Three trends driving growth in data centers

Listen to this article

Data center construction virtually stopped during the recession, with banks hesitant to lend large sums for speculative projects, says Jason Baker, co-founder of Eden Prairie-based Internet service provider and data center VISI, and now software development staff engineer at Dell Cloud Manager.

“Now that the economy has recovered, money is pouring back into the data center industry,” he said. “Providers are responding to the pent-up demand.”

Nationally, this catch-up construction is driving a number of trends, from cloud migration to larger facilities, and the Twin Cities is poised to capitalize on that growth.

The metro area has all the ingredients that go into the recipe for an ideal data center — low risk of earthquakes (and no hurricanes), a strong business climate with a mix of small and large companies, cost-competitive energy sources, a robust fiber optic network and a cooler climate that reduces air-conditioning expenses.

As a result, the Twin Cities is likely to be a strong choice for data center expansion and has already attracted some major players in the market.

Here are three trends that are driving growth, nationally and locally.

Data centers go big

Only a decade ago, data centers that were considered large usually covered about 30,000 square feet. When VISI was built in 2010, it seemed expansive at 40,000 square feet, but Baker said that would be a smaller facility today.

Many that are under construction or built within the past few years are double the size of VISI or larger.

Nationally, cloud providers like Amazon, Microsoft and Google are building centers that dwarf existing facilities, but they’re not the only ones thinking big. Technology company CyrusOne is building a 57-acre campus in Chandler, Arizona, that will represent nearly 1 million square feet of space.

“We are truly in the midst of an arms race,” said Baker.

Locally, that trend is playing out in several projects. ViaWest in Chaska broke ground only last year and is already offering 70,000 square feet of data center space. DataBank in Eagan offers a 90,000-square-foot building, and CenturyLink opened for business last year in Shakopee, with a 10-acre site that has 50,000 square feet of operational data center space.

Providers are getting larger as well, Baker said. “We’ve seen quite a bit of consolidation in the data center industry over the past five years,” he said. “Most of the large telcos have done acquisitions. Small data center providers will not be able to compete in the long run. It’s entirely possible that we will only have a handful of major U.S. data center providers in 20 years.”

Migration to the cloud

On overriding trend that’s driving data center growth is the rapid movement of businesses to a cloud model, says Graeme Thickins, a technology startup marketing consultant who serves on the board of MinneAnalytics.org, an event organization for the region’s data professionals.

Research firm IDG reported that 69 percent of businesses are already using cloud technology and an additional 18 percent plan to implement it in the near future. “Moving to the cloud lowers initial capital expenses for companies, as there’s no heavy investment in servers,” said Thickins. “For established businesses, the cloud is providing an attractive option when server or storage capacity needs to be increased.”

But cloud adoption is not an all-or-nothing proposition, he added. Some companies areusing a hybrid model that involves using cloud resources when necessary, without eliminating in-house data storage systems.

With the abundance of data center projects coming into the Twin Cities, Thickins thinks local businesses will be able to innovate more easily. “With increased cloud usage, the IT department is becoming more strategic to the business,” he said.

Municipal and state support  

Construction projects like data centers require more than local builders who are familiar with data center specifics — they require numerous conversations with state and city authorities, who can sweeten the deal for providers.

Although job creation numbers are lower than they would be for other types of businesses, data centers offer a ripple effect that makes them appealing for municipalities.

“Cities are rolling out the red carpet to data center providers,” said Baker. “While data center providers don’t necessarily employ a significant number of people, they support the technology operations of the surrounding industries, helping to retain other businesses in the region.”

As a result, municipalities offer providers tax incentives, land and utility upgrades, and offer public-private partnerships, he added.
As a local example, Dallas-based DataBank chose Eagan for a 90,000-square-foot data center, after considering a number of other areas of the country, said Kris Edinger, general manager for the Minneapolis office.

Working with GreaterMSP, the state and Eagan, DataBank was attracted by property tax incentives and fast-track permitting. “We felt very supported in our expansion to the Twin Cities area,” she said. “We saw many advantages to building here. The state and the municipality just confirmed that decision.”

In general, look for similar expansion efforts to take place locally.With a better economy and increased demand, data center providers are taking advantage of tax incentives and technology innovations to expand. Nationally, this could result in higher data-center traffic and a boom in construction, and the Twin Cities is likely to be on the forefront of the trends.

Like this article? Gain access to all of our great content with a month-to-month subscription. SPECIAL: Start your subscription with our low intro rate of just $9.99.