Regional Growth Boosts Data Center Industry

This week's news has demonstrated one way the current data center demand is fundamentally different from the dot-com era boom and bust. The building between 1999 and 2002 was focused in the major Internet markets, where you could be confident of a critical mass of customers and fiber, especially in New York, northern Virginia, Silicon Valley, Dallas and Chicago. Some players - notably Switch and Data (SDXC) - ventured slightly further afield to build networks across "NFL cities."

This week's expansions by ViaWest and ColoSpace highlight the growth of the data center industry beyond the major U.S. markets. Over the past few years, we've seen a number of companies assemble networks of data centers in small and medium-sized cities. These are typically multi-tenant facilities that rely upon demand from local companies needing IT infrastructure. The steady growth of these regional providers demonstrates the breadth of data center demand, which extends well beyond the financial and Internet sectors.

Here are some examples of regional players who have thrived on the local business market:

There are also a number of providers with one to three facilities on secondary markets, including CDW Berbee, Team Companies, MarquisNet, FiberCloud and many more. We're also seeing projects spring up in small cities that until recently would have seemed unlikely candidates for data centers.

That's a big change from the dot-com boom. It wasn't a complete desert beyond the major cities, as Inflow built a 14-facility network before selling to Sungard in 2004. But there were spectacular failures among providers building out "chains" of data centers in second-tier markets, most notably the bankruptcies of Colo.com and Relera.

What's changed? Two things - broadband penetration and the integration of the Internet in the everyday routine of businesses of all shapes and sizes. The need for storage, security, disaster recovery and application hosting crosses geographic boundaries. Server rooms in offices and business parks aren't cutting it any more, and regional players with phased growth plans are reaping the benefits.