India’s data centre sector is set for massive growth fueled by AI and cloud computing, but faces hurdles like land acquisition and power availability. Business models, capex strategies, and sustainability are key challenges, a new report finds.
India’s data centre sector is set for significant expansion as rising artificial intelligence (AI) adoption, cloud computing and enterprise digitalisation fuel demand, though challenges related to land acquisition, power availability and execution complexity are likely to shape the pace of growth, according to a report by JM Financial.
The report said the domestic data centre industry remains at a nascent stage despite robust long-term growth prospects, with access to land and power emerging as the biggest differentiator for developers.
Key Challenges: Land and Power Access
According to the report, companies that have already executed large data centre projects or possess land banks with grid connectivity are expected to enjoy a competitive advantage as they can accelerate project deployment.
Highlighting one of the biggest constraints facing the industry, the report said, “Access to land and power remains the key differentiator,” adding that companies with established relationships and ready access to these resources are likely to benefit by materially shortening deployment timelines.
Evolving Business Models
The report also pointed to an evolving debate over business models, with operators weighing traditional colocation services against integrated full-stack infrastructure offerings. It noted that while colocation remains a stable and predictable business driven by long-term contracts, full-stack offerings can generate higher revenue per megawatt and improve customer retention. However, these also bring greater technology risk, higher capital intensity and execution complexity, making business model selection another key challenge for the sector.
Capex vs. Opex Strategies
The report further said service providers are evaluating capex and opex strategies. While leasing data centre capacity under an opex model offers greater flexibility and lower execution risk, owning infrastructure through a capex model provides stronger strategic control but requires significantly higher investments.
Sustainability and Energy Efficiency
Another hurdle identified by the report is sustainability. As AI workloads increase power consumption, enterprises are placing greater emphasis on both energy efficiency and renewable power sourcing. “Maintaining a low PUE remains important; however, enterprises are also prioritising access to renewable energy,” the report said, adding that securing renewable power through procurement arrangements is likely to become increasingly important.
Contrasting Corporate Strategies
The report also highlighted contrasting strategies adopted by major IT companies. TCS is focusing on building AI-ready infrastructure through its HyperVault initiative and leasing capacity to enterprises, while HCLTech is pursuing a full-stack AI strategy by combining data centres, compute infrastructure and AI models to serve enterprise clients.
Overall, the report noted that sector’s long-term outlook remains favourable, but the availability of land, power, renewable energy and efficient execution will determine which players emerge as leaders in India’s rapidly expanding data centre market. (ANI)
(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)