The data center industry in India is expected to double its capacity in the next two years, and captive and hosted data centers capacities will grow at comparable rates.

In the long term, India has the potential to become a hub for data centre hosting for nearby markets such as Middle East, East Africa and Southeast Asia, says Gartner. There is enough capacity and diversity of network connectivity to these regions to allow applications to be managed out of India.

"There has been a significant increase in storage demand in India, growing from one petabyte in 2001 to more than 34 petabytes by 2007, thereby increasing the data centre uptake in companies," said Nareshchandra Singh, principal research analyst, Gartner. "The potential for Indian data centers is large with the external-controller-based (ECB) market expected to grow by more than 22 per cent in 2008, making India the fourth-largest market for ECB storage in the Asia/Pacific region."

Data center growth will be driven by increasing domestic requirements from sectors such as financial institutions, telecom operators, manufacturing and services. Companies are also investing in additional data centers to enhance or meet disaster recovery and business continuity requirements.

However, the development of data centers in India faces a few major obstacles, including security concerns and data retention worries. "The biggest challenge is the concern about a lack of energy supplies in the country. Even several tier 1 cities, such as Delhi, Mumbai and Bengaluru, have experienced several power blackouts each year. This can become a serious issue as data centre energy requirements in India continue to grow with the rapid implementation of high-density equipment," added Singh.

Gartner recommends that Indian companies building data centers need to incorporate innovative designs and adopt the concept of 'Green IT' and virtualization technologies. Investing in Green IT provides two distinct benefits to the companies, namely; brand value as an environmentally friendly company and the significant reduction in the energy cost component of the IT budget.