Field of Dreams

Mar 12 2001

On a 150-acre patch of land on the edge of San Jose, Calif., there's little more than dandelions, wild mustard and a cluster of greenhouses. It's a strong reminder of the area's agricultural past. But a different kind of farm is a year away: a massive server farm where a complex of buildings humming with networking equipment and powered by a dedicated energy plant will spread across the property in an experiment of grand proportions.

There's nothing new about server farms, more prosaically known as data centers, which house computers that store information for the most popular sites on the Internet. They've been quietly cropping up in metropolitan areas for several years, leasing space to Web companies. But this one, and one like it planned for Gainesville, Va., will eclipse them all in size and audacity. The owner, US DataPort, plans to create big server farms - really big server farms. The San Jose campus will house the equivalent of 10 to 20 average server farms, with 2.5 million square feet of floor space.

US DataPort hopes the scale of the projects and the dependable power sources will attract dozens of Web hosting companies, Internet service providers, telecom carriers and corporations that want to run their Internet operations offsite. The fact that the technology sector doesn't seem to be in a particularly ambitious mood right now doesn't faze company founders. In fact, they're trying to turn the general malaise to their advantage.

They're betting that, in a market in which electricity rates are rising and network infrastructure spending is falling, even the outsourcers - the hosting companies and ISPs of the world - will need outsourcing. "The concept is to try to solve a number of problems they face," says Grant Sedgwick, founder, president and CEO of US DataPort, including using economies of scale to reduce capital and operating expenses. The idea is "to have costs spread over a campus instead of just a single building," he says. Sedgwick believes his farm will allow customers to build and expand their operations more quickly. What's more, the onsite power plant will provide tenants with a reliable, economical energy source.

There's the matter of cash, however. The project is expected to cost more than $1 billion. But US DataPort has raised only $8 million from individual investors. To complete the first phase of both projects, it plans to secure $200 million from institutional investors in exchange for a share of revenues and take on $250 million in loans. Tenants will help pay for the development of their individual facilities. And energy provider Calpine will finance, own and operate the power plants.

While Sedgwick admits he's a little scared about the amount of money, he says it's ultimately a low-risk proposition. "This is clearly a next-generation idea," notes Sedgwick. "We have a very good solution to an industry that probably uses more power per square foot than any other in the world."

And even if the server farm goes belly-up, it's not back to dandelions. "Underpinning this investment is the fact that this is good real estate, regardless of what people think about the concept," he says. "It doesn't go up in smoke if the business doesn't work out."