by Vangie Beal

Why Your Data Center TCO and Location Matter

Nov 19, 20126 mins
Data CenterDisaster RecoveryFinancial Services Industry

From tax incentives to energy rates, there are several key factors that directly impact the total cost of ownership over the lifetime of your data center. Building your facility in the right place, then, is no small task. Here's what you need to know to keep costs down.

Selecting a good location for your data center is a critical element of data center planning, as deciding where to build and maintain a facility directly impacts the total cost of ownership (TCO) over the lifetime of the data center.

In looking to either purchase an existing facility or build a new data center, there’s an exhaustive list of factors to be weighed and analyzed before you select a site. To that end, spoke to industry leaders to learn more about considerations that range from the probability of basing your data center in an area where a natural disaster could occur to the availability of utilities and the cost of energy.

Key Data Center Location Considerations: Expenses, Expenses and Expenses

According to data center solutions provider Lee Technologies, a subsidiary of Schneider Electric, one basic mistake organizations make is failing to take TCO into account. In its report, The Top 9 Mistakes in Data Center Planning: The Total Cost of Ownership Approach, Lee Technologies recommends that the best approach to is to focus on three basic TCO parameters: capital expenses, operations and maintenance expenses, and energy costs.

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Keith Lambert, senior vice president of design, build and construction for Lee Technologies, says the company looks at potential sites for clients looking to build new or retrofit an existing structure. Depending on the organization’s needs, there’s a number of different ways to approach site selection.

Lotus Formula One
The TechVault data center in Vermont deploys Schneider Electric equipment. (Image credit: Tom Way Photography)

“We’re mainly interested in site selection if there are tax incentives in the area—and only if they are true incentives,” Lambert says. Many communities, especially those in rural areas, offer incentives aimed at attracting investment and creating jobs in construction as well as information technology.

Utility costs matter as well, Lambert adds. “For example, we want to know the cost of water per gallon, the electricity rate and also the cost of [sewer] discharge.”

There’s also real estate, infrastructure, materials and labor. At the moment, says David Eichorn, data center practice head for Akibia, which offers services to improve the availability, reliability and performance of data centers, Oregon is a popular data center location. That’s due to a combination of a highly skilled labor force, favorable climate and lower cost of living than, say, neighboring California. (For many of the same reasons, Canada is also attracting the attention of firms looking to build a data center.)

Finally, during the site selection process, it’s critical to examine network connectivity in the area and find out how close to the facility it runs. Depending on the complexity of the site and redundancy levels, the availability of multiple power sources may be a key factor for some companies.

Don’t Let Energy Costs Overwhelm Your Data Center

Power doesn’t come cheap. Rob Woolley, senior vice president of critical environment services for Lee Technologies, says energy costs—and the types of deals you can get from various providers in the area—have become increasingly important over the past 10 years.

“The cost of energy and availability of utilities…is at the top of everyone’s list of selection criteria,” Woolley says, adding that green initiatives such as free cooling can have “a major impact on savings.”

Make no mistake, utility costs can be the deal breaker when choosing a site. For Lee Technologies, energy costs is also a leading indicator to get a client to build in a specific area—especially if there’s hydroelectric power or another source of energy in the area that drives operational costs down. “Hydro is great power. Not only is it relatively inexpensive compared to other sources, but it’s also very clean. There’s very little carbon associated with hydroelectric power,” Woolley says.

Akibia’s Eichorn, for his part, says that green IT is one of the biggest changes in the industry. “In the past couple years, it’s a positive trend that has taken hold in the data center industry.”

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Eichorn agrees that power has become an increasingly a cost driver in data centers. At the same time, green initiatives have people talking how to better manage power consumption. As a result, he says, there are many new techniques available to companies today.

“Companies use green, and they use it for different reasons,” Eichorn says. “There is an emphasis on being environmentally conscious, but there’s also the [monetary] value…that being green brings to the table.”

Backup Data Center Shouldn’t Be Too Close—Or Too Far

Most companies don’t plan for just one data center at a time, Eichorn notes. Usually, it’s two: a primary facility and a business continuity and disaster recovery redundant facility.

David Eichorn
David Eichorn, data center practice head for Akibia, believes today’s data center industry provides accessibility to green initiatives for everyone.

One of the biggest concerns, Eichorn says, is the proximity of the two data centers. Putting one facility in an area that’s prone to natural disasters is risky enough, but if your data centers are too close, a hurricane, tornado or other big storm could take out both facilities, he says.

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At the same time, if the data centers are too far apart, turn-around time suffers. In addition, putting facilities in another state, province or territory will increase the overall cost (and complexity) of capital and labor, which is an important consideration for small and medium-sized companies. (Larger firms with multiple offices, of course, have more options for where to base a data center.)

In the end, Lambert says, most businesses establish a perimeter or short-list of ideal regions and go from there. If you narrow your site selection down to a few regions, then you can analyze the benefits of each location and plan your facility.

The good news for companies looking to expand facilities or invest in new data center builds is that the industry is more open today than it was in the past. Far from being proprietary and secret, today’s data centers show that there is more interest and more willingness from companies to share their experiences and knowledge with other companies.

“When people bring knowledge and technology advancements to the table, it brings forth a more open environment and accessibility to green initiatives for everyone,” Eichorn says.

Based in Nova Scotia, Canada, Vangie Beal has been covering small business, electronic commerce and Internet technology for more than a decade. You can tweet with her online @AuroraGG. Follow everything from on Twitter @CIOonline, on Facebook, and on Google +.