Trend Forecast 2021: Data Centers on the Move

Mitch Fonseca • January 27, 2021 • 3 minute read

Colocation in Data Centers



Where they’re headed depends on who has the power

2020 might have ended with a collective sigh of relief, but the stroke of midnight on December 31 didn’t erase what began in 2020. Setting global issues aside for the moment, that’s not entirely a bad thing. The previous year, while challenging, did have some bright spots if you knew where to look. And I think the coming year, while no less challenging, will also have some shining moments.

Lacking a crystal ball, based on some of the key trends we saw last year, I think we are in for more of the same when it comes to data centers in 2020:

It’s 106 miles to Chicago … Hit it

Last year, we saw the exodus of financial exchanges from NY to Chicago in response to the threat of rising financial transaction taxes and, to a lesser extent, costly real estate and soaring utility costs. This shift (and the threat that spurred it) will almost assuredly continue in the coming year as taxability remains an issue, and enterprises eager to hedge their bets proactively make the move west. The Windy City, a large exchange in its own right, is already attractive from a business standpoint, making it a powerful lure for those looking to escape heavy taxes.

Mirror, mirror

If the past year has taught us anything, it’s that you can never be too prepared. If a move to Chicago is good, mirror sites in Columbus, Ohio, and Minneapolis are better. Take one of our financial customers on our service exchange platform. They have active-active sites between Minneapolis and Chicago, while another customer is doing something similar on the colo side, managing their own infrastructure as active-active between Chicago and Columbus. Backups are great but being able to dramatically cut recovery time in the event of a disruption is much, much better.

There’s a great future in (sub)markets

It’s not just big cities that are attracting enterprises. Chicago-adjacent cities are feeling the data center love as businesses seek out asynchronous replication closer to Chicago. Oak Grove, Franklin Park, and Aurora, for instance, are increasing in popularity. Their proximity to Chicago coupled with lower real estate costs make them attractive for businesses looking to save on expenses — they can put network hubs in downtown Chicago and their actual compute or data storage in the suburbs and still meet their bottom line.

Power to the data center

Where, for the most part, it's financial institutions eying a move to the Midwest (and Chicago, specifically), commercial enterprises are looking to relocate south. Tethered by their need to service their East Coast customers while maintaining business connections in Europe has made Ashburn, Va., with its low utility costs, the East Coast data center/colo destination of choice. Meanwhile, 3,000 miles away, California continues to be a huge challenge for West Coast-based businesses thanks to its high-cost power. It’s not surprising then that cost-effective Phoenix is fast becoming a data-center hub.

Across the country, enterprises are moving data centers away from markets with high power costs (e.g., New York, Santa Clara, Los Angeles) and moving to sub-markets, where they’re able to secure power rates at about 50 percent of what they were paying in larger metro areas. Given that power is the largest single expense on the colo data center side of the business, I think we can expect to see businesses picking up stakes and moving to areas where power is cheaper.

 

This is the first in a series of trend pieces. Check back in the coming weeks to see what else we think is in store for data centers in 2021.



Views and opinions expressed in our blog posts are those of the employees who made them and do not necessarily reflect the views of the Company. A reader should not unduly rely on any statements made therein.



Mitch Fonseca SVP & GM, Data Center Services, Cyxtera

Mitch Fonseca

SVP & GM, Data Center Services, Cyxtera