Study ranks cheapest places to build a data center

In a new study focusing on the healthcare industry, the Midwest once again came on top as one of the most affordable places to build a data center.

A new data center site selection study echoes findings from a similar one last year: the Midwest is best.

Princeton, N.J.-based site selection specialists, The Boyd Company Inc., has published its list of the best places to build a data center, taking into account 50 cities in the U.S. and focused on the healthcare industry. The list compares the annual operating costs of building a 150,000-square-foot facility with 150 employees.

Cheapest places to build a data center by estimated annual operating cost
City Cost
Sioux Falls, S.D. $16,131,793
Ft. Walton/Destin, Fla. $16,386,387
Pensacola, Fla. $16,562,083
Jacksonville, Fla. $16,879,315
Lee County, Fla. $17,022,961
San Antonio, Texas $17,054,703
Ft. Wayne, Ind. $17,062,231
Orlando $17,076,394
Sarasota/Bradenton, Fla. $17,136,032
Birmingham, Ala. $17,185,474

Just like a data center site selection study from last year that focused on the financial industry, Sioux Falls, S.D., came in as the most affordable place to root a data center at about $16 million. New York City came in dead last at about $22.5 million.

In fact, nine of the 10 most expensive places to build a data center are on the East or West coasts. Meanwhile, half of the 20 cheapest places are in states like Indiana, Kentucky and Nebraska. Florida, however, scored very well, grabbing six of the 10 cheapest locations.

"This is the outsourcing of the future," said John Boyd, president of The BoydCompany. "We're talking about jobs leaving headquarters in New York, Chicago, Boston and going to a Sioux Falls or an Ames, Iowa."

Healthcare data centers more expensive

Overall, the cost of building a facility in the new study exceeds the projections that Boyd laid out in its earlier study on the financial industry. Why? The data center modeled for the new study -- 150,000-square feet, 150 employees -- is larger than the previous study, which looked at building a 125,000-square-foot facility for 75 employees. Boyd said healthcare data centers tend to be larger than those in the financial industry because they employ more people to manage health privacy regulations, such as HIPAA.

For example, Boyd includes 20 medical records technicians in the healthcare study that aren't part of the financial study.

But while healthcare data centers may cost a bit more overall, Boyd's analysis of regional costs showed no change over last year's results, for a number of reasons.

Away from natural disasters

Earthquakes and mudslides on the West Coast; ice storms in the Northeast; hurricanes in the Gulf Coast; and terrorist threats in major metropolitan areas. All of these reasons make the Midwest an attractive place to build a data center, according to Boyd. When your facility is going to cost millions, it's best to make sure it isn't going to be wiped away by one disastrous storm.

Most expensive places to build a data center by estimated annual operating cost
City Cost
New York City $22,542,097
San Francisco $21,889,593
Newark, N.J. $21,227,240
Boston $21,031,699
Stamford, Conn. $20,857,417
Chicago $20,433,269
Los Angeles $20,418,852
Hartford, Conn. $20,011,311
Philadelphia $19,953,246
San Diego $19,456,506

There is one exception, said Joe Clabby, president of Yarmouth, Maine research firm Clabby Analytics.

"If it's the northern Midwest, then I guess I could buy it," he said. "But if you get into Oklahoma, Kansas … that's tornado country."

Power costs

In a poll of 125 users at the Gartner data center conference in November, 68% said either power or cooling is their primary data center's greatest facility problem. For some, the problem is access to available power. For others, it's rates. Most importantly: power interruptions must be rare.

"Let's go back a couple years to California, and they were having huge brownouts," Clabby said. "Once they got back online they were paying through the nose for power."

The federal Department of Energy tracks monthly power rates per state. In the most recent report looking at September figures, the cheapest region is West North Central, which includes Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. The most expensive regions are the Pacific noncontiguous (Alaska and Hawaii), New England and the West Coast, where prices overall are distorted by the extremely high cost of electricity in California.

Labor costs and talent pool

Simply put, it costs less to hire a data center manager in the middle of Iowa than in the heart of the Big Apple. Cost of living has a lot to do with it.

It's cheaper to live in the Midwest. A data center employee can buy a good-sized house in the Midwest for about the same price they can get a cramped, one bedroom condo in Manhattan.

That leads to the next question. It may be cheaper to hire someone in Sioux Falls, but is there any talent there to hire? Boyd said yes, either through local university connections or younger people willing to relocate.

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Dakota State University, for example, is only an hour outside of Sioux Falls and has several undergraduate and graduate degree programs in computer science and information systems. That makes for an ideal talent pool for Sioux Falls' employers to draw from.

And for those who fled the Midwest to attend college in the Northeast, available jobs and the lure of returning home can be attractive.

"This kid may look more favorably toward moving back to the Midwest where they can spend less and get more," Boyd said. "Essentially, people go where the jobs are."

Local incentives

Boyd also cited local incentives, such as promises of fast-track permitting or tax breaks as a factor, but they're certainly not as important as the others. Boyd said every city is trying to attract jobs, and almost all of them have some kind of tax incentive package to lure them there.

Let us know what you think about the story; e-mail: Mark Fontecchio, News Writer.

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