"We’re competing with a number of different regions, and they only select one location. It’s a very low ratio compared to the volume of projects you initially work on."– David Maahs, executive vice president of economic development, The Greater Des Moines Partnership
"We’re competing with a number of different regions, and they only select one location. It’s a very low ratio compared to the volume of projects you initially work on."
– David Maahs, executive vice president of economic development, The Greater Des Moines Partnership

Data centers for Google Inc., Microsoft Corp. and IBM Corp. have already made their homes in Iowa’s low-cost market, and a recent study suggests the state could soon see more similar projects.

The Boyd Co. Inc., a corporate location consultant based in New Jersey, conducted a study to find highly secure, cost-effective sites on which to build data security centers to support the banking and finance industry -- with several Midwestern cities landing in the top 10.

The Ames area was in the No. 3 spot, behind Sioux Falls, S.D., and Tulsa, Okla. Council Bluffs placed fourth, and Omaha took the No. 8 spot.

Based on operating costs alone, Des Moines ranked No. 9 out of 45 cities in the survey, while Ames ranked No. 6. (see chart below)

John Boyd Jr., principal with the company, said the Midwest is likely to soon see an influx of companies and jobs from the data security industry because of three key factors: the federal government’s call for consolidating data centers from 3,300 centers to 1,000 centers by 2015; the Dodd-Frank Wall Street Reform and Consumer Protection Act, which will increase banks’ digital records; and the defense industry, which Boyd believes will be the next big player in the data security field.

Boyd said his company currently has four clients in the data security industry, one of which is a third-party data center that is interested in Iowa because of the state’s strong banking and finance sector.

However, attracting and recruiting data centers is a long, and often unsuccessful, process, said David Maahs, executive vice president of economic development for the Greater Des Moines Partnership.

Maahs said there is about a 10 percent success rate of bringing prospective businesses to Greater Des Moines.

“We’re competing with a number of different regions, and they only select one location,” he said. “It’s a very low ratio compared to the volume of projects you initially work on.”

A number of factors go into a company’s final decision, most of which are out of the control of economic development organizations, Maahs said. For instance, tax policy, which is one reason Sioux Falls outranked cities in Iowa; South Dakota’s lack of corporate and personal income taxes gives it a large competitive edge, Boyd said.

Likewise, the newest federal government data center is being built in Salt Lake City at Camp Williams. The $1.2 billion, 1 million-square-foot facility was highly coveted and ended up going to Utah because of its cheap office space, Boyd said.

But plenty of federal data centers still need to be consolidated, and many will likely end up in the Midwest’s lower-cost markets.

The Partnership is very proactive when it comes to promoting the region to attract new or expanding data centers. For the last four years, in addition to taking part in one to two trade shows a year, it also visited with consultants.. Maahs said the organization often touts studies like the Boyd Co.’s when talking with large companies that are looking to build a data center.

“We cite it in marketing material and analysis, because it demonstrates Des Moines’ cost-effectiveness,” he said.

However, the Partnership and other economic development organizations often work with and provide information to companies without knowing their identities. Maahs said the Partnership will receive a call informing it that a client is interested in a particular area, and it will provide the requested information and materials. Usually, the client’s name is kept confidential until it has whittled down its list.

When it comes to successfully roping in a data center, Maahs said the Partnership works closely with local and state economic development boards, calling it a team sport, and luckily, Iowa has laws in its books that make it a strong competitor.

In 2009, the state passed legislation that gives data centers a sales and use tax exemption on computers and other necessary equipment, including cooling systems and backup generators.

Additionally, Boyd pointed to Gov. Terry Branstad’s new initiative to reduce commercial and industrial property taxes by 40 percent during the next eight years, which he said was a game changer that companies are excited about.

Branstad’s request to the Legislature to add $25 million to the state’s High Quality Jobs Program, which is an incentive fund that will offer loans, grants and tax credits, would also help, he said.

“Businesses like it,” he said. “It will attract new companies or companies looking to expand.”

The Midwest’s smaller markets are attractive to businesses because of their lower cost of doing business and strong universities where employers can recruit top talent.

Another key factor is the cities’ relatively low number of natural disasters, such as hurricanes and earthquakes.

“Economics only tell part of the story,” Boyd said, adding that quality of life and a wide range of housing options play into companies’ decisions as well.

The industry is growing at a rate of about 20 percent a year and is absolutely critical in the fight against security breaches and identity left, Boyd said. Depending on the size of the center, anywhere between 30 to several hundred jobs can be created, and they all come with good salaries.

Additionally, as in most other cases, the data security industry coming to Des Moines would benefit more than just one part of the economy. A company moving here would mean work for those in real estate and construction as well as high property taxes on the large centers, which can be several hundred thousand square feet.

“This is one industry we don’t have to worry about going to China,” Boyd said.