Dean Barber

Some Hows and Whys on Data Centers

In Site Selection on October 13, 2013 at 7:00 am

I’m in the problem-solving business.  On the corporate side, that means site selection – finding that optimal place for a company where the risks are reduced and chances for success are greater. There’s much work involved in honing it down to the right spot.

On the economic development side, it means helping a community identify and leverage assets while addressing those shortcomings that can be improved upon to better a local business climate and compete for future corporate investment.

So there you go, that’s what I do.

But for me to help either a company or a community, I have to be well armed with information. Data is the fuel that stokes the fire.

For any corporate client, no matter what the industry type, if I am going to help them, they need to help me. That means they have to confide in me and give me the inside story. I have to know the true drivers of a project in order to add value.

Last week, the CFO of the North American subsidiary of a large Japanese electronics manufacturer told me that the single most important factor in determining their future location for a corporate headquarters was based on “sustainability,” “being eco-friendly” and “green.”

Now that was the company’s choice and preference, and who am I to say that’s wrong? But it is that kind of information that I would certainly have to know if I were to provide good service. This was part of their corporate culture.

That Last Question

Also last week, I found myself on a panel discussion concerning the siting of data centers. Being that I was attending the Texas Data Center Summit, this was a logical discussion to have.

I shared the stage with four other people – all of whom were data center industry executives and experts, to which I do not consider myself. However, as the only site selection consultant, I was intent on not being intimidated or embarrassed, even if the panelists broke out into some alien, techno-speak that would leave me baffled.

So everything was going fine until the very last question came around, and we were all supposed to answer it. I’m paraphrasing, but the question was something like this — “With today’s modern data center, is water any longer an important factor?”

As we had been placed at the speakers’ table in alphabetical order, I was on deck, the first person to answer. I thought about the question for a moment. I knew that historically that cooling was an important issue for data centers, but I also knew the technology was rapidly changing, which could make that all moot.

I folded my hands on the table in front me and leaned forward into the microphone. “Probably,” I said, trying to invoke my best consultantese tone. I then leaned back in my chair and said nothing else.

There was some chuckling around the room, but I was subsequently relieved when the four other panelists confirmed my ever-brief answer. They went into great micro-technical terms as to why water remained a huge issue. I didn’t care as I felt vindicated.

But there are other factors involved in site selection for data centers, which I could have elaborated on should the event organizers have excused the true operational experts and allowed me to hog the microphone. But that didn’t happen and it was probably for the best.

Other Factors

But being that I own, operate and hog this blog, I will now share those other factors in determining a best location for a data center that I didn’t get to talk about. And just because the other panelists were operational experts does not mean they were experts on site selection, which is my core focus.

Generally, I do not advocate that companies dwell solely on or accentuate the importance of incentives as driving factor for site determination. That also holds true for data centers but to a somewhat lesser degree. Here tax considerations can hold more prominence.

If local and state governments will abate sales and property taxes, either in full or in part, on what are typically very large capital investments, well, that is certainly something to be considered.

Please understand that I’m no homer for Texas, although I like living here very much. As a site selection consultant, I cannot be a homer for any place. My job is to take a company to the best place it needs to be, which I say and actually believe can be from Maine to California (yes, even California) and from Canada to Mexico.

Texas, which has been a preferred location for data centers, just upped the ante with a new state law that took effect on Sept. 1. The new law now exempts sales tax on – and I am using a very technical term here — the “innards” of a data center. That would include the electrical and cooling systems, hardware, all data storage devices, peripheral component software – essentially any component parts and fixtures that make a data center work.

To qualify, a company must create 20 new full-time jobs that pay 120 percent of the existing county pay rate (typically not difficult) in a building that is 100,000 square feet or larger. Projects involving a capital investment of $200 million would get a 10-year sales tax exemption, while those with $250 million or greater would qualify for a 15-year exemption.

But aside from the tax abatement enticements, there are other considerations to be weighed in a site selection process. Here are a few:

The Three Rs. Data centers don’t make a huge sucking sound when the switches are flipped, but they do use large amounts of electricity. Any location should be evaluated in terms of the affordable cost of power, which means rates, but let us not also forget reliability and redundancy. Future capacity is key to meeting future needs. As with virtually all site selection projects, we are thinking about long-term viability.

Acts of God. Well, I call it acts of God because I am a (very flawed) man of faith. But we’re talking about natural disasters and weather events. The geography of a place has a lot to do with that. I’m not inclined to recommend that a data center be placed near an earthquake fault line, in a flood plain or tornado alley or along a coast line that could be battered by a hurricane. No place is completely safe, but you hedge your bets as downtime for a data center would be catastrophic.

The Backbone Connected to the … There is an old saying in Texas – “God made man and Samuel Colt made them equal.” Well, that’s not completely true, but it is quite true that not all telecommunication infrastructure is created or distributed equally. That necessary optic fiber backbone is not all the same everywhere. Quality and proximity matters as it will affect speed and transmission. The “latency” of a site is about all about transaction time and just how truly connected it is to major existing trunk lines. Carrier type and support will be of great interest.

Tax Rates. Well, we touched on this somewhat already. If you can abate all or a portion of sales and/or property taxes, then you, too, might be able to compete for a data center. But you have to have the other ingredients also in place. Those states that do the best in competing for data center usually have passed legislation specifying the terms for tax abatements.

Workforce. It’s true that most data centers will not employ many people – usually well below 100. But those people who will be employed are typically very well paid and educated. Generally, a data center should go where those people already live. It’s much better to find an existing pool of qualified labor than having to recruit your talent from outside the area.

Quality of Life.  I was hesitant to include this. If by chance a company finds itself in the position where it will have to recruit at least a portion of its workforce from the outside in, then it would be best to be in a place that would cater to their geek side. I’m sorry. That didn’t come out quite right. The point is that most techies will usually not want to live in places that don’t offer at least a semblance of quality of life, which of course we all have different definitions of. We could talk circles around this one. At least have a Starbucks.

Construction Costs. This is typically viewed as a front-end cost that can and does vary by region. If you consider that a data center has a lifespan of 20 years, it may not be a major consideration for the long-term. But those initial upfront costs can matter as they can affect design and scope of a project. Construction costs probably should be looked at in that context.

Oh yes, and let us not forget water, that subject which thankfully did not result in me having a public panic attack. Data centers are designed and/or fitted with extensive plumbing to keep those “innards” (there I go using those technical terms again) cool. Just like electricity, we want affordable rates and reliability for long-term sustainability. As with any site selection project, we are in this for the long haul and any interruption of service or failure to provide simply cannot be an option.

Well, there you have it. My abbreviated take on the data that I would collect and evaluate in siting a data center. Keep in mind that data, or information, is the fuel that keeps the machine running in a site selection project. If a community cannot provide the needed data, it cannot remain in the game. And that’s for a data center project or any other kind of project.

This coming week, I will be attending Industry Week’s Roundtable in the High Desert in Tucson, Ariz., where I will be a featured speaker. Given the choice, I think I would rather speak in a high desert than a low desert. I do hope to both entertain and inform as I hate the sound of a snoring audience.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas.

If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

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