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  • 2022
  • Working Paper
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Where the Cloud Rests: The Location Strategies of Data Centers

By: Shane Greenstein and Tommy Pan Fang
  • Format:Print
  • | Language:English
  • | Pages:48
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Abstract

This study provides an analysis of the entry strategies of third-party data centers in the United States. We examine the market before the pandemic in 2018 and 2019, when supply and demand for data services were geographically stable. We compare with the entry strategies of major cloud-based data centers for services on demand, which include those known as cloud services. We conclude that third-party firms and cloud providers have different entry strategies. The former favor urban settings more, and appear sensitive to buyer demand for proximity. They trade-off costs of supply, which vary with density; and economies of scale, which cannot be achieved without large volumes of demand. We also find that data center firms providing specialized services display an urban bias. Cloud providers display a lower propensity to locate in urban areas, and they tend to concentrate their building in a small number of locations. We see little evidence to suggest cloud providers will spread their data centers to any but a small number of low-density locations. Our findings support speculation about the likely direction of changes as demand shifts to the cloud, and the location decisions begin to concentrate in the hands of cloud providers.

Keywords

Cloud Computing; Location Strategies; Data Centers; Information Infrastructure

Citation

Greenstein, Shane, and Tommy Pan Fang. "Where the Cloud Rests: The Location Strategies of Data Centers." Harvard Business School Working Paper, No. 21-042, September 2020. (Revised June 2022.)
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About The Author

Shane M. Greenstein

Technology and Operations Management
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