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Understanding the Silicon Valley Data Center Market

After you read this post, make sure to read our article How to Choose the Right Data Center.

Data Center Frontier recently released the 2018 Silicon Valley Market Report. It has insights and overviews of the second largest data center market in the U.S. What were the most attention-worthy points from the report? Let’s take a look at what the report means for the region as well as the national wholesale data center market.

Why is the Silicon Valley data center market still a critical location?

Much has been made about the death of the data center market in Silicon Valley. It’s too expensive! Power is not cheap! Land is hard to acquire and build on! Earthquakes!! People have predicted the demise of the region over and over the last few years. Lower-cost markets are popping up in the west, and many are growing incrementally. The demand, however, in Silicon Valley remains strong—but why? There are several likely factors, but the most common and prominent one is proximity. A large number of technology companies still have their headquarters in the region, and most want the convenience of having easy access to their data center. Companies and teams are willing to pay a small premium so they don’t have to get on a plane or drive into a desert to get work done at the data center.

How do you make the economics work?

Although the costs can be higher in the region, the economics can work if you plan and understand the key factors when making decisions about your data center. First and foremost is that Silicon Valley is not one region. Location matters and Santa Clara is where it’s at. There is a reason you’ll find most wholesale data center providers concentrated in Santa Clara. It’s all about the power. Silicon Valley Power (SVP) provides cheaper and more reliable municipal power than all the surrounding areas served by PG&E. If you build an efficient data center or work with a provider that manages their facilities with low PUEs, your spend amounts are not much different from many other regions on the west coast when comparing the total cost of ownership.

What trends are driving the need for data centers in Silicon Valley?

In Silicon Valley, there has been an explosion of new technology developments, from artificial intelligence to self-driving cars to Internet of Things (IoT), and all of these require massive amounts of compute power to run. One trend we are seeing is that these companies are building large footprints quickly and want easy access to their data center footprint. The natural choice is to deploy close to their headquarters. These companies all have headquarters or large campuses in the area, and want their data centers to be near to these locations—hence the continued growth and deployment of Silicon Valley data centers.

What is happening in the denser data center? How does this affect Santa Clara data centers?

The number one topic of discussion with data centers today is DENSITY. Companies are slowly moving towards increased density, and building and utilizing racks and servers that can run more in a smaller footprint. Three-to-four years ago, racks commonly ran at 4-5kW per rack, while today, we are seeing more and more customers moving to 7-8kW and beyond. Many are starting to utilize taller racks (52U!!), and most are stuffing racks full and running equipment closer to their limits. All these trends are creating many new challenges, but also creating value for both customers as well as data center operators. Running denser and running hotter means that you can squeeze more out of your existing footprint and utilize less space to run your data center—and in Silicon Valley that can mean real dollar savings.

What should customers be thinking about when making data center decisions?

The most important takeaway from the report is inventory—or more importantly, that the region continues to be supply-constrained. Given the complexities and cost of building in the region, there are only a few providers that are aggressively and continually building in the region (and of course Vantage is leading the way) to meet the demand. As new buildings come online, most are already pre-leased or are leased quickly once open. What this means is that customers need to plan—your capacity planning should be done at least 12 months in advance, and you should be looking at all projects under construction in the region. With just a bit of planning and awareness of availability in the market, you can always find the right data center solution and provider to meet your needs.

Don’t forget to read our next post, How to Choose the Right Data Center, and be sure to read the entire market report to learn more about the Silicon Valley Data Center Market!