Data center giant outlines attractiveness of Springs for doing business

July 2, 2016 Updated: July 2, 2016 at 3:27 pm
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Work underway Tuesday, June 28, 2016 at the site of the T5@Colorado business park. The business park in south Colorado Springs will be devoted to data centers. Photo by Mark Reis, The Gazette

Corporate data centers might not be the sexiest economic development projects around.

They're essentially large, nondescript buildings - so-called technology warehouses where businesses store computer servers and other equipment used to operate their websites and internal networks. Data centers don't employ many people, generate steady streams of sales-tax-paying shoppers or attract hordes of tourists who pump money into local economies.

But companies typically invest tens of millions of dollars - or more - to construct and equip their data centers, which can generate spinoff jobs and other economic activity by suppliers and businesses serving the data center. Once completed, data centers expand a community's property tax base without necessarily requiring much in the way of government services - outside of utilities.

That's why it was key for T5@Colorado - a 100-acre south-side Colorado Springs business park that's envisioned by its developers as a home to multiple data centers - to snag its first user, local business officials say.

The entrance Tuesday, June 28, 2016 to the site of the T5@Colorado business park. The business park in south Colorado Springs will be devoted to data centers. Photo by Mark Reis, The Gazette 

Last month, SAP America Inc. of suburban Philadelphia, the U.S. subsidiary of international software giant SAP, paid $3 million for 9 acres in T5@Colorado, southeast of Interstate 25 and Circle Drive. The company, which has started moving dirt on the site, actually plans to construct two data center buildings that, combined, could total a little more than 200,000 square feet if built to their capacity, an SAP official said.

As other cities and states dangle financial incentives in front of businesses to attract their data centers, Springs officials hope SAP's arrival will become a catalyst for more projects at T5@Colorado and in the Pikes Peak region.

"No. 1, just getting the first business in the door to prove the concept of T5 will be really beneficial" to the business park and its developers, said Dirk Draper, president and CEO of the Colorado Springs Regional Business Alliance. "Second, to get a firm with the caliber of SAP just further solidifies Colorado Springs' reputation in the world of data centers in the U.S."

SAP joins Walmart, FedEx, Progressive Insurance and Hewlett-Packard as companies that have located data centers in the Springs.

Michael Wuerth, SAP's global head of data center services, told The Gazette the company plans to simultaneously construct two buildings at T5; one will have 60,700 square feet in its first phase, and the other initially would be 40,700 square feet. Each building could grow to 101,100 square feet if the company decides it needs more capacity as its cloud computing business grows.

SAP's buildings are targeted to open in December 2017, and the company will employ about 20 people to staff them, Wuerth said. He declined to disclose their cost.

Globally, SAP owns and operates more than 10 data centers, including three in the United States; its largest data center is in its corporate home of Germany, Wuerth said. The company also rents more than 40 data centers for its cloud business.

SAP's Springs data center will be company owned and operated; if built to capacity, it would be SAP's second largest in the world after its facility in Germany, Wuerth said.

SAP's latest site search in the United States was a lengthy process, Wuerth said.

Among the company's needs - common to businesses that operate data centers - were a secure site and a location with an efficient power source, since data centers consume large amounts of electricity for their operations.

T5's location is in an area that's set back from Circle Drive and is on the east side of Interstate 25. Meanwhile, Colorado Springs Utilities, which economic development officials tout as having reliable power at affordable rates, will serve T5.

Two other factors made the Springs attractive: the availability of a quality workforce to staff the facility and the area's climate, Wuerth said.

A data center's sophisticated equipment needs to be cooled constantly and maintained at an appropriate temperature. SAP determined that Montana, Nevada, Utah and Colorado made the most sense from a weather standpoint, Wuerth said.

"It doesn't make sense to go down in the hot areas (of the country), even if there would be a favorable energy rate or a favorable staff base," he said.

Vince Colarelli, part of the group developing T5 and owner of general contractor Colarelli Construction in the Springs, said the area's cooler weather allows businesses to use outside air to control data center temperatures.

"You can use 'free cooling' almost year-round, which allows you to reduce your reliance on mechanical cooling done by chillers and thus save money from an operating cost standpoint," Colarelli said. "It increases your reliability. You're not having to manage outages with mechanical equipment."

Eventually, SAP chose Colorado and focused on Denver and the Springs, Wuerth said.

"There is a very strong focus on Colorado and Colorado Springs and the Denver areas," Wuerth said. "The reasons for us are clear, because it is the balance that I described between not-too-cold winters: not too much snow, but also not-too-hot summers and not a lot of humidity."

For SAP, he said, "Colorado Springs was the right place."

That's the kind of message economic development officials probably want to bottle as they court companies considering the Springs as a data center site, Draper said.

Not only does Utilities offer a low-cost and reliable power supply, its municipal ownership means decisions are made by city officials who are responsive to the needs of local businesses and industries, Draper said.

When it comes to the weather, the Springs has something else that business alliance officials try to market: A lack of natural disasters - such as tornadoes and hurricanes - that can disrupt a data center's operation, Draper said.

Even before SAP made its announcement, the business alliance was working with three prospects who were considering the Springs as a site for their data centers, Draper said.

SAP's announcement, Colarelli said, validates the business park's potential.

In 2010, he and a partner proposed the business park, which they said could accommodate five to 10 data centers totaling hundreds of millions of dollars worth of investment. That year, the Springs City Council annexed the business park land and declared it an urban renewal area. That designation allows tax revenue generated from development at the park to be used to pay for utilities and other on-site public improvements.

Although it took years to bring the first user to T5, Colarelli said, SAP's decision now is having a ripple effect. Colarelli said other companies have begun to show interest in T5; he's now talking to at least one national company that was skeptical of the project when approached in the past but now is listening, since hearing of SAP's decision to build in the park.

"These guys (SAP) are the sorts of organizations that have the luxury to go anywhere in the world," Colarelli said. "The fact that they decided on Colorado Springs affirms the advantages of our community to support national data centers in exactly the way we have been marketing to the industry."

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Contact Rich Laden: 636-0228

Twitter: @richladen

Facebook: Rich Laden

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