California Tax Send Data Centers Packing

High energy and tax rates have sent a few California data centers packing. Lately it seems most of these companies have been setting up shop in Oregon. The reasons are strictly monetary as companies seek to save on annual operation costs. T5 data centers are among the latest of companies to invest outside of California. With wholesale data centers already established in the San Francisco and Seattle market, It’s getting harder for colocation data centers like T5 to deny the urge to build outside state. Here are a few reasons why:

Budgetary & Tax Woes

The tax foundation ranked California’s tax index at No. 48, virtually the worst in the nation for its Tax climate. Businesses continually face higher income and sales tax as a result. Budgetary constraints across a wide variety of state services also seem to increase state spending by borrowing across future funds. Once again, this causes headaches for small to medium enterprises looking to save somewhere down the road.

High Energy & Location Costs

Data Centers and commercial real estate rates are 50% higher than the national average. New green mandates for 2013 will boost rates even higher in California, straining companies in every sector. Operating costs typically increase another 23% every few years as companies try to keep up with the higher energy tax associated with green initiatives. Data Centers who hire outside the state also stand to save even though data centers don’t employ a large staff. With a list of cons this long it’s hard to blame companies like T5 for building data centers outside California. Here are a few reasons why local California Colocation companies may still have the advantage over out of state competitors:

Virtualization & Location Can Reduce Costs.

Many companies that colocate or house servers prefer to do so locally. The advantage: They can physically go down to the data center in a moments notice in the advent they need to perform system upgrades or routine maintenance. Having such a piece of mind is worth it for most California companies. Being able to monitor data closely cuts down the risks of outages and allows for proactive adjustments to made in the advent of disaster. Virtualization has also allowed local business to cut down on IT costs by consolidating data center equipment. With cloud computing making a strong impact on the market, data management costs may actually decrease.

For more information contact James Mulvey