As Connectivity Improves, Data Center Location Takes A Back Seat To Services

As technology changes, shifts are already being made in how data centers operate and where they locate. New technology is making it easier for data center planning to be driven more by client demands than real estate.

"Connectivity has gotten much better for data center users and this is creating greater flexibility for users when they are deciding to locate their data centers," JLL Executive Vice President Raul Saavedra said. "It's expensive to operate a data center, especially in a state with high taxes and electrical costs like California. Users are much more aware of the total cost of occupancy today and more are seeking markets close enough to reach both their user base or network and where they don’t have to compromise on speed of connectivity."

That shift means there are more opportunities for data center operators in states near the greatest demand, such as from tech companies in the Bay Area and Seattle on the West Coast, Saavedra said. The data centers can be close without being right in the market, so they can provide the services at a lower operating cost.

"So, in states such as Oregon, Nevada and Arizona, where the total cost of occupancy is significantly less and where you have flexible data center offerings, you are seeing more users move in," he said.

Corporations are increasingly investing in smart office devices and the Internet of Things, increasing the draw on data, JLL said in its 2017 Data Center Outlook. About 71% of corporations report they are gathering data for IoT initiatives, which will increase data volume and data center demand. Some major cloud providers expect to triple their infrastructure by 2020 to meet increased demand.

As companies are turning to more cloud solutions, there is a tip in favor of data centers in lower-tier markets, JLL reports.

Tier-two markets also benefit from increased demand for edge data centers, which try to bring data farther out from the core markets and closer to users to create a better experience, such as for a customer streaming video. Just as last-mile delivery has pushed logistics providers as close to customers as possible, so has shifting data demand called for a more distributed network of data centers.

Saavedra also said there are more high-density data center solutions now available that allow operators to create more efficiency through technology — which means taking up less real estate. These shifts are already factoring into how data centers are designed as operators seek more flexibility for demand changes in the future, he said.

The expectation is that end users will continue to put more demands on the cloud. Company employees and customers want to work anywhere, across multiple devices, Deloitte's 2016 Cloud and Infrastructure report notes.

"Already today the performance of an end user device is less about processing speed than about data delivery," according to the report. "The back-end data center provides the processing, hosting, and analytics. The user device needs to get more information more quickly and sustainably."

In the end, many data center clients will likely want a hybrid of services to meet their need.

"Not everyone is going to be OK with putting a valuable deployment entirely in the cloud," Saavedra said. "There is a certain degree of control/discretion that users will want to maintain."

To hear more about the latest data center trends, join us at Bisnow's Data Center Investment Conference & Expo, West on Nov. 30 in San Jose.