5 Critical Factors When Selecting a Datacenter Location

The location of your datacenter is one of the most important decisions you'll make for your infrastructure. While many organizations focus primarily on cost and availability, the reality is that location impacts everything from performance and reliability to compliance and disaster recovery. A poorly chosen location can lead to costly downtime, regulatory violations, and operational inefficiencies.

This comprehensive guide explores the five critical factors that should influence your datacenter location decision. Whether you're building a new facility, selecting a colocation provider, or evaluating cloud regions, these considerations will help you make an informed choice that supports your business objectives.

1. Network Connectivity and Proximity

The Importance of Network Performance

In today's interconnected world, network connectivity is the lifeblood of modern business operations. Your datacenter's location directly impacts latency, bandwidth availability, and connection reliability.

Key Connectivity Considerations

Carrier Diversity and Redundancy:

• Multiple Tier 1 carriers providing service to the facility
• Diverse fiber routes and entry points
• Carrier-neutral facilities with multiple providers
• Redundant network infrastructure within the building

Latency Requirements:

• Proximity to end users for low-latency applications
• Distance to cloud provider regions for hybrid architectures
• Network peering arrangements and internet exchange points

Bandwidth Capacity:

• Current bandwidth requirements and future growth projections
• Scalability of network connections
• Cost of bandwidth in the selected location

Strategic Location Benefits

Major Internet Hubs:

• Ashburn, Virginia (US East) - Primary internet exchange point
• London, UK - European connectivity hub
• Amsterdam, Netherlands - European peering point
• Singapore - Asia-Pacific connectivity center
• Tokyo, Japan - Asian internet exchange

Cloud Provider Proximity:

• AWS, Azure, and Google Cloud regions
• Direct Connect and ExpressRoute availability
• Reduced latency for hybrid cloud architectures

2. Power Infrastructure and Reliability

Electrical Power Fundamentals

Datacenters are power-hungry facilities requiring robust electrical infrastructure. Power availability, reliability, and cost vary significantly by location.

Power Grid Assessment

Grid Reliability:

• Historical uptime and outage frequency
• Power quality and voltage stability
• Local utility company track record
• Smart grid technology adoption

Capacity and Scalability:

• Available power capacity in the area
• Ability to add additional power feeds
• Transformer and substation proximity
• Electrical infrastructure modernization

Alternative Power Sources:

• Natural gas availability for backup generation
• Renewable energy options (solar, wind)
• Microgrid capabilities and islanding potential

Cost Considerations

Electricity Rates:

• Commercial electricity costs by region
• Time-of-use pricing structures
• Demand charges and power factor penalties
• Renewable energy incentives and tax credits

Backup Power Economics:

• Generator fuel costs and availability
• Battery storage system requirements
• Microgrid implementation costs

3. Natural Disaster and Environmental Risks

Geographic Risk Assessment

Natural disasters can devastate datacenter operations, leading to extended downtime and data loss. Comprehensive risk assessment is essential.

Seismic Considerations

Earthquake Zones:

• Proximity to fault lines and seismic activity
• Building codes and seismic reinforcement requirements
• Historical earthquake frequency and magnitude
• Liquefaction potential in the area

Seismic Design Standards:

• IBC (International Building Code) compliance
• Seismic zone classification
• Foundation and structural engineering requirements

Weather-Related Risks

Hurricane and Tropical Storm Risks:

• Coastal proximity and storm surge potential
• Historical hurricane tracks and frequency
• Floodplain designation and elevation requirements
• Wind load considerations

Flood Risk Assessment:

• FEMA flood zone classification
• Historical flood patterns
• Drainage and stormwater management
• Flood insurance requirements

Climate Considerations

Temperature Extremes:

• Average high and low temperatures
• Extreme weather event frequency
• Cooling system design requirements
• Energy efficiency implications

Environmental Factors:

• Humidity levels and condensation risks
• Air quality and particulate matter
• Corrosion potential from salt air or industrial pollution

4. Regulatory and Compliance Requirements

Legal and Regulatory Landscape

Datacenter location significantly impacts your ability to comply with industry regulations and data sovereignty requirements.

Data Sovereignty and Privacy Laws

GDPR Compliance:

• EU data residency requirements
• Cross-border data transfer restrictions
• Privacy shield and adequacy decisions

Industry-Specific Regulations:

• HIPAA for healthcare data
• PCI DSS for payment card information
• SOX for financial reporting
• FedRAMP for government contractors

Local Regulations

Zoning and Building Codes:

• Facility use permits and zoning restrictions
• Building height and setback requirements
• Environmental impact assessments
• Construction permitting processes

Utility Regulations:

• Electrical interconnection requirements
• Water usage permits for cooling systems
• Waste disposal and recycling regulations

Tax and Economic Incentives

Tax Advantages:

• Local tax incentives for datacenter development
• Property tax abatements
• Sales tax exemptions for equipment
• Renewable energy tax credits

Economic Development Programs:

• State and local incentives
• Workforce development grants
• Infrastructure improvement funding

5. Economic and Operational Factors

Cost Analysis Framework

Beyond direct costs, location impacts operational efficiency and total cost of ownership.

Real Estate Costs

Land and Construction Costs:

• Commercial real estate prices
• Construction cost variations by region
• Building availability and lead times

Lease vs. Own Considerations:

• Long-term lease agreements
• Build-to-suit options
• Colocation facility pricing models

Labor Market Dynamics

Skilled Workforce Availability:

• Local technical talent pool
• Education and training programs
• Cost of living and salary requirements
• Remote work capabilities

Vendor Ecosystem:

• Local service providers and contractors
• Equipment suppliers and distributors
• Maintenance and support services

Business Continuity Planning

Risk Mitigation Strategies:

• Geographic diversity for disaster recovery
• Multiple facility locations
• Cloud-based backup and failover options

Supply Chain Considerations:

• Proximity to equipment manufacturers
• Shipping and logistics costs
• Customs and import duties

Location Selection Methodology

Comprehensive Assessment Process

Step 1: Define Requirements

• Business objectives and technical requirements
• Risk tolerance and compliance needs
• Budget constraints and growth projections

Step 2: Identify Candidate Locations

• Market research and facility tours
• Connectivity and power assessments
• Risk analysis and due diligence

Step 3: Quantitative Analysis

• Cost-benefit analysis
• Risk-weighted scoring
• Total cost of ownership calculations

Step 4: Qualitative Evaluation

• Stakeholder interviews and feedback
• Vendor relationship assessments
• Long-term strategic alignment

Decision-Making Framework

Weighted Criteria Scoring:

• Assign importance weights to each factor
• Score each location against criteria
• Calculate composite scores and rankings

Sensitivity Analysis:

• Test assumptions and variables
• Scenario planning for different outcomes
• Risk-adjusted decision making

Regional Considerations

North America

Primary Hubs:

• Northern Virginia (Ashburn) - Network connectivity
• Northern California (Silicon Valley) - Technology ecosystem
• Texas (Dallas/Austin) - Power reliability and costs

Emerging Markets:

• Ohio and Indiana - Economic incentives
• Nevada - Renewable energy potential

Europe

Major Centers:

• Amsterdam, Netherlands - European connectivity
• Frankfurt, Germany - Financial services hub
• London, UK - Financial and business services

Considerations:

• Brexit implications for UK locations
• EU data residency requirements
• Energy costs and renewable mandates

Asia Pacific

Key Locations:

• Singapore - Asia-Pacific connectivity hub
• Tokyo, Japan - Technology and finance
• Sydney, Australia - Regional data center

Growth Markets:

• Mumbai, India - Cost advantages
• Seoul, South Korea - Technology innovation

Future-Proofing Your Decision

Technology Trends Impacting Location

Edge Computing:

• Distributed infrastructure requirements
• Proximity to end users and content
• 5G network availability

Renewable Energy Transition:

• Carbon-neutral datacenter requirements
• Renewable energy availability
• Sustainability reporting requirements

Hybrid Cloud Evolution:

• Integration with cloud providers
• Interconnection and peering requirements
• Multi-cloud management complexity

Long-Term Planning

Scalability Considerations:

• Future expansion capabilities
• Modular design approaches
• Technology refresh cycles

Exit Strategy Planning:

• Facility decommissioning costs
• Equipment relocation expenses
• Contract termination clauses

Making the Final Decision

Balancing Competing Priorities

Technical Requirements vs. Business Needs:

• Performance requirements vs. cost constraints
• Compliance mandates vs. operational flexibility
• Risk mitigation vs. growth opportunities

Short-Term vs. Long-Term Goals:

• Immediate deployment needs
• Future expansion requirements
• Technology roadmap alignment

Implementation Planning

Transition Strategy:

• Migration planning and timelines
• Change management processes
• Stakeholder communication plans

Performance Monitoring:

• Key performance indicators (KPIs)
• Service level agreements (SLAs)
• Continuous improvement processes

Conclusion: Strategic Location Selection

Choosing the right datacenter location requires careful consideration of multiple factors that impact performance, compliance, cost, and risk. While no location is perfect, understanding these five critical factors—connectivity, power infrastructure, environmental risks, regulatory requirements, and economic considerations—will help you make an informed decision.

Remember that location selection is not a one-time decision. As your business evolves and technology changes, you may need to reassess your infrastructure strategy. Regular reviews of your location strategy, combined with comprehensive monitoring and risk assessment, will ensure your datacenter continues to support your business objectives.

The right location provides more than just physical space—it creates a foundation for reliable, efficient, and scalable infrastructure that drives business success. Take the time to evaluate all factors thoroughly, and consider consulting with infrastructure experts to validate your analysis and ensure optimal decision-making.