Winston-Salem has advantages for data center locations, ranking says

Winston-Salem continues to be a prime cost option for companies wanting a safe haven for sensitive data operations, according to a national study by a site-selection company.

However, even though the city has had on average the second-lowest operational cost for a U.S. data center the past six years — $10.5 million for 2012 — the city continues to find few takers.

Part of the reason is that companies prefer major data centers in the upper Midwest, where there is less potential for natural disasters, and where the costs of land and power are lower, according to The Boyd Co. of Princeton, N.J. The group annually studies data-center costs for 45 metropolitan statistical areas.

When companies such as Apple, Facebook and Google do consider North Carolina, specific state incentive packages for data centers have led them to rural counties where the tax credits tend to be more lucrative.

Apple placed its $1 billion data center in Maiden, Google has its $600 million facility in Lenoir and Facebook put its $450 million facility in Forest City.

Data centers are huge collections of Internet servers able to process tremendous amounts of data traffic. They are expanding as technology migrates to the concept of cloud computing, where information that once was kept on individual computers is stored in a sort of digital warehouse, making it cheaper and available whenever it's demanded.

North Carolina has a combination of natural and man-made advantages that draws data centers, including relatively cheap electricity and a climate that doesn't reach the extremes of cold and heat that are a challenge for facilities with huge amounts of sensitive electronic equipment.

Dan Lynch, president of Greensboro Economic Development Alliance, said the Triad "is definitely on the radar screen for data-center projects."

"However, non-enterprise data-center companies, such as Google and Facebook, are usually in search of huge incentive packages that in North Carolina only the most distressed counties can offer," Lynch said.

"We have had clients en route to look at one of our sites only to cancel when they discovered we are a (higher level) Tier 3 county as opposed to Tier 1 or 2."

As much as the capital investment serves as an economic shot in the arm for the rural counties, the job creation side of the projects pales in comparison. The combined workforce for the Apple, Facebook and Google centers is projected to be 300.

Winston-Salem has had some success landing major data centers.

In 2005, Lowe's Cos. Inc. opened a $100 million data center in the Madison Park office complex with 25 employees. It received about $3.8 million in local and state incentives. Last August, Lowe's added a 90,000-square-foot building there, but no new jobs.

In 2007, the Clearing House Payments Co. opened a $22 million data center in Winston-Salem with 80 local workers. The company is eligible for nearly $900,000 in local and state incentives.

Wells Fargo & Co. has about 1,000 employees in technology and operations in the West End data center. Data Chambers LLC, recently bought by North State Communications, has 120,000 square feet of data-center and disaster-recovery space.

John H. Boyd, a principal with The Boyd Group, said landing data centers will require creative economic initiatives, including incentives, at the local and state levels.

"Information security will be a major driver coming out of financial and health-care reform," Boyd said. "About 40 percent of financial, insurance and health-care documents are digitized now. The goal is 100 percent within four years."

State and federal regulations dealing with the privacy of financial and patient information already have compelled operational redundancies, according to analysts.

"There's the need for data-security space for disaster recovery, risk management and replicated transaction platforms," Boyd said. "There's a growing need of space for handling and preventing security breaches and computer crimes."

Boyd said top choices for data centers also have a major National Security Agency-approved cyber-security program at a nearby university or college. N.C. A&T University has such a program.

"For many banks still recovering from the financial meltdown, improving the bottom line on the cost side of the ledger is much easier than on the revenue side," Boyd said.

"As a result, location decisions at all levels of the bank's organizational structure, from the corporate headquarters suite to remote, outsourced call centers, are being made with cost minimization as an overriding objective."