Can it be?
Trading firms and marketplace operators are wasting money on the big “monolithic” data centers they’re building, as electronic networks proliferate, market data explodes and volumes surge?
That’s the contention of Ronald H. Bowman Jr., author of “The Green Guide to Power: Thinking Outside the Grid” and “Business Continuity Planning for Data Centers and Systems: A Strategic Implementation Guide.”
At last Thursday’s meeting of the Wall Street Technology Association, he said the financial thinking and planning – and, remember, this is America’s finance industry – can be ‘remarkably dysfunctional.”
The executive vice president of Tishman Technologies says the “superspend” on 100,000-square-foot data centers at $2,700 a s square foot in New Jersey, where Wall Street essentially has moved, needs to be rethought. Tishman has built data centers for Morgan Stanley, Merrill Lynch and Bank of New York Mellon.
Where should the new capital be?
Here’s the thinking.
The biggest two costs that need to be managed are energy and sales tax. Pick the right city and your charge per kilowatt hour can be 4 cents. Pick the wrong one, 14 cents. Go to Alabama and your sales tax can be 4 cents on the dollar. Pick California and it goes past 8 cents. Before adding in municipal sales taxes.
Get those two factors right (i.e., pick the low-cost options) and you can save “well over” $1 billion over the first 20 years of the facility.
Oh, and then there are the lower real estate and constructions costs. The space in a remote site, which uses fiber to collapse distance, can be $600 or $700 a square foot.
“Taking 100,000 square feet in New Jersey might not be the most productive use of our money. If we can take 10,000 feet in New Jersey and 90,000 square feet in North Carolina or in Iceland or Nova Scotia, where energy is 4 cents a kilowatt hour or there is no sales tax, where you can make a meaningful impact on your total cost of ownership, it’s making a bit more sense.”
How do you split that 100,000 feet into 10,000 and 90,000?
The only part of Wall Street trading and investment operations that need to be in New Jersey, in co-location or other facilities where closeness really matters to the trade, are the day-trading and high-frequency trading “algo farms,” he contends. The 10 percent.
The numbers have not spoken for themselves out of fear, he says. Fear of building a box in an out-of-the-box manner.
“Fear has governed the decision-making process for way too long. Pleasing the boss has governed the decision-making for all too long,’’ he said. “That’s why I think the toothpaste is out of the tube’’ on siting and operating data centers.
There are other factors that make little sense about sites in New Jersey. One major new marketplace data center, he notes, is near a suburban natural gas depot – and a train track where there happened to be a railway “fire and explosion” recently. Not the safest of locales. “You don’t get to vote on the event,” Bowman notes.
Another data center, retrofitted for another major marketplace operator, is “300 feet from the mouth of the Lincoln Tunnel” and has an underground parking facility. Such facilities have been known to be targets of vehicles that hide bombs. “This (location) is not at the corner of security and resiliency,” Bowman said.
So, now you start to look at some place really safe, really low cost and really far away. Like Iceland.
It’s midway between North America and Europe, for one thing.
This can be strategic, as electronic markets proliferate across the pond, too. And markets start to operate in integrated and around-the-clock fashion.
But, more key, is ice. Iceland has a lot of the stuff that can be used the chill air in computer server rooms. Cheap. Water, he says, is “making a comeback” into data centers.
The glaciers provide four-fifths of energy, through hydropower. Geothermal sources provide the rest. And fiber is plentiful in Reykjavik, the capital.
You don’t have to go out into the Atlantic. North Carolina makes a lot of sense. So do many sites west of the Mississippi, he says.
Looking closely at what applications and functions a firm really needs to have in New Jersey will break up the big box data centers, he expects.
“The monolithic superstructure spend I think is pretty much over,’’ he said.
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