Data Centers as an Economic Development Driver

Leveraging an industry to drive employment and infrastructure investment

APEX is a Duluth, Minnesota based private sector led business development engine for northeast Minnesota and northwest Wisconsin. APEX investor-members represent many of the most influential companies in the region. APEX promotes sustainable economic growth through attraction, retention and expansion of businesses and industries that align with the region’s competitive advantages. The organization invests significant human and financial resources to build sophisticated strategies and business cases to cost-justify investment within the region. Duluth, Minnesota is the world’s largest inland port, located on the edge of Lake Superior, the largest of the Great Lakes. Duluth forms a metropolitan area with Superior, Wisconsin, referred to as the Twin Ports. The Duluth/Superior Metropolitan Statistical Area population approached 285,000 according to the 2018 Census.

Outcome Summary

  • Construction of Involta’s $13M data center facility, $2.6M redevelopment of existing customer-owned facility and $1M, 144-count metro fiber ring
  • Attraction of additional telecommunication investment in the region from carrier companies further enhancing competitive offerings and lower cost of connectivity
  • Within 6 months, Involta brings 6 full-time jobs with an expectation to grow to 10-15 within one year of operation and construction-related employment amounted to approximately 38 full time equivalents

The Challenges

Identifying Data Centers as an Emerging Market

In 2005, APEX and its economic development partner and investor, Minnesota Power, a division of ALLETE, had identified data centers as an emerging market. Information technology and data storage needs are a challenge for any business, particularly for compliance-driven corporations, healthcare and educational institutions. In fact, they represent realms of significant growth potential for the data center industry. It appeared to be a viable attraction strategy for the regional economic development partners to consider and validate.

In regions the size of the Twin Ports, often referred to as Tier II communities, companies are faced with the decision to invest considerable capital resources in privately owned data centers that are inadequate for compliance needs and very costly. Others choose to outsource colocation needs to other parts of the state or country.

Potential Tenants Identified for Twin Ports Data Center Expansion

With insight provided from APEX investor-members, Essentia Health and SISU Medical Solutions, APEX learned that they had potential anchor tenants for a data center expansion. Headquartered in Duluth, Essentia Health, a Midwest integrated healthcare provider serving 74 locations over a five state area, was in dire need of a facility solution for the organization’s IT operation. SISU Medical Solutions, a healthcare IT services provider, was also evaluating a solution that accommodated for growth, resiliency and flexibility. Both organizations were independently in the midst of evaluating whether to invest significant internal capital resources or work with a provider of colocation services. Inquiries made to other APEX investor-members and employers in the Twin Ports region uncovered several additional entities that would be interested in colocating within a data center facility as well.

Twin Ports Area Regional Features

In addition to having potential customers, the Twin Ports area had several unique regional features that were of interest and value to the data center industry. These features included:

  • Proximity to the Twin Cities Metropolitan market
  • Energy savings due to a year-round cool climate
  • Cost competitive, reliable power through Minnesota Power, a division of ALLETE
  • Available, cost-competitive real estate options
  • Very low incidence of natural disasters that would impact a robustly designed data center
  • Local and state economic development incentives
  • Exceptional education and training resources

The Catalyst for Telecom Investment

Multi-tenant, carrier neutral data centers are powerful economic engines in rural communities. While data centers do not offer large employment figures on their own, with the salary and benefits package generally averaging at least $65,000, they are highly desirable in Tier II communities. In addition to generating spin-off employment in construction, operations and maintenance, they are also often catalysts for additional telecommunication investment. 

The APEX staff and regional economic development partners set forward an aggressive, sophisticated strategy to recruit a colocation data center to the region. APEX invested considerable financial and human capital to research and understand the industry players, motivators and drivers.

The Transition

Involta Identified as Partner

Involta, headquartered in Cedar Rapids, Iowa, fit the criteria that APEX was looking for in a data center operator. Involta and APEX began a relationship in December of 2009. The company had a strong balance sheet, experienced management team and was strategically focused on expansion to mid-sized, Tier II markets like the Twin Ports.

APEX, and the regional economic development partners, leveraged their experience with the data center industry and their knowledge of the local market to align Involta with the potential tenants and to garner the financial and technical resources to cost-justify the company’s investment in Duluth. APEX worked simultaneously to educate the public sector on the value of having a data center in the community. While Involta would employ a modest number of people, the company planned to invest considerable capital in terms of data center and telecommunication infrastructure. Another advantage to Duluth’s location was proximity to the Twin Cities Metropolitan market. Involta knew the value a community the size of Duluth could offer potential customers.

“There are several data centers in the Twin Cities, but a Duluth location offered cost-effective power, real estate and human resources as compared to a major metro area. Those considerations are often part of any organizational decision regarding colocation solutions,” commented Bruce Lehrman, CEO of Involta.

Involta Builds Two Multi-Tenant Colocation Facilities in Duluth

After considerable due diligence on both APEX and Involta’s part, Involta announced in June 2011 the official decision to build and operate two multi-tenant colocation facilities in Duluth. The company not only invested in a new concurrently maintainable and highly secure facility, but also partnered with a client to redevelop an existing building as a second location. By September 2012 both of the facilities were operational. The data centers house mission critical computer systems and related infrastructure for healthcare organizations, compliance-driven businesses, government agencies and educational institutions.

Involta CEO Bruce Lehrman expressed great appreciation for the support shown by APEX and its investor members. “Without the assistance of APEX, St. Louis County and the City of Duluth, it is unlikely this project would have made it out of the planning stage,” stated Lehrman.

Lehrman also praised the efforts of Minnesota Power, a division of ALLETE, for their project assistance. “They stepped up with the community expertise, a desirable site location and the reliable power strategy we needed to locate a data center in Duluth,” said Lehrman.

The Outcomes

Two Multi-Tenant Colocation Facilities in Duluth

  • Construction of Involta’s $13 million, world-class, concurrently maintainable Technology Drive Data Center facility in Duluth, incorporating state-of-the-art technology, meticulous process and technical talent to secure customers’ mission critical technology assets.
  • Involta invested $2.6 million in redevelopment of an existing customer-owned facility to the Duluth 6th Avenue Data Center that provided an “active/active” environment for the healthcare organization and other customers.
  • Construction of a $1 million, 144-count metro fiber ring between the Involta data centers to offer customers a resilient, cost-effective solution for an “active/active” environment.

Local Employment

  • Construction-related employment over the course of 12 months, amounting to approximately 38 full time equivalents.
  • Within six months of operation, Involta directly employed six employees, with an expectation to grow to 10-15 within one year of operation.

Attraction of Additional Telecom Investment

  • The Involta facility attracted, and continues to attract, additional telecommunication investment in the region from carrier companies further enhancing competitive offerings and lower cost of connectivity.
  • The attraction of Involta represents a monumental step in positioning the regions of northeast Minnesota and northwest Wisconsin as magnets for technology-based business development and industry growth for many years to come.

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