Data centers to head west for big space, low costs

Previously, few people would have connected the Ningxia Hui autonomous region, a cool, dry underdeveloped area famous for growing goji berries, with high-technology data centers.

But that changed when Amazon Web Services, a division of the e-commerce website, signed a memorandum of understanding in mid-December with the Beijing municipal government and the Ningxia government for the joint construction and development of cloud computing services for Chinese clients.

Beijing will be the front office and Ningxia will be the back office of the venture, known as AWS China.

Ningxia has announced plans to build a gigantic cloud computing base covering 12.8 square kilometers that can eventually house 1 million servers.

Despite a sparse population and small economy, Ningxia has ambitions to host many massive data centers, as do other local governments in that part of the country. Analysts said that the dream is quite feasible, as there will be more such centers being located in western China.

Some are already in the works. Just a couple of weeks before the AWS move, ZTE Energy Co announced a plan to build China's largest data center in 2014 in the Xinjiang Uygur autonomous region. That center will feature cloud computing, data storage and backup services.

According to Analysys International, a Beijing-based consulting firm, 10 cities in East China, most of which are first-tier cities such as Shanghai and Hangzhou, have data centers of varying sizes.

"But more and more companies are choosing to build large data centers in remote areas in western China because of the region's advantages in power supply and climate," said Qian Lili, an analyst with Analysys.

Qian pointed out that electricity represents about 50 percent of a data center's operating costs.

"The power supply in China's coastal areas is not only expensive but also unstable. There are even blackouts in the summer. That's fatal to data centers, because they must operate 24 hours a day," she said.

Abundant wind power makes Ningxia an ideal choice for large data centers. What's more, electricity rates are set by local governments in autonomous regions in China, which means that power can be cheaper in Ningxia than in big cities, Qian added.

Climate is also critical in the site selection of data centers, because it effects to what extent natural cooling technology can be utilized.

"If you can cut your spending on air conditioning, you can cut a lot of costs for running a data center," Qian said.

For example, that's why Google Inc chose to build a data center in Finland, Qian added.

Aiming to guide the development of data centers in a greener and more sustainable way, the Ministry of Industry and Information Technology issued guidelines on the issue in January 2013.

The guidelines specify that the site selection for data centers should consider factors such as power supply, climate and geological conditions. The latter matter in terms of reducing the risk of natural disasters, such as earthquakes.

The guidelines made many cities in remote areas in western China pop out of the map. There are downsides to running data centers in remote areas, however, such as challenges in operation and maintenance.

Charlie Chen, a market analyst with IDC China, also pointed out the disadvantage of the area's poor network bandwidth, which is a key factor for cloud services.

But he said that the situation will improve, as China will invest heavily to add four direct backbone network nodes in the western areas.

For cities in remote west China, building data centers for cloud computing offers a great opportunity to upgrade their industrial structure and ride the wave of China's newest growth engine, information consumption.

"The cooperation (with Beijing and AWS China) will help fully utilize data center and infrastructure resources in Beijing and Ningxia, which will benefit from the spillover effect from Beijing's Zhongguancun Science Park in terms of getting more projects and talent," said Yuan Jiajun, executive vice-chairman of the Ningxia government.