Top 10 Criteria For Choosing a Data Center Location

DQI Bureau
New Update

IT Data Centers are a huge investment and most midsize companies need to setup their own data centers to run their business operations. Building new data centers is a time consuming effort needing millions of dollars and months of planning. Companies cannot afford to make a wrong decision when designing and setting up a new data center as these need to build for a life of around 20 years.


This article describes the challenges faced by enterprise data centers and explores various criteria which can be used for selecting a location for a new data center. Most of the businesses run their operations based on information technology processes and data centers form the heart of IT infrastructure of any organization. For all medium and multinational organizations, data centers form the backbone of critical business processes.

Variety of services like web hosting, telecom services, banking services depend on the data center infrastructure to offer services to clients. With the advent of ecommerce, smart phones, social networking and mobile communications, requirements of enterprise wide data centers keeps on getting complex.

Companies like Facebook, Netflix and Google cannot afford a downtime of even a single minute. They need a robust facility which can be operated 24x7 without disruptions and provide scalable computing power to customers around the world.


Companies want to build data centers in locations which are not prone to natural disasters, terrorism and also provide cheap and reliable resources like electricity, network and transport facilities.

Although Data Centers are such a critical part of any business, decisions regarding locations are sometimes arbitrary. In the past, companies have mostly setup their Data Centers near to their offices. This is rapidly changing now. As most of the monitoring and equipment administration work can be done remotely. Companies are looking for different sites for their data centers and proximity to the corporate office is not required any more. Main economic, political, geographical & social factors which influence the decision regarding the site are discussed below:

(1) Disaster Avoidance

Reducing the physical risk of catastrophic facility failure starts with site selection. Beyond the direct physical threat posed by natural disasters (earthquakes, hurricanes, lightning storms, Tornadoes, floods, etc.) data centers can be crippled by damage to supporting infrastructure or rendered inoperable because key employees and vendors are unable to reach the facility. When deciding where to locate a data center, CIOs must choose an area with a low risk of natural disasters. Areas which fall in earthquake zones should be strictly avoided.


(2) Network Carrier Availability

Communications is at the core of a data center functioning. All equipment in a data center needs to communicate with devices spread around the world for different business processes. Companies need good fiber connectivity. Location should have more than one network carrier for redundancy. Google set up one of its largest data center in Dalles (Oregon, USA) due to availability of cheap power and easy access to fiber optic network. A Data center with poor connectivity is a useless setup.

(3) Availability of Power

In US, Data centers consume power equal to 2500 typical homes. Power requirements have been raising from the data centers and this is the reason that data center energy efficiency is one of the hot topics in IT industry today. Data center electricity costs have become the second highest expense in the data center operations at 13 %. Therefore, cheap and abundant power supply is one of the main criteria for siteselection. Water availability and cost also needs to be considered if Data Center design uses water based cooling.

(4) Transport / Accessibility

Although data centers can be setup in small cities, these should be still easily accessible by any means of transport. Suppliers of IT equipment (like HP, Cisco, Dell, IBM, Intel etc.) and other construction crew need to be able to travel to the site easily. Air connectivity is also preferred so that support personnel can be flown to the site ASAP if needed for outages.


(5) Land and Building Cost

Since Data Centers are massive facilities, cost to acquire the land is a crucial factor in the site selection. Usually land is cheaper in small remote cities. Land in big cities is 5 times the cost of same land in a small town and data centers need lots of lands. Therefore building data centers outside the main cities is cost effective. It is also not easy to upgrade the building of a 24x7 data center, therefore Building Construction cost also needs to be looked into account

(6) Tax Structure, Incentives and Subsidies

Political Factors impacts all investment decision even if the operation of a data center is a purely technical issue. Corporate Tax structure varies in different states. As data centers involve massive capital investments, companies look for ways to reduce their taxes. Locations offering lower taxes appeal to companies interested in making huge capital investments in data centers. For example, Washington State has one of the lowest corporate taxes in the US. Oregon State also offers lots of tax incentives to companies setting up Data Centers. Taxes is one of the main reason that Amazon, Microsoft, Yahoo, Providence have setup their data centers in different cities of Washington & Oregon.

(7) Availability of Skilled Manpower

Data Centers not only create lots of job during construction, but they also need on site engineers - electrical/telecom/IT engineers to operate the site. Therefore, IT managers need to consider the local talent pool when looking at a potential data center site.


(8) Safety and Security

Crime rate of the city needs to be checked. Also, terrorism threat needs to be evaluated for the city being considered for building the new data center. Physical safety of the data centers is of extreme importance as any disturbance to the facility can impact business processes. Data Centers host critical business data and data integrity cannot be compromised. Therefore, Data Center access should be controlled and regularly monitored.

(9) Urban Planning and Environment

What are the environmental and business laws of the various cities? Data Center is not a very environmentally friendly business due to its huge energy consumption. Some communities do not want any industries. Permits to build data centers are required from local municipalities - which can be time consuming. Therefore DC planners need to be very conscious of the communities when looking for cities for building new data centers.

(10) Climate Conditions

Environment and climate are very important when considering a location for data center. Since data centers need colder temperatures and humidity control, cities with moderate climate are preferred. This is the reason many companies are setting up their new data centers in extremely cold places like Scandinavian countries in Europe and Pacific Northwest in US.



Data Centers are at the core of any business enterprise operations. Data Center Industry is going thru a transformation and getting matured. Performance is no longer the sole criteria for defining the success of data centers. Energy efficiency, resources optimization and business continuity are also as important as the technology of IT equipment itself. With so much at stake, companies need to plan accordingly in order to deliver the best business value to the enterprise

Different mathematical models (like hierarchical decision modeling, ranking and ratings system) can be used to evaluate the various financial, social, political, and geographical factors which an organization need to look into when choosing a location for data center. This will ensure that right investment decisions are taken as millions of dollars and companies business operations are at stake.