John McDonald: Data centers are Indiana’s new factories

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John McDonaldAt the start of the new millennium, no one would have guessed that the manufacturing-centric state of Indiana would evolve to become a Midwestern tech giant. But it has. Overall, the technology sector accounted for about one-third of our state’s new job commitments from mid-2017 through July of 2018, beating out all other industries.

This shift is rooted in rapid technological advancement worldwide and an industry that’s continuing to be disrupted at warp speed. With more than 175 zettabytes of data expected globally by 2025, data centers will continue to play a vital role in the ingestion, computation, storage and management of information. Therefore, the development of hyperscale data centers in as many locations as possible is the obvious (and ongoing) next step.

In Indiana especially, such data centers are vital to building upon our growing tech sector and sustaining the sector’s momentum over the next several years.

To that end, progress came when Gov. Eric Holcomb signed a bill at the end of June this year providing tax incentives to organizations choosing to build sizable data centers in Indiana. The new law provides exemptions from the state’s sales tax for items including equipment, electricity, construction and build-out for up to 50 years.

These incentives are already gaining traction. Digital Crossroads in Hammond is just one company jumping on board to furnish a lakefront data center in the former State Line Generating Plant on Lake Michigan shores. Going forward, in promoting Indiana as a new kind of technological and industrial crossroads, the state’s incentives are expected to attract other companies looking for similar data center locations.

Another clever idea is repurposing old space. Lifeline Data Centers chose to overhaul the former Eastgate Mall, because along with the facility’s ample space, Lifeline’s CEO cited its central location and our exceptional cost of living as primary factors for choosing Indianapolis for the company’s growth. Data Realty in South Bend built a gleaming new data center on the grounds of the old Studebaker Factory, lifting what was once a brownfield into the digital age.

Why is this so important that we should all want our tax dollars used to incent it? It’s because data centers are the factories of the digital economy. As Indiana’s economy shifts away from parts made in our plants, products moved on our pavement and food grown in our fields, data centers are the new factories, 5G networks are the new roads and schools are the new field where brainpower is grown.

Economically, a CBRE study concluded that—based on a typical state and municipality tax structure, as well as economic and demographic characteristics—a $1 billion data center could generate upward of $200 million in tax revenue over 10 years, including construction and ongoing operations. That’s an impact equivalent to a corporate headquarters creating 1,700 jobs with a $130,000 average salary and making a $40 million capital investment.

Case in point, at least for Google. In February, the company announced its $13 billion investment plan for new data centers in Ohio, Nebraska, Nevada and Texas. The plan also includes the expansions of existing centers in Oklahoma and South Carolina. The jobs count is anticipated to be tens of thousands of new employees.

So why not Indiana? Attracting new data center operations is now just as critical to spurring economic development as attracting a new factory was to the previous generation—a true measure of our dedication to advancing technology.•

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McDonald is the CEO of Fishers-based ClearObject and chairman of the Indiana Technology and Innovation Policy Committee. Send comments to [email protected]


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One thought on “John McDonald: Data centers are Indiana’s new factories

  1. While Lifeline has converted the former mall to a data center, they have done nothing to improve the exterior of the location. This is an eye sore and another reminder of the neglected east side. This would not have been acceptable on the north or south side of Indy.