The changing shape of the Internet can be seen in a three-hour drive across the mountains and plains of western Oregon. The drive winds up and around Mount Hood, and across miles of wilderness to a high plain above Prineville, a town of 10,000 residents.
It's about 150 miles from Portland, the nearest significant city. But this is where a big chunk of the Internet resides, serving status updates and photos to many of Facebook's 850 million users. Millions more will soon see their music and videos routed through Prineville, with the news that Apple will build a server farm in town to support its iTunes and iCloud apps.
The notion of placing major Internet infrastructure in a small town in central Oregon would have been unimaginable a few years ago. When I began covering the data center sector more than a decade ago, the most critical facilities were located in the heart of the nation's largest cities, close to customers and fiber intersections.
Powerhouses in Heart of the Big City
Emblematic of this trend were buildings like 60 Hudson Street and 111 8th Avenue in New York, One Wilshire in Los Angeles and 350 East Cermak in Chicago. These huge buildings were the powerhouses that kept the Internet running. They also reflected the tendency for the new economy to rise in the footprints of the old, leveraging transit centers, printing plants, and early communications hubs to build connectivity centers.
Now the largest server farms are being built in places like Prineville, or Quincy, Washington or western North Carolina. What's the common thread? These locations all offer abundant land for massive facilities that can house of tens of thousand of servers, and the electricity to power these armadas of servers. They offer tax incentives that make it cheaper for data center operators to buy their land and servers. They also offer the opportunity to cool servers using outside air instead of power-hungry chillers, slashing the cost of operating the data center.
The pursuit of cheap power and lower taxes is changing the face of the data center industry, placing huge facilities in remote locations far removed from the users. But unlike the shifts that altered the map for manufacturing, data center location is not a zero-sum game - existing data center hubs continue to thrive, even as "Internet-scale" facilities set up camp in far-flung locations.
Different Categories of Data Centers
This is due to the diversity of customer requirements in the data center, which guides where servers will be housed, and in what kind of facilities. In recent years the industry has moved away from "building snowflakes" - the historic approach to custom facilities built in secret, which led to no two data centers being exactly alike.
There are three major categories of data centers, each of which has different criteria for where they build and operate. These include:
- Colo & Connectivity Hubs: Service providers offering colocation place their facilities near customers and network-dense interconnection points. These are prominent in northern Virginia, the greater New York market, Chicago, Dallas and Silicon Valley.
- Single-tenant Enterprise Data Centers: Control and security are key differentiators for these facilities. Typical approach features a stand-alone building occupied by one enterprise tenant, set back from local roads to provide a security buffer. Prime markets include northern New Jersey, Atlanta and Texas metroplexes (including Dallas, Austin, Houston and San Antonio).
- Scale-Out Mega-Data Centers: Huge facilities supporting clouds have evolved into a distinct breed of facility, built at massive scale and populated with commodity hardware. Power pricing is the key driver in where these facilities are built, along with tax incentives and an environment suitable for fresh air cooling that can eliminate equipment.
The site location process for most colocation facilities and enterprise data centers tends to be a low-key affair. But the mega-data centers for brand name companies like Google, Microsoft, Facebook and Apple have become major prizes for states seeking to boost economic development.
Data centers have always created few jobs due to the high level of automation in these facilities. As a result, they don't appear to be a compelling candidate for economic development incentives, which have traditionally been all about job creation.
Symbols of the New Economy
But there's a political component to this. Data centers represent far more than jobs or bricks & mortar. They have become symbols of the new economy, a tangible sign that a community is making a successful transition to the digital economy. Governors and local legislators understand the value of a press conference to announce a new project from Google, Facebook or Apple.
That's why North Carolina has hit the data center trifecta with projects for all three of those companies, and continues to offer aggressive incentives for new projects. We've been tracking this trend for years, and there are more states than ever before offering incentives for data centers. It's a trend that allows states with infrastructure and ambition to compete for projects once confined to historic Internet hubs.
That competition will intensify as the Internet continues to transform our economy. As states continue to offer tax incentives for data center projects, don't be surprised to see massive server farms pop up in towns you've never heard of before.