Article

Data center site selection: Relocate to the Midwest?

Mark Fontecchio
More than just corn is popping up in Des Moines. There are also data centers.

Google and Microsoft have both built data centers in Iowa, and apparently for good reason. According to a Boyd Company data center location study, the Midwest

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is one of the best places to build a new facility -- if you can.

For more on data center site selection:
Study ranks cheapest places to build a data center

Data center locations ranked by operating cost

Data center operations flock to central Washington

"If a company is looking for a project, if you look at the cost of land, insulation from natural disaster, electric power rates, ability to hire skilled labor – the Midwest has all of that," said John Boyd, president of the Princeton, N.J.-based company.

Even something as seemingly innocuous as a time zone is important, according to Boyd. He said that the fact that the Midwest, is in the Central time zone could be beneficial because it allows workers to communicate with both coasts and thus essentially expand the workday.

Boyd's study this year focuses on the health-care industry, as he said it will be one of the fastest-growing industrial sectors in the next four years, especially with health-care reform legislation likely on the table. (President-elect Barack Obama has proposed digitizing medical records. Doing so requires a lot of data storage and computing resources, which in turn requires a lot of data centers.)

Breaking down data center site selection
The study looks at the annual cost of operating a 150,000-square-foot facility with 150 employees across 50 cities and accounted for six major factors: labor, electric power, amortization, property and sales tax, heating and air conditioning, and corporate travel.

The costs range from a high of $36.8 million to a low of $17.5 million, with New York City being most expensive and Sioux Falls, S.D., ranked as the cheapest place to build a new facility. Also in the top 10 were four other Midwestern cities: Louisville, Ky.; Tulsa, Okla.; Ft. Wayne, Ind.; and yes, Des Moines.

The study also broke out which cities were cheapest and most expensive for each individual category:

  • Labor. The cheapest is Ft. Walton and Destin, Fla.; the most expensive is San Francisco
  • Electric power. The cheapest is Des Moines; the most expensive are Hartford and Stamford, Conn.
  • Amortization. The cheapest is Pensacola, Fla.; the most expensive is New York.
  • Property and sales tax. The cheapest is Louisville; the most expensive is New York.
  • Heating and air conditioning. The cheapest is Colorado Springs, Colo.; most expensive is Miami.
  • Corporate travel. The cheapest is Sioux Falls; the most expensive is New York.
Florida: Cheap, but a good idea?
In terms of overall cost, the state of Florida fared well, with three of its cities ranking in the top 10. But Boyd said that Florida is not necessarily the best place to build a new data center. Companies have to factor in intangibles such as natural disasters before deciding where to locate their facilities.

The following are the 10 cheapest places to build a data center (by estimated annual operating cost):
Sioux Falls, S.D.: $17.5 million Ft. Walton/Destin, Fla.:
$18.2 million
Pensacola, Fla.: $18.3 million Louisville, Ky.: $18.9 million Tulsa, Okla.: $19.0 million Ft. Wayne, Ind.: $19.1 million
Des Moines, Iowa:
$19.4 million
Birmingham, Ala.:
$19.6 million
Jacksonville, Fla.:
$19.6 million
San Antonio, Texas:
$19.7 million

"What our table looks at is costs," he said. "The severity of [Hurricane] Katrina and the 24-hour news cycle brings that notion of severe weather and natural disasters before corporate decision makers. It is a real concern."

But Boyd said that every region of the country has its drawbacks. "There is no perfect location, and there are always tradeoffs." While the Gulf Coast has its issues with natural disasters, the Midwest has trouble retaining the best technical staff. Even though the region has plenty of IT educational opportunities, according to Boyd, many of those students may choose to go to Silicon Valley or the Northeast after they graduate. It's a lifestyle decision, he said; some prefer skyscrapers and sewer grates to corn fields and fertilizer plants.

Follow the leaders
Both Google and Microsoft, two of the most prolific data center builders in the world, have built data centers in Iowa, Microsoft in West Des Moines and Google in Council Bluffs.

Considering how large these companies are, it's understandable that smaller businesses might follow them. You know those two corporations have done due diligence in determining an ideal location for a data center. If Microsoft and Google think it's good a place to build their data center, it's probably a pretty good place for any company to build its data center.

"People do that," he said. "Both those companies are very judicious in their site selection. It's the same as in the retail industry, when companies follow Wal-Mart and Target."

Let us know what you think about the story; email Mark Fontecchio, News Writer. You can also check out our Data Center Facilities Pro blog.


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