Where to put your next data center

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.

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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 US$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.

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