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Data centers more affordable in midcontinent, study finds

A Princeton, N.J.-based site selection firm recently published a study of 35 top data center locations, ranking the cities by estimated annual operating costs.

What are the three most important considerations when building a successful data center? Location, location, location.

The 10 least expensive cities by estimated annual operating costs:
  1. Sioux Falls, S.D.
  2. Winston-Salem, N.C.
  3. San Antonio, Texas
  4. Birmingham, Ala.
  5. Ames, Iowa
  6. Charlotte, N.C.
  7. Indianapolis, Ind.
  8. Tulsa, Okla.
  9. Des Moines, Iowa
  10. Columbus, Ohio

To that end, Princeton, N.J., location consultancy The Boyd Company Inc. recently published its list of the top data center cities in the U.S. The study compares the cost of operating a data center in 35 U.S. cities -- including 25 of the nation's largest financial centers as well as 10 other locations -- ranked by estimated annual operating costs, scaled to a data center employing 75 workers and occupying 125,000 sq. ft. of new space.

Sioux Falls, S.D., was the cheapest city, with just less than $10 million in estimated operating costs per year. New York City was the most expensive city, at just more than $14 million, followed by San Francisco; Oakland, Calif.; and Boston. In fact, the East and West Coasts didn't fare well in the study on the whole.

"The selection process favored the midcontinent," said John Boyd, president of the firm. "These centers by and large are being located at a remote site from the corporate headquarters. Companies are purchasing large parcels of land at attractive prices -- creating a buffer zone around the sites if possible."

But that doesn't mean you should simply plop your facility in the middle of nowhere. There are several other factors to consider when selecting a site for your data center.

Price of power

The first criteria that comes to mind for many data center site selection experts is the price of power and its reliability. According to AFCOM's 2005 survey of its members, data center power requirements are increasing an average of 8% per year. Power requirements of the top 10% of data centers are growing at over 20%. At those rates, companies are less likely to accept high energy prices if they can avoid it.

Secure location

A second factor is insulation from natural and man-made disasters -- another criteria where the midcontinent excels according to Boyd. Companies are shying away from the Gulf region because of the hurricanes; California for mudslides, earthquakes and wildfires; and high-profile metro areas because of the terrorist threat potential.

But Ken Baudry, president of Atlanta-based consulting firm KJ Baudry Inc., warned that data centers located in the Midwest aren't disaster-proof. "You can build a building to withstand a hurricane or an earthquake, but if you're in the direct path of a tornado, your building is gone."

Networking infrastructure

Networking infrastructure was at one time the biggest factor in data center site selection, but according to Boyd, that factor has become less of an issue as most cities have come up to speed. "It was a question 10 years ago, but now we can look at the smallest rural community -- the network infrastructure is there, or it can easily be extended," Boyd said.


Access is also an important criteria -- and based on that, Baudry would list Dallas and Austin, Texas, as well as Altanta and Raleigh-Durham, N.C., as his hottest data center cities. "It's a reasonable day trip to send an IT exec on a plane."

Beyond that, companies need to consider accessibility to key vendors as well. "We look at cities that have a precedent for data centers," Boyd said. "If there's a precedent, vendors have gravitated to the area."

Talent pool

IT managers will also consider the local talent pool when looking at a potential data center location -- and that means evaluating local college IT programs. According to Boyd, the biggest draw today is for colleges that support the National Security Agency's (NSA) Certification for Information Assurance. The current list of schools includes:

  • Clark Atlanta University (Ga.)
  • Fountainhead College of Technology (Tenn.)
  • Illinois Institute of Technology (Ill.)
  • Indiana University of Pennsylvania (Pa.)
  • Rochester Institute of Technology (N.Y.)
  • Southern Methodist University (Texas)
  • Ohio State University (Ohio)
  • University of Alaska Fairbanks (Alaska)
  • University of Louisville (Ky.)
  • University of Memphis (Tenn.)
  • University of Minnesota (Minn.)
  • University of New Orleans (La.)

    "The NSA-certified programs in colleges and universities give a city a definite edge," Boyd said. "Federal mandates -- Patriot Act, Sarbanes-Oxley -- are driving this."

    Local incentives

    Another factor in data center deal-making is incentives from local government and utility companies in the form of cheaper taxes and rates. According to Boyd, local tax break incentives were first used by states in the Southeast to bring industry to the area, but now almost every state supports some kind of break for new business. "Every politician runs on the platform of new jobs," Boyd said.

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    Baudry agreed that most of the areas landing data centers are providing some sort of tax incentive package, and the areas that seem to attract attention have active economic development groups -- but it's often something worked out after the location has already been determined.

    Despite the importance of site selection factors, data center real estate expert Peter Sacco, president of Franklin Lakes, N.J.-based PTS Data Center Solutions Inc., said site selection for many data centers is limited to within 100 miles of headquarters.

    " Very rarely does a client say 'I can go anywhere in the world,'" Sacco said. "We don't see site selection as a tremendous driver" -- at least not for midsized companies.

    Data centers that are nearby are easier to manage and the cost of managing a remote operation can outweigh the benefit, Sacco said.

    Sacco cited customers that are building data centers in the New York City area. "They sure as hell wouldn't be built there [if it was based on site selection criteria]. But that's where they want to be."

    Let us know what you think about the story; email: Matt Stansberry, Site Editor. This article originally appeared on

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