There’s a saying in Texas Hold 'Em poker: "Go big or go home." When it comes to data center construction, Simon Tusha has a corollary: Build big or partner.
"If you’re not going to be using 30 megawatts, you shouldn’t (build your own data center)," said Tusha, the new Chief Technology Officer of Quality Technology Services (QTS). Tusha knows a little about building big. He was previously part of the data center team at Google, where he negotiated agreements for the company’s huge data center projects. Tusha has managed and developed more than 150 data centers representing more than 1.5 million square feet of space and 500 megawatts of critical power.
Tusha says the cost of power is transforming the economics of building and operating data centers. In a lively afternoon presentation at Wednesday's Tier 1 Datacenter Transformation Summit, Tusha says growing power bills are forcing companies to rethink their assumptions about the cost of building a new data center.
“Here’s the issue: does it scale financially?” he asked. ”What’s the net present value of a megawatt (of capacity) today? Some say it’s $15 million, others say $9 million. The megawatt value matters a lot.”
There are a range of opinions on the capital required to build a megawatt of data center capacity (see the recent post on this topic by data center energy expert Mark Bramfitt). The key point, Tusha says, is that the economics shift when the numbers gets huge. “When you hit 30 megs, you’ll see your cost drop from $9 million to $3.5 million,” he said.
Tusha isn’t the first to suggest that data center construction only makes sense at enormous scale. George Slessman, the CEO of i/o Data Centers, made a similar argument in a presentation at the Gartner Data Center Conference last December.
The challenge, of course, is that very few data center operators are building facilities with 30 megawatts or more of power capacity, primarily companies like Google, Microsoft, Digital Realty Trust, i/o Data Centers and the SuperNAP team. Is building data centers a game for only the biggest players?
The Power of Joint Ventures
Tusha proposed a novel solution: using joint ventures to spread out the cost and achieve more favorable economics. “You should find a partner and do it together,” he said. “A joint venture is a great opportunity for a bunch of companies to get together and build a data center.”
Tusha isn’t without an interest in the potential of this model. QTS recently bought a huge former semiconductor plant near Richmond, Virginia and plans to convert it into one of the world’s largest data center campuses. The property includes 210 acres of land and more than 1.3 million square feet of facilities from the former Qimonda memory chip manufacturing operation. Perhaps most importantly, the campus also has a power capacity of 100 megawatts, providing plenty of space and power to accommodate custom data center opportunities.
Unlike some panelists yesterday, Tusha doesn't view the industry focus on low Power Usage Effectiveness (PUE) ratings as counterproductive. He said low energy efficiency ratings on "green" metrics are within reach for many data center operators, but requires challenging many long-held assumptions about these facilities.
"Can I help you reach a PUE of 1.3 or even 1.1? Sure, but you’ll have to leave a lot of what you know behind," Tusha said. "If we don’t change the discussion, you’re never going to change your data centers. I don’t believe in data center mysticism. It’s a commodity, and we’re commodity brokers."