Thursday, 16th of August 2007 at 06:31:09 PM
Jim Kohs at Skill Cubes sent me a link about the recent tax abatement that Rackspace was getting and also asked about the new Microsoft data center that they broke ground on recently. They asked why Houston wasn’t getting the same love as San Antonio. Here are some initial thoughts:
The Microsoft facility is not competitive to Rackspace. They, like many other software companies including Google, Yahoo and Intuit are building data center space around the country to support their move into more online services (most everyone is moving towards the SaaS model.) The primary reasons they chose San Antonio are probably fourfold (here is a more extensive article on the reasons San Antonio is a preferred data center location):
1. Power in San Antonio is among the least expensive and most reliable in the country;
2. San Antonio has a lot of empty space;
3. Labor costs in San Antonio are lower relative to other tech towns (Austin, Dallas and even Houston);
4. Bexar county is going to give them a $20.7 million tax abatement for the facility.
Keep in mind that the jobs that Rackspace (4,500 in Texas total) and Microsoft (75 positions with new data center…not so big when you look at it that way) will not be as high tech as one might think. The Microsoft data center will likely employ several key network and engineering positions, but the rest will be data center operations, which is nothing more than guys building servers and electricians. Most of the Rackspace positions will be customer service and light technical support. The jobs that we want here in Houston are developers and other high grade technical positions.
I would also put those numbers in perspective. San Antonio created about 17,200 jobs over the last 12 months; Houston created almost 100,000 during the same period.
Overall, San Antonio is benefiting from their cheap power and wide open spaces (I believe the impact is greater from the new Toyota plant than both of these combined.) Perry has money to use and is spreading it all around. Most of his money for Houston will go to alternative energy technology and nanotechnology which I would argue has more long term benefit to Houston than a data center and a call center.
Just my opinion. Let’s hear yours.
Why San Antonio, not Houston? One word: hurricanes.
It may seem risky to some to locate a data center here in Houston. Actually, though, Houston has a good power grid, with dual grid possibilities, a good network grid (multiple providers as well), and some tall, very hurricane-proof buildings.
So, hurricanes should not be a concern here, but then again … look at today, the streets were flooded, making it nigh impossible to get around town. So, your Houston data may be high and dry, still powered and connected – but the employees can’t get to work!
You’re right, though, about job quality. Data centers themselves don’t damand the most in technical talent.
Do you think nontech manufacturing will remain in Houston? Recent mergers make me curious if we will see products being invented here but made else where. I don’t know what the base carbon materials used in the creation of a nano tube. It would seem however that the technology for building the tubes is similar to chip manufacture. If the material is carbon from coal and not oil I would think moving closer to the source would make sense. All the articles on nanotech still seem to be on research investment. If or when a viable product is created for either government or for commercial consumption there are no guarantees that manufacturing will remain in Houston.
Kevin, I am not sure that I agree about flooding, although I too got caught up in the problems near Kirby and 59 at lunchtime. San Antonio had it’s share of flooding while I was there and tends to be more prone to it given the bedrock the city sits on not allowing rainwater to absorb into the ground.
You are correct about Houston being a decent location for data centers. In fact, Houston has its fair share of high profile data centers with The Planet (www.theplanet.com) and Cyrus One (www.cyrusone.com) located here. The underlying issue here is cost. Check out this listing of the top 10 cheapest places to locate a data center:
Top 10 Cheapest Data Center Cities (by operating costs)
1. Sioux Falls, S.D. $9.7 million
2. San Antonio, TX $10.3 million
3. Ames, IA $10.4 million
4. Tulsa, OK $10.5 million
5. Des Moines, IA $10.5 million
6. Omaha, NE $10.5 million
7. Colorado Springs $10.7 million
8. Albuquerque, N.M. $10.8 million
9. Denton, TX $10.9 million
10. Champaign, Ill. $11.1 million
Source: TheBoydCompany.com
As the saying goes, money talks…
Aaron, I am no expert on nanotech so take what I say with a grain of salt. My understanding that the creation of carbon nanotubes requires special equipment which companies can either acquire for a significant investment or license from places with the appropriate facilities, such as Rice University which has one of the top facilities globally. There are overseas firms that develop and manufacture carbon nanotubes but from what I have heard anecdotally, they are lacking in quality control (the story I heard was that one place was using a sock to capture nano-particles coming from a processing machine…that can’t be safe.)
I am on the fence about non-tech manufacturing moving elsewhere. I doubt you’ll see many pipe fabrication plants popping up in China to service pipeline overhaul in the Gulf. The steel will come from overseas and the labor may be imported locally to keep costs down but shipping big items is not inexpensive or timely.
On the flip side, my suspicion is that within 10-15 years, more technical manufacturing will be offshored as better collaboration tools become available. The more you can use technology to train remotely (video, computer animation), the more you should see it happening overseas.
Folks — This is my first blog post ever, so please forgive me if it’s too long.
Comments on Nanotechnology. I’m not a scientist, but have a volunteer and contract-business-worker history with local Nanotechnology entities.
In Texas, the main centers for Nanotech are as follows:
Austin — primarily for electronics
Dallas/Fort Worth — primarily for Aerospace
San Antonio — primarily for Health Sciences
Houston — primarily for Aerospace, Health Sciences and Energy.
This is a generalization, of course, but a relatively useful shorthand for where we’re strongest in Texas.
Rice has extremely deep and active collaborations with Federal research arms, with Aerospace and Energy companies and with the Texas Medical Center, and works both in Nano-Photonics (google up Naomi Halas and Jennifer West) and Single-Wall Carbon Nanotubes (SWNT; google Rick Smalley and Robert Curl, who co-won the Nobel Prize with a UK scientist for discovering the C-60 molecule, or Buckyball).
Those of us who are Nano-fans do believe that Nano will eventually surpass Energy in global revenues, but as with any emerging technology, the timing is impossible to predict. The big bucks will be made not only from manufacturing — which jtabin rightly says is non-trivial, and the best SWNTs do come from the Rice lab — but also from licensing technology. This is similar in some respects to the Energy technology industry here in Houston: we definitely want to continue making tools, but it’s just as important to make money from the Intellectual Property.
It would be easy to say that Nanotechnology is just another cold fusion or Segway — where has the real impact been, so far? Fortunately, the field is showing substantial progress, with big players in Aerospace and Energy beginning to invest real money and resources into it. The reason: Nano, especially SWNT, shows the ability to solve problems that require capabilities at the extremes of temperature and pressure; solutions that are not feasible using conventional technology. I actually started thinking Nano was a chimera, for awhile, but am back on the bandwagon.
Echoing what A Swanson says, we DO need to be concerned that the technology – and therefore the employment – is transportable. That’s why the Smalley Institute at Rice, and others, are trying to tie the innovations – the actual applications of Nano within an industry – to industrial segments where we have global competitive advantages here in Houston.
Other key words to google, sites to search: Armchair Quantum Wire, http://cnst.rice.edu/, Dr. James Tour, Quantum Wired