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Is There a New Opportunity for You Within These Walls?

By Patrick Cisler

What comes to mind when looking at these pictures? When I first saw similar images, I thought these buildings were a corporate headquarters for the latest Silicon Valley technology company, a modern healthcare facility, an architecture firm, or even a secret nuclear testing site given the security fences and cameras. Well, in fact, these are all buildings that house data centers.

A Data Center is a facility used to house computer systems and associated components, such as telecommunications and storage systems. Trying to understand all the intricacies and language involved in a the world of Data Centers can be overwhelming, so I am going to attempt to avoid creating confusion by focusing only on the main drivers for attraction of a Data Center project. The following information is based on the research of and recent conversations with Data Center companies.

So what does a company looking to construct a data center in your region look for before breaking ground? It mostly boils down to the ability to power their facility in an efficient manner.

One of the first questions you will get when speaking with Data Center companies is, “What is the cost per kilowatt of electricity?” Data Centers often use enough power to keep a small town running. One executive said that $.04 was really competitive while $.05 was just average. I had another individual ask if we could provide $.03/kw! I don’t know about you, but there are not a lot of areas that I know of that can accommodate these prices. We have some of the lowest rates in the state of Michigan, and we don’t come close. In fact, no state in the U.S. averages rates these low, but there are unique regions that can accommodate those prices, such as in the Pacific Northwest.

Closely tied into the cost of electricity is where the power comes from. As this industry modernizes, there is a major focus on renewable energy and energy efficiency. You won’t get very far on a data center company website before finding the words PUE (Power Usage Effectiveness) measuring how effectively the power is used on the computing equipment in a data center. You will find company bragging rights as they try to get close to the 1.0 ratio. Renewables are important as well. One executive told us recently that he would be interested in considering our city if “no less than 35% of the energy supply” came from renewables. Again, here is a little exercise; close your eyes and think of a place in the United States that this is possible. There certainly aren’t many, and this is why again, the Pacific Northwest is a hot spot for Data Centers where they can utilize both hydro and wind power.

With the rise of cloud computing, some organizations are moving towards storing their data wherever they can get the best price. This again allows for the Pacific Northwest to be a desired region. However, many organizations aren’t comfortable with the distance to these centers and the chance of needing emergency access. Therefore, many Data Centers are built close to home base for an organization. If the organization isn’t large enough to need their own facility, they can take advantage of co-location Data Centers (co-location refers to a data center that houses multiple organizations’ data by providing equipment, bandwidth, security, etc. in one physical location). This brings us to the commonly used phrase “location, location, location.” When it comes to co-location data center sites, they desire to be located near metropolis cities. It is natural that organizations like to be close to where their Data Centers are located, and with the greatest number of organizations located near a big city, it is possible for co-location Data Center providers to attract the largest number of clients.

Approach the larger organizations in your area to find out what they currently use for their Data Center needs. Many of them will have an on-site area devoted to data storage. Chances are, however, with the continued growth of technology and the need for storage that they will hit capacity at some point in the near future and be forced to face the decision of where to move their storage. Do they want to build on-site or build a separate building in the region? Or do they want to take advantage of cost and scale with co-location or the cloud?

The location is not only important to attract clients, but location also matters when it comes to cooling capabilities and environmental hazard risks. One of the most expensive costs of operating a data center is the power it takes to keep the equipment/servers cool. Because of this, many of the modern data centers built prefer to be located in cooler climates where they can take advantage of their surroundings. When speaking to an executive of a Midwestern data center company, he mentioned that he believed over the next few years data centers would stop being built in hotter states such as Arizona, and even current data centers in those states would begin re-locating entirely. An example of this is Microsoft, which recently expanded a cloud computing data center in Dublin, Ireland that relies almost entirely on outside air to cool servers.

Let’s review: If you want to attract cloud data center sites or large organizations that are comfortable with building data centers away from their current operations, do you have the capability to offer cheap electricity, a cool climate, relatively safe location from natural disasters, efficient energy, and renewable energy capabilities? Along with these unique characteristics, Data Center projects are also looking for those common attractions to every industry such as local tax incentives.

One conclusion I came to after working with Data Centers is that they may not be worth attracting in the long-run for two reasons. First, they are very bottom line driven, as in only looking for the cheapest cost to operate. And the truth is, I can’t blame them. They don’t have a large number of employees that need to operate the site outside of a few security guards and computer technicians. This means that they don’t have to be located where there is a large skilled labor pool or in a desired location that will please their employees. They are concerned with how to operate in the most cost effective manner possible while being environmentally and energy conscience at the same time. Therefore, breaking the bank to attract them may not be worth it if it always comes down to dollars and cents. The lack of employees leads to my second reason for foregoing data center attraction. The initial construction phase will bring a small boost to some local companies, but after that there isn’t much on-going employment opportunity in addition to the few positions just mentioned. This means there isn’t a draw of employees moving there to work and not a large increase in tax revenues. The utility companies will benefit from the boost in electricity revenues, but it could have little economic impact beyond that (in my opinion).

This is my advice for moving forward with this growing industry: Most organizations still like to be close to their data storage in case they need their people to access it or in case of emergency. Because of this, whether you are a metropolis or not there are organizations in your own backyard that are going to need to upgrade data storage in the near future and will want it close to their home base. Some of the big ones to focus on (but not limited to) are hospitals, financial institutions, technology, transportation, government agencies, utilities, and educational institutions. Start connecting with them to determine how long they can store data on-site, and find out their plans for future storage. If you track enough companies, you may find some breaking-ground or co-location projects right at home in the years to come. Don’t wait for cloud computing centers to attract all the business elsewhere. If you would like to stay up-to-date on the latest in data centers, this is a well-run website dedicated to the industry: (www.datacenterknowledge.com).

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