Security concerns, increased medical records and financial regulations, and a need for space are all driving growth in the data center industry. Demand for data storage is only expected to increase as the Internet of Things and advanced device connectivity emerge, trends that will drive continued innovation in the industry. A recent panel discussed these and other trends.
- Skip Newberry, President of the Technology Association of Oregon
- Mark Meyers, Director of Enterprise Sales at Comcast Business
- Charlie Allcock, Director of Business Development at Portland General Electric
- Bill Cory, Regional Vice President of Sales at ViaWest
NEWBERRY: Starting from the ground floor, how would you describe the role of data centers within a broader technology infrastructure context to somebody who knows little or nothing about them?
CORY: Data centers are facilities that exist so that businesses that have infrastructure – servers and computers, IT equipment that is sitting in their business today – can have a place to put that infrastructure that is safer, more efficient, and doesn’t take up space in their own office. A data center is safer because it has redundant power, cooling, security and connectivity, so the IT equipment and the important data it houses are always available.
NEWBERRY: What exactly is housed in a data center, and what are the functions?
CORY: When you walk into a data center, you see an almost endless line of seven-foot-tall racks full of servers and other equipment that are housing software applications and other important business data. These racks contain almost all the critical data necessary to run a business – everything from software as a service applications to corporate IT infrastructure to voice-over-IP phone systems.
MEYERS: A data center is an excellent place to put electronic information you would want access to anytime and from anywhere.
NEWBERRY: Following from that, what’s the distinction between on-premises vs. co-located?
CORY: On-premises typically means at a customer’s office location. If you think about a business that has three offices, they might disperse their IT infrastructure across all three of these locations, particularly if there is some geographic diversity. Another approach is colocation, which is when you locate that equipment outside of your building altogether, typically at an offsite data center that is built to host that type of data.
ALLCOCK: The key takeaway in all this is that a data center is a piece of infrastructure. That’s really the core here. In a sense, it’s no different than a water line – a physical structure most people never see but everyone needs. As we enter into this age of “Internet everywhere,” all of the data that goes with that has got to live somewhere. Data centers are the most efficient way to address that need.
MEYERS: The recent economic downturn accelerated the move into data centers because people were looking to shed costs. They could outsource not only their technology and the management of that technology, but in many cases the people who took care of it for them. It used to be a niche in this market. There was a lot of information floating around about large corporate data centers – Google, Facebook, and Amazon – but in terms of growth of commercial data centers and the small- to mid-sized businesses taking advantage of that, I would say that the economic downturn exponentially accelerated that trend.
ALLCOCK: There are many different kinds of data centers. There are the ones where the company owns and operates their own data center, like Google in The Dalles or Facebook and Apple in Prineville. But what we’re seeing in the Portland area is a different kind of data center – one that serves as host for data from many different, smaller companies.
CORY: There’s a retail data center play, which is what ViaWest does. And there’s wholesale, and the difference is a retail provider gives you more services. We have employees who work in the data center to help support equipment needs, to power-cycle equipment, to do some actual database administration and work on the software that resides on the servers. We also have an entire suite of Hybrid IT solutions in addition to colocation, including cloud, compliance services and security solutions. In a wholesale data center, there is less of that. On the point about growth – the economic downturn, falling costs and rising demand as businesses create software-based applications that they serve up to end users, all of that has coalesced into what we see today, which is a really an almost insatiable demand for data centers.
ALLCOCK: The technology has gotten so much better and more sophisticated, it has to be housed and maintained in a unique, very specialized environment to perform optimally.
NEWBERRY: What are some other areas or markets that you’re seeing drive demand apart from the traditional technology definition?
MEYERS: Electronic medical records are huge. There was federal legislation that mandated electronic medical records and that includes imaging. If you get a CAT scan today, they’re transmitted over a large fiber-optic pipe, they’re stored in a data center, and they’re available to the radiologist in his home office and his radiology office. It takes a lot of bandwidth and storage because they’re very high-resolution images.
CORY: Electronic medical records, and HIPAA compliance, absolutely. Then there are all kinds of rules governing financial compliance. Compliance and security, outside of just the pure desire to get infrastructure out of the building, are probably the two biggest drivers. And across multiple industry verticals they might be slightly different. ViaWest recently acquired AppliedTrust, a well-known security consultancy for this very reason. We now provide consulting and professional services around security, compliance and DevOps because so many of our data center customers were looking for that expertise.
NEWBERRY: Oregon’s economy is made up predominantly of small and medium-sized businesses. What are those businesses looking for when they’re looking at data center services?
CORY: For IT departments now, it’s not about “patch the software on that server down the hall, do all the mundane work that really is not value-accretive to a business.” Small and mid-sized companies come to us so they can get those tasks off the plate of their IT staff and redirect their energies to more value-added work.
NEWBERRY: What are some of the things about speed and latency and where data centers are located that are important in delivering services?
MEYERS: Applications care about the amount of time between when you create a keystroke and when the information is retrieved and delivered back to you. That’s referred to as latency. We expect consumer applications such as; photos, music, and social media, to be available instantly irrespective of the device we are using or our current location. When you experience delay in accessing those applications it’s frustrating. Now imagine if you’re in an office and need to access an application which is important to your business; without appropriate, low latency bandwidth, it’s not going to work.
CORY: We talk to customers every day who are looking and evaluating where they might put their data infrastructure, and consistently they have a very specific maximum latency in mind. We have clients that say, “I can’t be in your Salt Lake data center, I can’t be in Denver, I need to be in Hillsboro.” It drives product development and capital expansion locally because the businesses have a need for that service to be provided locally.
NEWBERRY: How do we encourage more of this type of investment here? What are some of the other things that companies are looking for as they’re making their location decisions?
ALLCOCK: There are advantages to locating in Oregon. It’s relatively easy to find workers. The construction companies here know how to build facilities for this kind of equipment. The power reliability is here. Clearly in Oregon there are trends: The enterprise owners tend to locate on the east side of the Cascades. Folks who want access to commercial airports with direct flights to many destinations, they want to be on this side. There are different kinds of data centers that are coming into Oregon for different reasons.
MEYERS: One thing that has driven the growth of commercial data centers – what I would call retail data centers that cater to smaller enterprise – is a forward-looking tax policy through the creation of economic zones. Commercial power rates, which are lower comparative to other states, have driven growth. It’s a clean, reliable power source. There’s access to geothermal, wind, and hydroelectric power. Undeveloped land is another plus; there’s a cost effective place to put a data center here with access to the grid, versus if you looked in San Jose for example.
CORY: Another real benefit is our location between San Francisco and Seattle. At some point there had to be a spillover of people and businesses. You see companies moving here from the Bay Area or Southern California from a disaster recovery standpoint, and they take advantage of tax benefits in terms of sales tax. And frequently they’re bringing employees with them, even opening offices here.
MEYERS: Even when they don’t move an office with employees here, there are still economic dollars to accelerate through the economy. When you build a new data center you’re using a local architect, local general contractor, plumbers, electricians, landscapers – there are a multitude of people that will work on these projects. And then you have the data centers themselves.
ALLCOCK: One surprise I’ve had as I’ve learned this industry is how much connectivity we have with Asia. Oregon has a high concentration of transpacific cables with the kind of capacity data centers need, and there have been announcements for two more that are going to increase that capacity substantially. If we think about this in a global business context, it is an important value-added reason for locating in Oregon.
MEYERS: Our customers want the same experience whether they’re pulling up an application from their smartphone here or on the other side of the world. They don’t care where the application is, they want the same experience. For that to happen, there has to be a web out from these data centers of fiber optic cable to other states, other countries, other continents.
NEWBERRY: There has been a focus on Oregon’s part to using enterprise zones and tax deferral tools to help attract this type of infrastructure. What do you see as the importance of those types of policies in a strategy to attract more data centers?
MEYERS: The mindset that tax deferral and enterprise zones for data centers don’t drive job creation is rooted in an old paradigm. Nobody’s going to create an automobile factory with 10,000 workers and put it here. To appreciate data centers, you have to look at the direct impact of the capital investment data centers make, the people they employee, the cottage industry that they employee to build and grow the business, etc. If you look at all that, then the economic benefits for the state are larger than they appear.
ALLCOCK: If you think about this as infrastructure, things like reservoirs and water lines are all paid for by the public. With data centers, you’ve got private investment coming in to build up infrastructure, with the public sector helping out a bit. Looking at it this way, the whole conversation starts to shift, so public sector investments via tax deferrals and other incentives can be seen as relatively modest costs given the significant private sector investment they encourage.
CORY: The question of who is in these data centers needs to be emphasized. The vast majority of the customers are small and midsized companies. They could be a startup organization here in Portland that doesn’t even have an office yet. They might have three people who work out of their houses, their business is a mobile app, and they need a place to put their equipment. Most of the customers have one or two cabinets of equipment, not hundreds of them. Having that local access is critical to a startup culture.
NEWBERRY: Mark alluded to this earlier, but what are some of the ways that the availability of clean, affordable power has played into growth?
MEYERS: Large companies that are looking to put in more than just a couple of cabinets, they do the ROI and they decide what states they’re going to look at. And we have low-cost commercial power here that other states just don’t have. That power cost is a large factor in that ROI calculation.
ALLCOCK: We’re absolutely competitive when you compare us to the national average and we’ve got a relatively green footprint that’s getting greener by the minute. A lot of our customers, prospective data center clients that come and visit and look for opportunities here, ask that question. We can help them check it off the list pretty quickly.
MEYERS: They want it inexpensive and they want it green.
CORY: There are those who think of data centers as giant energy hogs that suck down energy all day long, but data centers do not create demand for power. The businesses that are putting equipment in data centers would be consuming power wherever they choose to run their business. The data center actually provides a way to consume less power overall. These buildings are built to be as efficient as possible. As a data center operator, you want to have the most efficient delivery of power possible so you can pass a competitive rate through to your customer.
MEYERS: This is also a state where you can use heat exchangers and you don’t have to run HVAC in your large commercial data center 24/7/365, which is the way that it used to be done.
NEWBERRY: Bill mentioned security, and we read in the press about data breaches, in the public and private sectors. How are data centers approaching the challenge of security?
CORY: If you think of physical security, that’s not where data breaches happen. We provide that level of security, of course, but the acquisition that ViaWest made of AppliedTrust reflects where security is on the minds of the IT community and CEOs. It’s about logical security. It’s about having the right policies and the right equipment and systems in place to prevent outsiders from electronic access into systems. So it’s more on the professional services side, the consulting side, and data centers are moving in that direction. Just providing a building isn’t enough.
MEYERS: One of the benefits of having your application at a data center and of having a network that is everywhere is that you can work from anywhere. The problem is that it’s outside the controlled environment. It used to be that you had all your employees in the office, your servers were in a locked closet, laptops and desktops were locked down and didn’t leave the office – information never left those walls. That world doesn’t exist anymore. So you have to have a logical network layout to connect your offices and your data centers. You have to have an intelligent security policy.
NEWBERRY: What about threats to physical infrastructure? What are the risks that we have in the Northwest and how are companies approaching those?
CORY: Every region has its challenges. The big one here that people talk about is Cascadia, and someday that fault will go and that will be problematic. All companies should have a disaster recovery plan, but a data center is going to be highly protected from natural disasters. When we built our Brookwood data center in Hillsboro, we thoroughly evaluated the location, since often a difference of a few miles one way or another can mean a lower-risk seismic zone away from the fault line, or a lower flooding risk. We also made sure it was seismically protected.
MEYERS: It’s not about hoping that someday you won’t have a seismic event; you will. It’s making sure that you’ve built your facility to standards so it can withstand anything except the most horrific event.
CORY: When you compare it to a building that’s 100 years old downtown somewhere, you’re in a much better place in the data center. The data center is going to be built to the seismic standards Mark talked about. It’s also going to be built outside of a flood plain and it’s going to have the most current fire suppression system.
NEWBERRY: Regarding disaster recovery and resiliency, ViaWest recently offered a solution on data recovery. What are some of the innovations we’re seeing on services that are provided over the data center infrastructure?
CORY: Disaster recovery has moved to the forefront of technology offerings because the solution is easier and significantly less expensive than ever before. When IT providers can offer a solution that makes it easy to manage, easy to outsource and cost effective to help protect against significant data loss, all of a sudden the IT staff no longer has to dedicate major resources to a once-in-a-blue-moon scenario. We now have a Disaster Recovery as a Service solution that can restore services in a geographically diverse location and within as little as an hour, depending on the complexity of a customer’s environment, their infrastructure is back up and running remotely.
NEWBERRY: Shifting gears to smart cities and the Internet of things: As sensors become ubiquitous and more data is produced from the environment, what is the opportunity for the region and what role will data centers play in that trend?
MEYERS: I don’t think we actually know where this is going to go. I believe we are just beginning to see the early stages of the “Internet of Things”. We are placing sensors on everything; refrigerators, cars, thermostats, doors, etc. I don’t believe that we have any idea what the burden is going to be from a data infrastructure, bandwidth and storage capacity perspective.
CORY: If there is some new service that’s going to utilize traffic data to help me get home faster and avoid the accident on 217, for that to work it’s going to need to be low latency. This an example of how big data is pushing customer demand for data centers. So that new app may very well exist in a data center in Hillsboro, no matter where the company is headquartered.
ALLCOCK: We’re just scratching the surface. As a utility, we’re seeing the opportunity to, for example, monitor gas levels inside transformers. If you’re going to monitor it every 10 minutes, it’s a chunk of data. If you’re going to do it more regularly, that’s more data. And then what do you do with that data?
MEYERS: Comcast is making huge capital investments to expand its network to places where we don’t have fiber optics today. Next year we’re going to spend even more. That’s not building to specific customers; it’s just investing to lay more fiber, to make more bandwidth available in more places, for the businesses and services that we believe are going to be created as part of this revolution.
NEWBERRY: What do you see other emerging technology and infrastructure hubs doing, from a policy or regulatory standpoint, that you would love to see add fuel to the fire here in terms of growth?
MEYERS: Oregon is a very livable state, but when’s the last time we built a major highway? We don’t have the arterials that a Seattle or Sacramento or Bay Area – even a Salt Lake – has. I see other regions growing faster because of that. Probably there are readers who would argue that growth would detract from livability here, but this is an issue comparative to other markets.
CORY: There are many ways that we can improve educational opportunities within the state of Oregon. In particular, businesses can invest in STEM programs at the secondary and elementary educational levels and that investment doesn’t always have to be financial, it can be volunteerism and time. If we want Oregon to be better in producing technology leaders, then we all need to be a part of that solution.
ALLCOCK: The places that are tough to go up against are those where there is a regional or community focus to what the future of the economy is, and everybody in that community believes in it and is pushing toward it. That’s an area where we can do better.
MEYERS: We could do better in banding together to drive more investment here and create more jobs, which creates more taxes, which creates more education funds.
This article originally appeared in the Portland Business Journal.