IDC India has predicted that the Indian data center services market will see a compounded annual growth rate (CAGR) of 22.7 percent over the two-year period 2009-2011.

That is according to the latest findings from the IDC India report "Assessment of Business Opportunities in the India Data Centre Services Market" (January 2010). "latest findings"

It predicts that the India data centre services market will touch nearly Rs. 10,000 crore ($2.16 billion) by the end of 2011, representing a compounded annual growth rate (CAGR) of 22.7 percent over the two-year period 2009-2011. The overall India data centre services market was estimated at Rs. 6,300 crore ($ 1.4 billion) in 2009.

The Indian analyst group points to the key verticals that contributed nearly 80 percent of third party data centre services revenue in 2009. These were manufacturing and IT/ITeS, with the third party data centres constituting about 18 percent of the total revenues. IDC expects this to go up to 22 percent by the end of 2011.

It also forecasts that captive data centres ('captives') will grow at a CAGR of 19.9 percent during 2009-11, with manufacturing and banking, financial services and insurance (BFSI) showing high deployment. IDC defines "captive" data centre is an in house data centre set up by a company for its own use (as opposed to a data centre that services several external clients.

Demand from the Government sector is expected to pick up in 2010 and beyond. The report also states that growth over the next two years is being driven by high speed internet bandwidth service providers, data centre hosting players, power and cooling solution providers, hardware vendors and system integrators (SIs).

"Third party data center services are gaining traction with enterprise customers due to the lack of in-house skills, high investments and long gestation period that a data centre calls for", said Ravikant Sharma, Senior Analyst, User Research, IDC India."

As the economy gains further strength in 2011 and IT adoption in SMBs increases further to achieve business growth objectives, this segment is expected to become the next growth driver for third party data centre services," Ravi added.

But that is not to say that data center service providers in India can expect an easy ride. IDC India says that customers will increasingly look for better technical skills from the service providers, and will seek to close the gap between commitment and delivery. Captives are being favoured in sectors involving high degree of security, internal controls and tighter management.

"Shrinking budgets, rising energy costs, increased preference for outsourcing and adoption of blade servers in data centres have led to new engagement and management models - ranging from co-location services to pay-per-use platforms", said Arpan Gupta, Senior Analyst, Industry Verticals and Government Research Practice, IDC India.