Where to Put It

Gather the tax experts for this task

If data center location was paramount to Rodney McPearson, a data center project manager at Cimarex Energy Co., he wouldn't have two of his five data centers in the hurricane-prone locales of New Orleans and Houston and a third in the tornado hot spot of Tulsa, Okla. But geographic diversity is a big deal to McPearson, so instead of consolidating to a single facility in a safe location, his company decided it was better off keeping its servers spread out.

And what attracted Virgin America Inc. to Burlingame, Calif., when the airline built its data center there two years ago? Was it the threat of earthquakes? The high cost of electricity? No, it was the price and availability of space in its Burlingame corporate headquarters -- space leased at a low rate during an earlier economic downturn, says Bill Maguire, Virgin America's CIO.

Let's face it: If data center location mattered, the San Francisco Bay Area wouldn't have one of the highest concentrations of data centers in the world.

Some companies have the ability to build data centers in areas that are geologically stable, are hurricane- and tornado-free, and have low-cost power and skilled labor available. In short, they can behave just like Google Inc. and build a data center wherever they want to.

But for most IT managers, pulling out a U.S. map to pick the best spot is akin to playing fantasy football. The job of most IT managers is to make the best of whatever environment they must run their data centers in, because they might have no say in picking. But if the choice is yours, here are some tips for getting the best spot.

Gather the Tax Experts

There's the ideal location, and there's the most cost-effective location, and tax breaks can have a major influence on where a data center is established, says Mark Levin, senior partner at Metrics Based Assessments LLC, a data center benchmarking and consolidation firm in Milford, Conn. When selecting a location for a data center, "what it really comes down to is, who is going to give me the best tax breaks?" he says.

Most companies don't have to shop for those deals. For sure, some locales advertise tax incentives, but local and state governments compete aggressively for the data centers that can provide jobs and pay taxes. Custom tax deals are the norm.

For example, when The Hartford Financial Services Group Inc. needed a new data center, its message to its home city of Hartford, Conn., was, "We can stay, or we can go."

The city worried that the company, its data center and its IT jobs would leave, says Mark McGovern, who heads Hartford's Department of Development Services. "The cost of investment in the inner city is higher than in other places," he says. Hartford offered tax incentives worth $13.6 million, and the financial services firm decided to build a new 31,000-square-foot data center there. "Without this assistance, we wouldn't be getting a $100 million investment and the retention of some 600 jobs," says McGovern.

Any discussion of data center location will involve a wide cast of characters, including real estate and facilities managers, financial officers and, especially, attorneys for finding and negotiating the best tax deals. But the choice isn't based solely on tax breaks. It isn't uncommon for a business to make a location decision based on zoning changes, approvals of new roads and traffic lights, or prompt processing of building permits.

But being as big as Google helps. In the summer of 2006, North Carolina adopted a state law that gave a sales tax break to any company spending $250million or more on a data center. Some six months after that law took effect, Google announced the opening of a $600 million data center in Lenoir, N.C., that employs 200 people.

Share the Space

Taxes may be a major consideration in a data center location decision, but so is proximity to headquarters. Consider, for instance, IT managers who use collocation services.

Collocation firms offer data center space and can manage the customer's physical equipment; meanwhile, the customer can manage its servers remotely. A customer might own its own equipment, or lease it and contract for management services. Whatever the setup, its users can access the systems from any location, giving the customer a lot of geographic flexibility.

Alex Bitoun, CIO at Houston-based health care provider Diabetes America Inc., uses the collocation services of CyrusOne Networks LLC. CyrusOne's facilities are only a 10-minute drive from his office, and that's the way he likes it.

Bitoun turned to a collocation provider because the cost of building, managing and securing a data center was too high.

From a technical point of view, the distance to the collocation facility shouldn't matter, says Bitoun. "We can pretty much do everything remotely," he says. And CyrusOne technicians can address any physical problems that his servers may have. "But there is something comforting about knowing that it's just a few miles away," says Bitoun. Proximity to the collocation provider mitigates risk by giving his technicians the ability to easily check on equipment. It also allows him to have face-to-face meetings with the provider.

Find the Fastest Hub

But having a data center service provider near corporate operations can matter for pure technological reasons as well. Don Goin, CIO at Santander Consumer USA Inc., a Dallas-based automotive financial services firm, also had options when it came to choosing a location for his data center. He selected Terremark Worldwide Inc., which is based in Miami but also has facilities in Dallas.

Terremark has a network access point in Miami that's used by telecommunications carriers as a hub, and because of that, Goin says he considered Miami as primary base for his data center operations. But Santander's call center would have to connect to Miami via a LAN, whereas it could use a much faster Metro Ethernet connection to Terremark's Dallas facility.

"Metro Ethernet vs. LAN makes a big difference," says Goin. If Santander used Web-based interfaces exclusively, the distance wouldn't matter, but the company uses fat clients and a combination of applications delivered via a Citrix presentation server and an application server.

In the end, Goin says, he chose to use Miami as a disaster recovery site, not a primary data center site.

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Next: How to staff it: The data center skill in highest demand. 

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