance: Our facilities are certified for various industry standards, including PCI DSS, ensuring compliance with stringent security requirements.
Operational excellence: We have over two decades of experience in operating mission-critical facilities, with well-established procedures and best practices.
Regular audits: We conduct frequent security audits and assessments to identify and address potential vulnerabilities.
Staff training: Our teams undergo regular training on security protocols and best practices.
Customer isolation: We provide secure, isolated environments for each customer's infrastructure.
24/7 monitoring: Our facilities are monitored round-the-clock by trained security personnel and advanced surveillance systems.
Disaster recovery: We offer disaster recovery services to ensure business continuity for our clients in case of any security incidents.
These comprehensive measures ensure that our clients' data and infrastructure remain secure and protected at all times.”
Like any other data center company, ESDS stressed upon both physical and cyber threats. It is focused on offering unparalleled protection to customer data. Apart from implementing necessary physical security, it has deployed multi-layered defense mechanisms to combat cyber threats. Its Security Operations Center (SOC) keeps a check always and quickly responds to any security problems.
Piyush Somani of ESDS Software Solution says, “Today, cyber security is on the rise, and the security of our data centers is more critical than ever. With the increase in both physical and cyber threats, we at ESDS are committed to providing unmatched protection for your valuable data. Our data centers have 24/7 high-definition video surveillance, biometric access controls, and armed security guards. We’ve also integrated advanced fire detection and suppression systems alongside redundant power and cooling systems to keep everything running smoothly, no matter what.
But it’s not just about physical security. We employ a multi-layered defense mechanism to shield against cyber-attacks. Picture next-generation intrusion detection, cutting-edge firewalls, and robust encryption protecting your sensitive information. Our Security Operations Center (SOC) works around the clock, monitoring network traffic and responding swiftly to security incidents. We conduct regular vulnerability assessments and penetration tests to address potential weaknesses proactively.”
On a similar note that security is important, Manoj Paul of Equinix India mentions that apart from deploying solutions for physical security, the company also invests in training its staff in terms of security. Equinix India also updates itself technologically so that it can keep pace with the evolving cybersecurity space. It works together with its customers to understand their security needs.
He explains, “Security is paramount in our industry, and at Equinix, it's woven into every aspect of our operations. On the physical security front, we employ a multi-layered approach. This includes 24/7 on-site security personnel, biometric access controls, and comprehensive video surveillance. But it's not just about having the right technology - we also invest heavily in training our staff to be vigilant and follow strict security protocols.
Cybersecurity is an ever-evolving challenge, and we're constantly upping our game. We've implemented advanced threat detection systems powered by AI and machine learning, allowing us to identify and respond to potential threats in real-time. We also conduct regular penetration testing and vulnerability assessments to stay ahead of emerging risks.
But perhaps most importantly, we recognize that security is a collaborative effort. We work closely with our customers to understand their unique security requirements and help them implement best practices. We also participate in industry-wide threat intelligence sharing initiatives, because we believe a rising tide lifts all boats when it comes to cybersecurity.”
Growth & Opportunities
Technologies like AI and Generative AI played the role of a catalyst that boosted the Indian data center industry. And the adoption of the latest technologies seeks high-performance data centers. The capacity of the industry is expected to reach 1,645 MW by 2026.
Furthermore, along with rapid adoption of cloud computing, digital transformation across verticals, 5G, expansion of IoT ecosystems and government policies further the scope of data center growth in India.
Amit Agrawal of Web Werks - Iron Mountain Data Center says, “The Indian data center industry is set for significant growth, fueled by the increasing adoption of AI and Generative AI technologies across various sectors. These technologies demand high-performance data centers, creating opportunities for expansion and innovation. The industry's capacity is projected to reach 1,645 MW by 2026, with a 24% CAGR, while globally, data center storage capacity is expected to double by 2027 due to rising AI demands.
India's large market, skilled workforce, and vibrant startup ecosystem make it a strong contender as a global data hub, especially with its focus on sustainability. The country's data center capacity has grown from 350 MW in 2019 to 854 MW in 2023, attracting international partnerships and investments from global colocation players and hyperscale entities.
Cloud computing is another major growth driver, with more enterprises moving to cloud platforms. The digital transformation across industries like healthcare, finance, and retail is creating demand for specialized data center services, especially for AI-driven applications. The rollout of 5G and the expansion of IoT ecosystems are also generating massive data volumes, driving the need for advanced data centers and edge computing.
Supportive government policies, including tax incentives and strategic land allocations, further enhance the sector's attractiveness to investors. Data centers that integrate cutting-edge technologies and offer scalable, secure, and efficient solutions are well-positioned to capitalize on the industry's growth opportunities.”
Jatinder Singh Pabla of STT GDC views incredible growth opportunities in the market due to some trends like capacity expansion, geographical diversification, AI adoption, focus on sustainability etc. The company also plans to double capacities to keep pace with the development.
Explaining the trends he says, “We foresee tremendous growth opportunities in India's data center industry:
Capacity expansion: India's data center capacity is expected to grow to approximately 3000 MW by 2030. This represents a CAGR of over 20%.
Geographic expansion: While continuing to significantly expand in existing metro markets, we see expansion in 5-6 top Tier 2 cities also.
AI-driven demand: The rise of AI and GPU-intensive workloads is creating demand for high-density, liquid-cooled data center solutions.
Enterprise adoption: Sectors like BFSI and Global Capability Centers (GCCs) are showing strong demand for data center services.
Government partnerships: We've signed MoUs with several state governments for investments in data center capacity.
Sustainability focus: There's growing demand for green data centers, aligning with our commitment to carbon-neutral operations by 2030.
Given these trends, we expect to double our capacities every four to five years for the foreseeable future, reflecting the robust growth in India's digital ecosystem.”
Other than 5G, digital transformation, and the latest technologies, there are various factors that are encouraging the data center segment to inch towards growth. OTT subscription, data localization laws, Digital Personal Data Protection Act 2023 etc. are further boosting the industry.
Prashant Pereira of Sify Technologies states, “By 2026, India's Data Center capacity in the major metropolitan cities is predicted to reach 1,645 MW. Key factors leading to the rise in Data Center growth are penetration of 5G across the country, adoption of Cloud Services, increase in OTT and content usage, according to a joint report by the Confederation of the Indian Industry and Colliers.
The Data Localization laws, and Digital Personal Data Protection Act 2023 also has led to increase in Data Center capacities in India.
In recent years, the Indian data center market has seen significant scalability and density changes. As a result of this expansion, India is in an advantageous position for future growth. Though Tier 1 cities have typically been chosen for primary data center expansion, India is experiencing a steady increase in the number of Data Centers in Tier 2 cities, which are also favorable locations for developing Edge Data Centers.
Data centers, like other businesses, are continually evolving as technology advances and business needs change. With technical advancements such as IoT, AI, and ML, the emphasis is shifting to third-party data centers and cloud platforms to address structural requirements. It also allows organizations to move much of the cost of running a data center by moving from on-premises data centers to the cloud, which offers computing, storage, and networking as a service.”
India's data center market is on the brink of remarkable growth, fueled by a variety of factors that are driving the industry's rapid acceleration. Data center companies are anticipating a significant surge, driven by the widespread adoption of digital transformation, emerging technologies, 5G, and increasing OTT subscriptions. In addition to these drivers, the growth will be further bolstered by data localization laws and the DPDP Act 2023. The industry is optimistic and well-prepared to capitalize on the expected growth.
