Oklahoma – A Data Center Leader
Imagine, two decades ago, I told you Oklahoma would be known for a solid place to build data centers AND have the best player in the NBA, would you have believed me? I doubt it. But we learn in this story why this has come to past…well, with the data center industry anyways.
While several states have been attracting major corporations’ data centers, the Sooner State’s policies and resources have put it ‘on the leading edge.’
Throughout much of its history, Oklahoma has had a reputation for having two things more than most other states: oil and cattle. Now, the state is also becoming known for its data centers, with more than 70 global companies — including AT&T,Google, Hertz, Hyatt Hotels and Avis Budget Group — building data centers there.
To be sure, other Midwest and Great Plains states have been attracting data centers lately, too, but “Oklahoma is on the leading edge of that trend,” said Amy Fleischer, Ph.D., director of the NovaTherm Laboratory at Villanova University, whose researchers have studied data-centers operations.
The reasons have as much to do with the state’s business-friendly policies as the availability of low-cost energy, land and high-tech workers.
Larry Parman, the Oklahoma Secretary of Commerce, said one of the biggest surprises for companies coming into Oklahoma is that the state is fiscally disciplined. Photo courtesy of Larry Parman
“In 2001 we started enacting policies to attract companies,” said Larry Parman, the Oklahoma Department of Commerce Secretary. “One of the biggest surprises for companies coming into Oklahoma is that we are fiscally disciplined.”
Those policies included passing a right-to-work law in 2001, tort reform in 2009 and workers’ compensation reforms in 2014.
In addition, Oklahoma, along with about a dozen other states, offers tax refunds for IT equipment as well as other inducements.
“When you’re spending millions of dollars and weigh the 9.25 percent sales tax in Chicago, for instance, against no sales tax for IT equipment in another state, the savings quickly add up,” said Andy Cvengros, vice president of data center practice at Jones Lang LaSalle, a commercial real-estate strategy and services provider.
The continued availability of technically skilled workers also is a priority.
Oklahoma, known for graduating petroleum engineers, has increased its support for education in science, technology, engineering and mathematics.
“Oklahoma has a well-educated, high-tech workforce,” Fleischer said.
The state has also benefited from the migration of college-educated people from New York, Chicago, Los Angeles and other major U.S. cities. In fact, according to U.S. Census Bureau data, Oklahoma City ranked 21st among U.S. metropolitan areas with a net migration of more than 1 million people with college degrees from 2007 to 2011 — more than each of the metro areas of Baltimore, New Orleans and Salt Lake City.
For those people who came and stayed, the state’s low income-tax rate is attractive.
“The state income tax’s top rate currently is 5 percent and may be down to 4.85 percent soon, depending on state revenue,” Parman said.
IT workers in Oklahoma also benefit from salaries that are 25 percent to 40 percent above the state average, and a cost of living that is 90 percent of the national average.
“That combination creates a huge wealth effect that lets people buy homes and have a better lifestyle,” Parman said.
Cheap, plentiful energy
Sitting atop huge reserves of oil and gas, and with strong, steady winds and plentiful water, “Oklahoma has one of the cheapest electricity rates in the nation,” Fleischer said. “That’s a huge incentive.”
The state’s industrial per-kilowatt-hour rate is 5.46 cents, 20 percent lower than the national average of 6.82 cents.
Oklahoma’s diversified energy portfolio is also a benefit to data centers trying to limit their carbon footprints.
“Sixteen percent of our energy is produced by wind,” Parman said.
With wind farms capable of generating 3,134 megawatts of energy, the state ranks sixth nationally in terms of installed capacity, and ninth for wind resources. Additionally, Oklahoma is a leader in converting its power plants from coal to natural gas, which, as the fourth-highest gas-producing state, it has in abundance.
Furthermore, with generally mild winters, adiabatic cooling is viable much of the year, Fleischer said. Since nearly half of data centers’ electricity is used for cooling, free cooling can lower operational costs dramatically.
For data centers that rely on water for chilling, the state has many aquifers, including the Great Plaines Aquifer (one of the world’s largest) and numerous rivers that crosscut the state, Parman said.
A developed infrastructure
Natural resources aside, “high-speed data transmission and a high-quality electrical infrastructure” are two additional determinants in deciding where to locate data centers, Cvengros said. Which is why the Oklahoma Broadband Initiative was responsible for laying more than 1,000 miles of fiber optic cable in 2013 as part of its mission to provide broadband throughout the state.
Prairie states like Oklahoma have some compelling benefits, but they’re not right for all companies. For instance, Wall Street firms, whose transactions can be affected by a millisecond of latency, plan to keep their data centers close to stock exchanges.
Even if the first state at the top of everyone’s minds isn’t Oklahoma when it comes to tech, we are getting closer by the day. Where will be be in 10-20 more years? I don’t know, but I can’t wait to find out.