When Facebook, Apple and Google decided to invest hundreds of millions in North Carolina for new, sprawling data centers, South Carolina paid attention. Both states had the cheap land and cheap, abundant power required, but North Carolina had something its southern neighbor did not: tax incentives.
“We were at a disadvantage on sales tax, on income tax compared to North Carolina,” said Greenville Area Development Corp. Senior Vice President Kevin Landmesser, who has been working on recruiting and pre-approving sites for data centers for the last several years. “We were really cut out in terms of being considered.”
Thus began South Carolina’s campaign for data centers, beginning with 2012 legislation eliminating the electricity sales tax for data centers involving $50 million in investment and 25 employees. The law also exempts data centers’ computer equipment, hardware and software purchases from the state sales tax, which legislators hoped would be enough to get in on the multibillion-dollar industry.
Today, the Upstate is home to dozens of data center firms and services, including Immedion, ArmorRack, Windstream, Qutera, Ahold Information Services, Integral Solutions Group and BMW’s Information Technology Research Center, among others.
“The next logical place”
“Incentives have definitely been an asset to those states that have an aggressive incentive for data centers, and South Carolina has that,” said Stu Heishman, Duke Energy’s vice president for economic development, who partners with economic development entities across the six-state Southeast region. The utility company helped recruit more than $1.2 billion in capital investment and 3,200 jobs to South Carolina in 2015, according to the company. Since 2005, Duke helped recruit $12 billion and 33,000 associated jobs.
“I would say that data centers are one of the most energy-intensive that we focus on. That, and automotive,” said Heishman, who said his 27-person team also works on site-readiness, business recruitment and project management when recruiting companies. “We’ve got a very strong collection of large data centers in North Carolina, then another cluster in the Atlanta market. The Upstate is clearly a part of that corridor that should be the next logical place for a data center to look.”
While incentives play a big part, data centers have unique needs when it comes to utility, space, location and price – needs such as reliable power, redundant fiber infrastructure and utilities, a low risk for natural disasters and located outside of flight paths. One recruitment strategy is to fast-track the process with site-readiness measures, which complete due-diligence processes that reassure potential companies that a suitable site is available.
Need for speed
As is true with nearly every IT vertical in the majority of markets, workforce is a constant struggle.
“The overriding issue is that there’s just not enough quality, skilled workforce, so there’s a lot of ‘rob Peter to pay Paul’ going on,” said Rob Moser, Greenville-based third-party provider Immedion’s co-founder and COO. “We work with technical schools so that our requirements are communicated to them… but specifically in the Upstate where the market is so dynamic, we’re seeing the biggest challenges.”
Immedion chose Greenville nine years ago because of the growing business climate, he said, and now operates in Columbia, Charleston, Rock Hill, Asheville and, most recently, Cincinatti. Moser says the current focus is on integrating Ohio, but envisions further market expansions in the future.
“To have multiple options in terms of Internet carriers in the region is absolutely key… and then there is demand,” he said, noting that most of Immedion’s 600 customers are no more than 40 miles away. “As companies are looking to relocate in the Upstate, especially larger companies, having an enterprise-class data center in the market is an asset.”
But the data center industry has changed significantly since South Carolina’s 2012 legislation, according to Landmesser. For one, enterprise centers from big names such as Facebook and Microsoft made waves, but demand slowed down and was replaced by the need for co-location and third-party operations that housed multiple firms.
That, and there’s the persistent upheaval that comes with new technology, driving down technology costs and space requirements.
“Obviously they’re becoming more efficient… but that said, there’s this insatiable appetite for speed,” said Heishman. “Between media streaming and game time and all that, I think the average consumer spends more than six hours a day online. … The appetite for speed is what’s driving energy use even with the increase in efficiency.”