Data Centre locations: Out-of-town DCs V In-town facilities

In this blog from Matthew Dent, chief executive officer (CEO) of Volta, a data centre facility provider, which could perhaps be alternatively titled location, location, location, the various pros and cons of out-of-town data centres (DCs) versus in-town facilities are examined, in regard to latency, power availability, fibre connectivity and ease-of-access. The number one consideration …

January 27, 2014 | Volta Data Centres

In this blog from Matthew Dent, chief executive officer (CEO) of Volta, a data centre facility provider, which could perhaps be alternatively titled location, location, location, the various pros and cons of out-of-town data centres (DCs) versus in-town facilities are examined, in regard to latency, power availability, fibre connectivity and ease-of-access.

The number one consideration for anyone considering where to place a data centre (DC) location or to whether to site their matching engine in a co-location (co-lo) facility must be the availability and resilience of the power supply, closely followed by the proximity to a trading execution engine and what the fibre connectivity options are like.  

There are many DCs that are historically situated in the centre of towns, such as the London Stock Exchange (LSE) central London facility in the UK, and other facilities, such as the mammoth new Basildon data centre facility operated by NYSE Euronext in Essex, to the east of London, which are located in out-of-town locations to take advantage of the lack of size constraints. Both options have their various pros and cons and the assessment of these can change over time, depending upon the needs of trading firms and financial market participants, media companies, and other DC end user clients. 

Jones Lang Lasalle published a data centre industry barometer way back in 2010 addressing these locational issues and I still find it useful to refer back to it. The report suggests an appetite among developers and customers of data centres, which have a long construction lead-time of course, to move towards remote out-of-town locations. This was certainly a major trend back then as demonstrated by the building of the NYSE-Euronext Basildon DC; the future of which must now be in doubt following the ICE takeover of the exchange.

Almost 70% of the Jones Lang Lasalle survey respondents said they would consider a data centre over 200km away from an existing facility if there were significant cost advantages, in terms of cheaper land, more plentiful and easily accessible power supply, etc. The attractions of going out-of-town are therefore clear, but you can lose out on latency and fibre connectivity options and non-generator resiliency back-up options if you’re not careful, where conversely an in-town DC facility can sometimes score more heavily. As ever, it is a question for each individual financial market DC end user to gauge what are the key requirements, and the best options, for them when specifying a DC, based upon their own particular needs. Volta operates an in-town DC facility at Great Sutton St on the edge of the City of London trading conurbation. We are lucky to have a resilient power supply and good connectivity due to the building’s legacy as the old Reuters building, but not all such in-town facilities may benefit from these advantages. Additionally, we had to expand the power supply capacity from 2.8MW up to 9.6MW as part of the comprehensive refurbishment and upgrade of the facility.  

When Jones Lang Lasalle were producing their report, the key challenges then were that remote, out-of-town data centres, such as the NYSE-Euronext Basildon facility, had yet to be developed beyond the planning stage. The ability to guess as to their performance was limited. Three years on, with the facility built and Equinix’s big slough data centre campus to the west of London expanded still further, it is possible to get a better handle on the in-town versus out-of-town debate. Which one you plumb for is never an easy decision, but it is never as black and white as looking at the headline cost savings – you should always consider latency, resiliency and other factors, alongside cost.

The same in versus out-of-town debate applies to other major global trading hubs as well, of course, with the Wall Street markets for instance served by a number of ‘close-in’ data centres and numerous facilities across the water in New Jersey state where land and costs are cheaper. The debate applies globally and is a perennial one for this technology segment.   

In-town Data Centres V Out-of-town Facilities
As I’ve mentioned, the number one consideration for anyone considering where to place a data centre location must be the availability and resilience of the power supply. Certainly in central London, or indeed New York, both of which are already so densely populated, the power supply issue can be seen as a key deciding factor. However, for buildings like the Volta Great Sutton St facility in London, which have historically been used as a data centre previously, that problem was solved a long time ago when Reuters ensured sufficient connectivity and back-up. Legacy can therefore be a benefit. With a diverse 33kV power supply and 9.6MW of power (upgraded from 2.8MW) from two independent substations of the national grid (and then our own back-up generators as a fail-safe), the single City-based DC that Volta runs offers a level of resilience that is hard to match, in central London at least.  

The level of resilience should be taken into consideration by any company considering moving their IT infrastructure to a centrally located DC. Clients can be reassured that their services will not be interrupted by any planned or unplanned downtime if the spec is up to the standard of the Great Sutton St facility [this is, however, rare in town -Ed]. For the construction of out-of-town data centres, the cost of digging new power lines to the grid to provide a similar level of resilience will be significant, representing a considerable upfront cost to developers and one that will inevitably be passed on to customers. If the facility is big enough, however, and the economy-of-scale savings add up then it can be worth it.    

Fibre Connectivity

Arguably the second most important consideration in this debate of in-town V out-of-town is fibre connectivity. Central London is unrivalled in the number of carriers running fibre connections. If they don’t do so already, carriers want to run their services in London because the sheer density and number of potential clients makes it economically attractive for them to do so. Outside the front door of the Volta Great Sutton Street facility there are manhole covers under which lie the cables of all the major fibre carriers from COLT, BT and so forth, all bringing diverse links into the building.

Out-of-town, in less densely populated business districts, the economic argument for carriers to locate and route their fibre into a new data centre is less appealing. It is of course worth it for huge facilities such as the NYSE-Euronext Basildon DC. Generally the point holds, however, that it is far less likely that out-of-town locations can offer the diversity of fibre connections that an in-town DC can. 

At an out-of-town facility it is often common practice for a large number of carriers to lease their fibre connections from the one or two who have actually dug a physical connection into the facility, potentially adding leasing costs to the location equation. In my opinion, this model can have an adverse impact on latency, bandwidth and connectivity choice, especially in times where there is high demand for bandwidth, or when speed is of the essence – as it is for the financial services FS trading community. [Conversely, during the London 2012 Olympics there was a bandwidth crunch in central London as all the TV companies and media companies covering the event ate up power supply and connectivity, temporarily limiting the construction of new central London DCs. The old Olympic media centre in East London is now the BT Sports studio and another near-central London DC option in the UK capital -Ed]. 

Latency

It goes without saying that a key driver of latency is location, or distance to other locations. London and the City FS trading hub are home to the most dynamic and competitive financial services industry in the world. For many firms located in the City of London square mile, especially those involved in latency sensitive algo-driven high frequency trading (HFT), speed is a key consideration.  It is critical for their trading models to run profitably. In and around London the FS trading community have access to a number of data centres run by the leading exchanges. As previously mentioned you have the LSE central London DC; NYSE Euronext’s Basildon facility, east of London in Essex; and the Equinix Slough DC campus to the west of London. Any firm wanting to trade quickly between all the available markets will recognise that a central position can offer an attractive opportunity for latency arbitrage. If you want to access all three markets then being centrally located between all of them can be beneficial. If it is only one market you’re interested in then co-location of course becomes an option.  

What is certain is that trading firms will choose to locate their equipment where they can grow their business fastest in the future and, perhaps more importantly, where they can gain a competitive advantage – the decision rests upon each individual firm’s needs. 

Ease-of-access

One final consideration worth mentioning is ease-of-access. Small firms often house their IT systems in the ‘comms room’ (this may be simply a cupboard at the back of the office but sometimes a whole room full of servers is required). However, as companies grow and reassess the cost of running and maintaining their own infrastructure many of them decide to outsource or relocate their servers into a third party data centre.  For some of those companies getting physical access to their systems will remain an important requirement.  Therefore, having IT infrastructure located in a data centre close to the company’s offices will be an important consideration.

There is peace of mind in knowing that, should they need to, firms’ can quickly and conveniently get access to their equipment in the centre of town.  Out-of-town facilities boast about their proximity to transport links but when it comes down to it there really is no substitute in my opinion for being ‘down the road’ in a central location. Those firms using other data centre locations, whether in or out-of-town can also benefit from the convenience of a central London back up facility.

The expected rush to out-of-town DCs envisaged by Jones Lang Lasalle in its report of a few years, which emphasised how firms’ would move out if the cost savings were high enough, never really materialised. Yes there were certain developments and expansions, as evidenced by Basildon, Essex facility and expanded Slough DC campus, but there certainly wasn’t a massive rush to the countryside. The 2008 crash may have played a part in this, as it costs so much to develop large new greenfield sites and investment money was tight after the financial crisis, but I believe there was also a realisation that the resilience and diversity of power and connectivity options in town should not be so easily discarded. In-town DC locations work for many many firms, especially for those FS companies for whom latency is a key consideration. You should weigh up all the considerations before deciding where to host, or build, your data centre.    

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