Would You Drive 90 Miles to Save $1 Million Per Year on Your Data Center?

James Leach

One of the top data center markets in the world is Northern California, including Silicon Valley and the Bay Area.

According to the most recent report from Data Center Frontier and datacenterHawk, the Silicon Valley area is home to nearly 2.6 million square feet of commissioned data center space, representing 343 megawatts of commissioned power. That makes Silicon Valley the second-largest market for data center space in the U.S., trailing only Northern Virginia.

The problem is that the costs for power, people, and real estate in Northern California are some of the highest in the United States. Plus, data center supply in Northern California can be constrained, and there is the overhanging risk of earthquakes.

What if you could have the benefits of having your data center in Northern California with a lower price point, reduced earthquake risk, and available supply?

According to our recent analysis you could save nearly $8 million over a 7-year term by having your data center in Sacramento instead of San Francisco. The savings are between about $1 million and $7 million when compared to Phoenix, Reno, and Las Vegas.

So the question is, “Would you be willing to drive the 90 miles from Silicon Valley to Sacramento to save $1 million a year on your data center?”

Data Centers in Northern California

Base Rent – land and construction costs in Silicon Valley are high.

We all know that the cost of land and construction in Silicon Valley are high. Data from the National Association of Realtors published in August 2016, showed that the median price for a home in the region around San Jose, California was over $1 million — a first for any metro area in the country.

The same factors that make your Silicon Valley home expensive are true for your Silicon Valley data center. Supply of land is scarce. Plus, the expertise to build and operate a data center in Silicon Valley is often hard to find, making these human resources expensive as well.

Power – the largest single line item in your data center Total Cost of Ownership (TCO).

For a large-footprint, hyperscale cloud or enterprise data center deployment, it’s not out of line to spend $2 on power for every $1 you spend on base rent.

The mistake in many data center TCO models is that the cost of power is viewed as a sunk cost not a variable cost – a value to be plugged in, not managed. The good news is that data center operators tend to negotiate better power rates than you could get yourself due to quantity discounts. In addition, your overall power consumption in a new state of the art colocation facility will probably be lower than in your own data center through the use of more efficient cooling technologies and automation systems.

The even better news is that wholesale data center power pricing through the Sacramento Municipal Utility District (SMUD) is the lowest in the state of California. For example, data center power pricing in San Francisco is about 12 cents per kilowatt hour. In Sacramento it’s 6.9 cents – almost ½ the price. For a typical 1 megawatt deployment, the savings in power is about $648,000 per year for a total of nearly $5 million over seven years!

Planes, trains, and automobiles – which do you prefer?

How far do you want to be away from your data center, and how do you want to get there?  Sacramento is about 90 miles from the Bay Area. Reno is 220 miles, Las Vegas is 570 miles, and Phoenix is 750 miles. Would you rather drive or fly? Driving is probably the most flexible and cost effective option. A flight might take less effort than driving, but you need to make time for getting to the airport, parking, checking in, security, boarding, etc. Plus you will need a hotel and transportation when you land, and a return flight. Airports can also be more susceptible to weather delays. In an earthquake emergency, the airports are often closed.

Networks and the speed of light.

We’re living in the most connected era in history. But even with all the fiber in the ground, network performance is still bounded by the speed of light. Network latency can be a critical variable in the end-user application experience. No one wants to be looking at the hourglass. Roundtrip network latency to and from Sacramento and the Bay Area is 3 milliseconds (ms). In Las Vegas, the roundtrip network latency to and from the Bay Area is 15.3 ms. And in Phoenix the roundtrip network latency to and from the Bay Area is 18.1 ms. These network numbers make a big difference in application performance.

Environmental risk – earthquakes and severe weather.

The discussion around environmental risk and data centers in Silicon Valley or the Bay Area usually focuses on earthquakes. According to the U.S. Geological Survey, the Bay Area has the highest density of active faults per square mile of any urban center in the country. There is a 72% chance of a magnitude 6.7 or greater earthquake occurring over the next 30 years on one of these Bay Area faults (6.7 is the same size as the 1994 Northridge earthquake which caused 57 deaths and property damage estimated at $13-40 billion). The percentage shoots up to 89% for a magnitude 6 or greater quake. 

The good news is that once you get outside the Bay Area, the risk of earthquakes drops dramatically. Sacramento, for example, is on a separate tectonic plate from the Bay Area and is rated as a “very low risk”. However, not all data center locations outside the Bay Area have a low risk of earthquakes. For example, even though Reno is 218 miles away from the Bay Area, it has a similar risk of earthquake as the Bay Area.

Regarding severe weather, the desert locations need to deal with extreme temperatures and drought conditions. During the years 1981-2015, Las Vegas averaged 75 days per year of 100+ degree temperatures. During the same time period, Phoenix averaged 110 days per year of 100+ degree temperatures. Sacramento averages 11 days per year of over 100 degree temperatures, with half of those days in July.

Sacramento may experience heavy “El Nino” rains and excessive snow melt from the Sierra Nevada Mountains which can cause the rivers to overflow. Fortunately, Sacramento has spent billions of dollars over the last 20 years on a sophisticated system of levees and spillways, and has another $2.4 billion of flood-control projects in development. Record snowfalls of 471 inches from January-March, 2017 in Lake Tahoe were a good test for the flood control measures and all of the Sacramento data centers were safe.

What next?

Demand for data centers is booming particularly from hyperscale cloud companies and Fortune 1000 enterprises. The business case is compelling. You can shift your financial model from a significant upfront capital expense to a lower ongoing operational expense model that allows you to pay for what you use and scale up or down based on your business needs. Plus the performance and reliability improvements of today’s data centers will flow right to your bottom line.

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