Why Is Data Center Location Important?

The importance of data center location depends on what the organization aims to achieve and how the location supports application performance and user needs. Factors like power costs, fiber network availability, natural hazards, and economic incentives are critical to making informed decisions.

Key Considerations for Data Center Location

1. Costs and Infrastructure:

   • Power Costs: Energy expenses are a significant factor. Markets with lower kilowatt-hour rates can offer considerable savings.

   • Fiber Availability: Proximity to dense fiber networks in major markets (e.g., Northern Virginia, Dallas, Chicago) ensures better connectivity and lower costs.

   • Land Costs: Prices are rising due to limited availability of suitable sites near power and fiber.

2. Strategic Factors:

   • Risk Mitigation: Considerations include natural hazards (seismic, tornado, wildfire risks) and manmade risks like proximity to highways or railways.

   • Portfolio Diversity: Companies often seek locations that diversify their power grids and geographic presence to reduce dependency on specific regions.

3. Economic Incentives:

   Some states and cities offer tax incentives to attract data center developments, such as sales tax abatements on IT equipment. This can significantly reduce costs over time.

4. Regulatory Environment:

   Permitting and regulatory requirements vary. For example, states like California may have longer timelines due to environmental regulations, while others like Illinois or Oregon are more business-friendly.

5. End-User Needs:

   Latency requirements are crucial. Applications like financial transactions or online services rely on minimal delay, often driving edge deployments closer to users.

6. Leasing vs. Building:

   Leasing often depends on competitive markets with favorable rental rates (e.g., Dallas or Chicago), while building requires careful site selection and higher initial investment.

Data center location is integral to IT infrastructure strategy, balancing costs, performance, and risk. As reliance on cloud services grows, selecting the right location will remain critical to meeting business needs and ensuring operational success.