Understanding the Challenges of Data Centers in India

In the previous five years, India’s technical environment has undergone a sea change, with the country making rapid progress toward becoming a full-fledged digital economy. Much of it may be ascribed to the country’s increased internet connectivity and mobile phone adoption.

Data Centers in India

Today, digital payment choices are a preferred way of transaction, and a sizable portion of the population is actively engaged on a variety of social media platforms and e-commerce sites. Continued expansion of services such as AWS, Google Cloud Platform, and Azure, as well as social networking sites such as Facebook, Instagram, and Twitter that rely largely on the cloud, has contributed to the massive volume of data being generated.

Furthermore, as a result of the COVID-19 dilemma, businesses have been forced to embrace the ‘work from home’ paradigm, resulting in a greater reliance on virtual meetings and other IOT-based platforms.

The tremendous increase in data consumption and creation, as well as cloud usage, has increased the demand for data centers in India. The Digital India initiative, smart city development, and data localization rules have considerably increased demand for data centers in the nation.

Even small and medium-sized organizations are striving to turn into technology-led organizations with a movement toward increasing cloud-led innovation and their own data centers. Not unexpectedly, demand for hyperscale data centers and managed services has skyrocketed in the last two years.

However, there are a number of difficulties in India that must be addressed before we can truly launch on a development trajectory for the data center business. While the industry has enormous potential and aggressive data center construction plans are ongoing in key cities throughout the country, we are still a long way from labeling ourselves as data center-ready and presenting a trustworthy and appealing solution to interested clients.


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Some of the major obstacles now impeding data center expansion in India are as follows:

The scarcity of needed skillsets – At the moment, India is severely limited by a scarcity of trained labor, which is critical for the operation of a data center. Because the industry is still in its infancy in the country, there is a patchwork of information about it.

A global-standard data center needs a wide range of specialized skills, the majority of which take years to learn and cannot be recreated in a short period of time. It necessitates complex expertise in specialist areas such as power, HVAC, security, network, and civil, as well as project managers, technician, and analyst jobs for power systems, facilities control, and robotics, among others.

Fundamental technological abilities, such as programming, as well as knowledge of specific technology platforms and tools, are also required. Furthermore, data centers require individuals with problem-solving and critical thinking capabilities, as well as a strong emphasis on efficiency.


Lack of necessary infrastructure – In addition to the need for specialized skillsets for data centers to thrive, adequate infrastructure is also required. A data center’s fiber network and electricity requirements are critical components.

Most cities have only one power service provider and no backup power sources. Unstable power supply and a high dependence on generators provide a significant operational challenge for operators. The lack of resources, such as water to cool the facilities, presents additional problems for facility operators in supporting operations, resulting in power use effectiveness falling below the needed level due to high ambient temperatures. Furthermore, India’s present fixed broadband speed is lower than the worldwide average, which is a hindrance to effective data center operation.

Data Centers in India

Location and land limits – It is important to understand that the development of a data center differs from the development of other real estate asset classes. Before deciding on a location, a broad number of factors must be considered, as not every site is suitable for a data center critical evaluation must be carried out while keeping in mind the city dynamics and GDP, enough power infrastructure, land availability without any drawbacks, access roads, the feasibility of creating cable routes, availability of water resources, and competent workforce in mind.

In order to rule out such places, detailed analyses of criteria such as seismic activity, flood records, aircraft patterns, distance from transportation hubs, the existence of any industry with hazardous emissions, and closeness to establishments such as residential areas are performed. As a result, accessing land banks in cities with these specific conditions is challenging.


Policy needs – One of the most significant issues confronting the data center sector is a lack of appropriate policies to enable its expansion. With powerful governments at the state and federal levels, there are a variety of restraints for data center operators in terms of policies, approval processes, taxation, and other laws and regulations.

Stable policies between state and federal governments are necessary for data centers in order to expedite approval procedures and shorten delays. Consolidated efforts are also required on multiple fronts, including the construction of single-window clearances, uninterrupted power at cheap prices, 5G deployment, financial incentives, effective tax structures, and stamp duty exemption on property purchase, among others.

Data centers differ from commercial buildings in that they must adhere to a separate set of standards. As a result, the government must develop long-term strategies to meet such demands. The Ministry of Electronics and Information Technology recently released a draft policy framework for the intervention/promotion of data centers in India. It is predicted that once the ideas are adopted, many of the concerns impeding data center expansion would be remedied.


Capital intensive – Data centers are capital expensive, considerably more so than any commercial building, and thus presents a significant barrier to entry for many developers and investors. Common commercial construction standards that are applied to data centers waste space and raise costs. Furthermore, issues such as high real estate costs, spending for expanding wide area network connections, and higher equipment costs due to the ongoing pandemic have all contributed to the sector’s already high CAPEX.


Datacenter activities were expected to make substantial leaps in the year 2020, seen as a growth engine not just for the country’s economy but also for various auxiliary sectors.

While the COVID-19 situation has thrown a wrench in the works, the importance of data centers has only grown, and they were designated as critical services throughout the pandemic. Demand for data centers in India will continue to rise as a result of rising cloud usage, digital transformation, IoT, and social media use.

With the amount of data rising at such a rapid pace, it is just a matter of time until India catches up to the developed world — assuming the limits outlined are adequately addressed. When enacted, the draft policy on data centers is anticipated to assist incentivize the sector and provide global operators and investors confidence in India as a preferred data center site.



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