Choosing a data center location to meet your business's cost and IT requirements Featured

11:13am EDT July 5, 2011
Choosing a data center location to meet your business's cost and IT requirements

When the time comes for a corporation to decide on a data center location, there are a number of various inputs that must be addressed to properly validate this decision. A wrong projection, estimate, or even a simple oversight can be financially devastating. The initial step of a mission critical services team is to understand the requirement. You need to consider current capacities, age of existing equipment, new technological strategies such as virtualization and private/public cloud offering, and how they apply in the ever-changing world that resides on the raised floor. Once you understand your existing capacities, you can predict your growth, or contraction, over the course of the data center’s life. This will dictate the type of solution the IT organization will want to pursue.

Next, you identify criteria that eliminate sites with “fatal flaws.” A data center site search is basically a process of elimination. In identifying the optimal data center location, key factors would include latency, cost of power, likelihood of natural disaster, tax considerations, legislative issues, regulations, disaster recovery, business continuity, availability of specific fiber providers, cost of construction, proximity to labor and suppliers, and types of power. In terms of power, green companies might want to stray from coal while some companies are hesitant to rely on nuclear power after Japan’s recent crisis.

Most of the IT activity occurs from one of two types of data centers: colocation/wholesalers and enterprise users. An enterprise user manages centralized data shared by many users throughout the organization. A colocation/wholesaler furnishes the space, power and high-speed Internet links for a customer’s Web servers. Typically, the colocation/wholesaler will pursue major metros where the users exist or want to be — places like New Jersey, Chicago, Dallas and Allen in Texas, Northern Virginia, Northern California and Southern California. Some colocation/wholesale users are investigating emerging markets, or second- and third-tier cities, like Phoenix, Nashville, Seattle, Atlanta, Salt Lake, or Denver that have moderate client demands and fairly strong fiber connectivity. The very large enterprise users who build their own facilities will tend toward more rural areas, like Kansas City, Charlotte and Omaha, that are able to provide location-based economics, such as cheap power, lower tax burden and favorable incentives.

The 5th annual IDC Digital Universe study projected overall data will grow by 50 times by 2020, driven in large part by more embedded systems such as sensors in clothing, medical devices and structures like buildings and bridges. In 2011 alone, 1.8 zettabytes (or 1.8 trillion gigabytes) of data will be created, the equivalent to every U.S. citizen writing three tweets per minute for 26,976 years. And, the number of servers managing the world’s data stores will grow by 10 times over the next decade. The cost to build a data center is measured in terms of kilowatts, with the price ranging from $8,000 to $12,000 per kilowatt. The equivalent construction growth rate in dollars is $12 to $15 billion.

Per a recent McKinsey Report, data centers are making an impact in corporate planning. IT assets represent 50 percent of the total corporate assets, and data centers represent 50 percent of that 50 percent. Expenses are higher than ever, with IT budgets growing at 6 percent annually. Operational expenditures for facilities came in at 8 percent for IT, with a growth rate of 20 percent. Intensive data center users are facing meaningful reduced profitability.

Growth in supply at 6 percent is outpacing demand at 11 percent. Growth-related factors involve additional storage for security replication, governmental regulations, financial information, medical records and retail as well as popularity of handheld devices and gaming, and increased use of streaming video. Use of collocation models and speculative purpose-built data center building shells are increasing. Primary reasons for moving a data center are the need for additional power, cooling and space, and lease expirations. According to a Gartner Group Study, 70 percent of the Global 1000 corporations must move or modify their data centers. The average age of today’s data center is 12 years old. Today’s enterprise users’ existing facilities are space constrained, in the wrong geographic location due to changes in demographics or corporate service areas, unable to support high density loads, insufficiently fault tolerant, and overly exposed to external threats. Nevertheless, until the credit market changes, the lack of capital will continue to result in postponed improvements and construction of few new centers.

Bo Bond is a managing director/regional director in the Dallas office of Jones Lang LaSalle and co-leader of the Data Center Solutions team. With more than 16 years of experience in the commercial real estate industry, Bond has successfully negotiated more than 15 million square feet of real estate transactions in multiple states. His knowledge of technical issues, infrastructure and labor assessment has also allowed him to develop the unique skill set required for mission-critical and contact center requirements.

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