They are big and they do not employ many people, but competition to host the massive data centres that are opening up across the US is fierce, with scores of cities battling it out to attract each new centre. And data centre development is booming, with more and more companies needing to access data from anywhere and at any time.

These companies are spurred on by the knowledge that the cost of not addressing these data needs can be high. Professional services firm PricewaterhouseCoopers reports that globally, network downtime can cost up to $1600bn per year – that equates to $4.4bn per day, $182m per hour and $51,000 per second.


“Large companies, in particular, want their data secured and scattered around the country,” says Larry Gigerich, managing director of Ginovus, an Indiana-based consulting firm.

A windfall?

Further fueling this explosive growth is the number of companies utilising cloud-based technology, as well as new financial regulations, recently implemented by the US government, that require customer and corporate data to be stored in separate locations – not in one place as done previously. Both of these factors have seen the number of companies wanting to establish data centres grow quite considerably.

“International companies that have a large physical presence in North America are looking to the US for data centre locations,” says Mr Gigerich. “Energy costs in the country are much lower than in Europe and Asia, plus there is less risk of natural disasters, no risk of political instability, and North America offers a very strong telecommunications infrastructure with excellent connectivity.”

Swiss-based healthcare company Roche is one such company that chose to locate its data centre in the US. “The decision to locate a major data centre for Roche Diagnostics North America in Indianapolis, Indiana – where the company's North America diagnostics business is also headquartered – was driven by the fact the company has multiple operations in the US, Puerto Rico and Canada,” says Mr Gigerich. “It felt it needed to have a data centre in this hemisphere to support those operations.”

While data centres are not large job creators – and the focus in the US is largely on creating employment – a number of US locations are still vying for the business. “Some locations are attracted to these projects because they represent large capital investments,” says Mr Gigerich.

State governments benefit from the sales tax from the equipment going into the data centre and also expenses, such as energy, which are tied to its operation in the long term. Local governments are especially interested in data centre projects because they generate huge property tax revenues without placing great burdens on public services such as schools, police and fire support.

Some locations try to encourage companies to set up data centres by offering tax incentives. “These are typically in the form of property tax abatement or tax incremental financing to offset project costs,” says Mr Gigerich. In some cases, incentives may focus on infrastructure improvements, especially if a road or certain utilities are needed at the site. “Local communities see these data centres as offering a huge windfall of property taxes even if incentives are being provided,” adds Mr Gigerich.

Cost considerations

Incentives are only considered by a company, however, when it is locked in deciding between two or three locations. And even then, the most critical factor when deciding on a location is electricity costs.

“Electricity costs are almost always at the top of the list, followed by property taxes and their implementation and natural disaster risk,” says Mr Gigerich. “Companies look at earthquakes, tornadoes, floods, and wild fires – anything that can disrupt the facility. Companies are especially looking for more geographic diversity for redundancy and back-up purposes.”

Cisco operates 51 data centres in the US: 13 for business applications, 38 for engineering purposes. “Our global strategy is based on projections that business growth and capacity demand is increasing,” says John Manville, vice-president, network and data centre services, Cisco IT.

In choosing where to build its newest North American data centre, the company narrowed a field of 420 potential locations – already prescreened – down to Phoenix in Arizona, Denver/Boulder in Colorado, and Richardson in Texas. The company opted for Richardson because it already had an unoccupied building of the right size that was already part of a Cisco campus.

Portable technology

In a bid to be more efficient, some companies have started opting for data centres built in pre-fabricated modules. These 'containerised' or 'modular' servers can be wheeled into a facility and be operational just hours after the construction or outfitting of a building is complete. Such servers offer greater power efficiency. “With the advent of these containerised servers, some companies are laying foundations, but not constructing the buildings until space is needed,” says Mr Gigerich.

The modular concept was made possible by the emergence of co-location providers, who lease space within a building, specifically for data centres. “Companies could come in and build their data centre without owning the building – only the equipment,” says Mr Gigerich.

In cities such as New York, companies can buy even an old building and design it in a manner that allows modules to be added as needed. “This is an important development because the technology for the equipment that goes into data centre has changed so dramatically over the past 10 years that the required footprint is smaller, although needs for more power and telecommunications connectivity continues to increase,” says Mr Gigerich. “The module gives more flexibility.” 

Manhattan has had significant success in attracting big names, with companies including Google and Microsoft establishing data centres in the island's existing real estate. Mr Gigerich says that the big draw to Manhattan is its world-renowned global financial sector. “Manhattan offers a superb telecom infrastructure, largely because of the presence of Wall Street-related firms and activities,” he says.

Data sprawl

Some companies, such as Internap Network Services, are starting to look over the Hudson River to New Jersey, where they can take advantage of cheaper real estate. Moreover, New Jersey has started to offer tax incentives to compete with New York City.

Certain locations in the south-west and mountain (states that run along the Rocky Mountains) regions of the country are also having success in winning data centres projects. “Not only does the mountain region offer low cost electric energy and attractive property tax rates, there is low risk of tornadoes, earthquakes and floods,” says Mr Gigerich. 

US-based computer technology corporation Oracle is currently working on developing a major data centre project in West Jordan, Utah, a project that it first started in 2010. The 73,000-square-metre, $313m data centre will improve the company's geographic diversity. The plans call for a modular-type green data centre that would allow the company to realise power efficiencies and expand when needed. Utah offered Oracle more than $15m in incentives, while West Jordan provided its own $10m incentive package.

Iowa is another location that has proved popular for data centres. Microsoft is investing $678m to expand its data centre in West Des Moise, Facebook is opening a server farm in Altoona and Google recently opened a data centre in Council Bluffs. 

“The Council Bluffs area across from Omaha, Nebraska, has done a tremendous job in putting together a business park focused on attracting data centres,” says Mr Gigerich. “Tax incentives also make Iowa attractive.”

Elsewhere in the midwest, Microsoft operates a 'mall-sized' 2.1-square-kilometre data centre in Northlake, a suburb of Chicago. The centre, which exemplifies the trends in data centre development, features more than 50 parking stalls in which modular servers, housing between 1800 and 2500 servers each, can be installed in hours. These help the company realise new advancements in power efficiency, including using outside air to cool the centre.

Green technology is changing the design of data centres dramatically. It is one of many factors – from tax incentives to the emergence of co-location providers – that is shaping the evolution of this burgeoning sector.