According to research from Frost & Sullivan, data center hosting demand continues to outpace supply in the Asia Pacific region.

The data center and managed hosting services market in Asia Pacific has been growing for nearly a decade, and Frost & Sullivan analyst Chengyu Wu expects growth to continue in Australia and New Zealand at a compound annual growth rate of 14.8%. Revenues in ANZ are expected to top approximately $836 million by the end of 2011.

But, in the region, hosting currently exceeds supply and Wu said, “Over 80% of the major data centers in Asia Pacific are running at close to 90% capacity and space is at a premium.”

Much of the growth for data center hosting is due to strong domestic demand as organisations are prompted by government initiatives toward e-governance and e-readiness.

“Government-driven investments into next-generation broadband networks, IT infrastructure build-outs and e-ready nations have created a growing Internet-savvy population that demands rich content, collaboration and web application,” Wu said. “This demand is the primary driver of the growth in data center space in the region.”

The data center outlook looks positive, but Wu said that many data center operators are struggling with the high cost of operations, which have increased over the past few years. According to Frost & Sullivan Director Jayesh Easwaramony, power costs can often account for more than 50% of data center expenditure.

As talk of green data centers turns to money savings in addition to environmental benefits, with tools such as virtualisation and utility computing, Wu believes the market is moving in the right direction. But because of the skills and cost required to implement, adoption rates of these measures have been minimal.