WSTA Data Center Seminar:
Data Center Real Estate

An expert talks about everything you need to consider when choosing where to put your data center.

by Alex Goldman ISP-Planet Managing Editor [August 27, 2007]

On Tuesday August 7, 2007, I walked down the street from our Manhattan office and attended (as press) a seminar offered by the Wall Street Technology Association (WSTA) called "Next Generation Data Center Challenges and Solutions."

Although the seminar was directed at the CTOs of major financial firms, the issues that these companies face are the issues that ISPs are facing now or will face in the future when they grow.

Ronald Bowman, executive vice president at Tishman, spoke at a session that was called "Outside Plant Considerations for Multi Market Data Center Site Selection" and could have been called, "Where to Put Your Data Center."

Bowman disarmingly began his presentation by admitting that he still cannot explain what he does to his own children, and added that real estate clients are becoming more and more knowledgeable, challenging real estate specialists to add value. Then he showed how he adds value and what he does.

Variables
Choosing a data center site, Bowman said, requires juggling a massive number of variables. You want access to power and fiber. If you're using water cooling, you want access to water and space for a reservoir. You want to know whether the land you're looking at it subject to flooding or other hazards.

There are legal and regulatory issues. You want to know the state sales tax. He urged financial companies to think outside the box, which is the local area. "You may need to back up critical apps in Connecticut, New Jersey, or Pennsylvania, but non-critical apps can be backed up in states where there's no sales tax, such as Oregon, Georgia, or New Hampshire."

Federal regulators want financial firms to have backup sites far from New York City. In 2002, a group of government agencies with responsibilities for the U.S. financial system (the SEC, the Federal Reserve, and something called the Office of the Comptroller of the Currency) issued an RFC and draft white paper called the Interagency Concept Release: Draft Interagency White Paper on Sound Practices to Strengthen the Resilience of the U. S. Financial System. In 2003, the agencies summarized comments and issued what Bowman called White Paper 2.

Initially, the agencies had appeared to favor requiring financial institutions to have backup sites hundreds or even thousands of miles away from headquarters, but the institutions themselves opposed a specific number. Instead, the agencies settled for urging financial institutions to have backup sites some distance away, writing:

"long-standing principles of business continuity planning suggest that back-up arrangements should be as far away from the primary site as necessary to avoid being subject to the same set of risks as the primary location. Back-up sites should not rely on the same infrastructure components (e.g., transportation, telecommunications, water supply, and electric power) used by the primary site. Moreover, the operation of such sites should not be impaired by a wide-scale evacuation at or the inaccessibility of staff that service the primary site. The effectiveness of back-up arrangements in recovering from a wide-scale disruption should be confirmed through testing."

Bowman said that this has come to be interpreted as meaning that backup sites should be 250 miles away or more. He pointed out that financial institutions face opposing pressures. "Networks need to be centralized for real time applications, but they need to be decentralized for backup and recovery."

We think that these requirements could, if properly regarded, force companies to have backup sites farther away. As far as we know, there are three major electrical grids in the U.S.: East, West, and Texas. This is a simplification, of course. There are a local power systems, such as hydro power in the Northwest.

Bowman said that most "acts of god" effect a radius of 20 to 45 miles. Of course, some are larger. Again, we disagree. Katrina was larger than that, as was the northeast blackout of 2003.

We have been arguing for some time that data centers on the East Coast and West Coast should have backup agreements structured like peering agreements where one data center on one coast serves as backup for the opposite coast.

Basic considerations for data centers
Bowman urged executives to remember that elements of data centers don't last forever. A UPS system may be rated for 15 years, but could have a shorter effective life if used regularly.

Being in a state without sales tax (such as New Hampshire, Georgia, or Oregon) could save a financial firm $100 million dollars.

When looking at a data center site, you want to know the availability of fiber, free space optics, satellite, and wireless. You want to know the local tax rates and power prices. You can find your own flood maps.

He was asked to advise on a recent project, he said, where people were already on the ground surveying. He found online that it was a superfund site. "It was on the corner of main and main for crap, and I don't mean allegedly cancerous substances—I mean substances that people die from."

Cities that have a lot of available fiber, Bowman said, seem to have a population of about 250,000. "Most people feel you have to choose between a cornfield site and an urban site." (We recently wrote about a webhost that has one of each: a data center in Iowa and one in Chicago.)

$2,200 per square foot
He said that a tier four data center can cost $2,200 per square foot, at which point clients have sticker shock and start looking for savings.

A backup electric feed, he said, costs 75 percent of the primary, because the utility has to set aside that transmission capacity and not sell it to anyone else. Some people prefer to put in more generators, which is not cheap, but is not as expensive as the second power line.

Some people insist on four independent sources of fiber, but in a cornfield situation, they're likely to all be on the same right of way, subject to being cut by the same drunk driver.

Cornfields have hidden costs, and urban areas have unexamined benefits. "People need to think about data centers on a TCO basis. It's not a $13 million plot of land. It's a $1.7 billion investment amortized over 15 years."

Environmental regulations can be a surprise. "It's the biggest gotcha. You can spend 6 to 18 months on environmental challenges."

On the other hand, some states are eager to see more data centers, not because they provide jobs (they provide high paying jobs, but few of them). Data centers pay taxes. "States like North Carolina, South Carolina, and Texas have lost their main industries, furniture and textiles. They want your taxes. Although you don't provide many jobs, you're also easy on services—you won't be a problem for the police or the schools. Some of these states will provide incentives."

An ISPCON keynote speaker, Clarence E. Briggs III, CEO of Fayetteville, N.C.-based webhost AIT, told attendees that his company purchased a data center out of bankruptcy for $36,000 and a promise to the local government to create 250 jobs, invest $205 million, and stay in town for five years.

Asked about water for cooling, Bowman cited statistics from New Jersey, where he lives. He said you cannot rely on constant water delivery. "The state has 250 to 350 water main breaks each year. We lose 8 wells each year to toxicity. When we drought, the wells are limited. You need surface storage, and you can lose 600 gallons per hour of surface storage to evaporation."

So, if you use water, plan ahead.

Asked about designed super high power rooms, he said that super rooms can get super broke and land you in super trouble. Gas-based fire retardant systems are great, but replacing the gas can be super expensive. "I'm a fan of high ceilings," he said. Spread the heat, lower the risk.

—End