Economic Development, Real Estate, and Technology

Switch: What to expect

The company’s data operations in Nevada deliver ripple effects of jobs, investment.

July 1, 2016
| By Pat Evans |
Text Size:

The future impact of Switch Ltd.’s SuperNAP in West Michigan has yet to be determined, but a Nevada economist said the company’s Las Vegas facilities have been transformative.

In a community dependent on tourism, Switch helped start a southern Nevada technology boom, said Jeremy Aguero, principal at Las Vegas-based economic firm Applied Analysis.

“We have the narrowest economic base of any major metro area,” Aguero said. “Hotels and casinos are more important to us than automotive in Detroit or aeronautics in Seattle and similar to government in Washington.

“(Tech has) been transformative for our community in its effects on policies, universities, K-12. What it can offer has helped us in every aspect.”

Switch’s SuperNAPs — “NAP” for Network Access Point — are among the world’s most technologically advanced data centers. The company’s Reno, Nevada, location will be the world’s largest, once built.

Switch provides secure housing for companies’ data equipment. Along with the Grand Rapids site, the company plans locations in Thailand and Milan, Italy.

Construction to transform the former Steelcase Pyramid in Gaines Township is underway, and incentives the state approved in December are scheduled to be finalized this month, with the Gaines Township Board and Michigan Strategic Fund Board voting on a Renaissance Zone application on July 11 and 26, respectively.

The incentives void the personal property taxes on potentially billions of dollars’ worth of data equipment, company officials said, but the company will reimburse state and local governments for real property tax values.

The first phase of the project, set to finish in 2021, would invest more than $151 million and create 103 jobs, according to documents filed with the company.

Co-located tenants and future development will generate more investment, the company said.

“Switch estimates that the economic impact of the SuperNAP Grand Rapids data center campus will be transformative to Gaines Township and the surrounding communities,” Switch Executive Vice President of Strategy Adam Kramer wrote in an application to Kent County. “In addition to the investment by Switch, it is forecasted that the co-located clients will invest hundreds of millions of dollars in new equipment to be located on the data center campus.”

Switch predicts a $5 billion economic impact over 10 years and more than 1,000 jobs related to the West Michigan SuperNAP.

The actual impact on the Grand Rapids area is yet to be determined, but in the years since CEO Rob Roy founded Switch in Las Vegas in 2000, there’s plenty of anecdotal and quantitative evidence of the company’s effects in Nevada, Aguero said.

First is the initial capital investment, which in Nevada has been billions of dollars from Switch and co-located clients between its Las Vegas and Reno facilities, Aguero said.

Included in the investment is the equipment used to house the data within the facilities, which has to be updated every three or four years. Aguero said an eBay representative told him the equipment is updated more like every 18 months.

“There’s the initial construction and a constant refresh of the latest, greatest and newest technology going into it,” he said, adding there is more activity in and out of the Switch facility than in the rest of the 105 million square feet of warehouse and distribution space in Southern Nevada combined.

Switch’s clients include companies such as eBay, Disney, Xerox, Zappos, Amazon, Dreamworks and the U.S. government. The city of Henderson, Clark County, Southern Nevada Water Authority, Clark County School District and State of Nevada all house their data centers in the SuperNAP, according to the Las Vegas Sun.

“Until you physically see it, you can’t understand the magnitude of all the activity occurring,” Aguero said.

The Las Vegas site also offers a look into what jobs are going to be offered in West Michigan.

Aguero said there will be direct, indirect and induced employment (jobs created by employees spending their money locally). He believes the estimate that Switch could generate 1,000 jobs in West Michigan is conservative. Only a portion of the projected employees are directly employed by Switch, he said. As of last year, Switch employed more than 400 employees in Las Vegas, according to the Las Vegas Sun.

“It’s the security, technicians and engineers to keep the place running,” Aguero said. “Those are relatively high-paying. It’s a function of wages and salaries [in West Michigan], but it’s well above state average in Nevada.”

Indirect employees can range from suppliers and transporters of equipment in the facility and also include the co-located tenants within the data center. In Nevada, more than 5,000 badged employees do at least occasional work in the data center, helping maintain their companies’ data center equipment.

For instance, Shutterfly, the online photo editing and storage company, has more than 1,000 data cabinets in the Las Vegas facility.

“If you have $1 billion worth of servers, chances are you’ll have fairly significant human capital that will monitor them,” Aguero said.

Many of the 5,000 badged workers don’t live in Las Vegas but are there for at least part of their work time. Those who don’t live in the area fly in and out, visit restaurants and stay in hotels, Aguero said.

That’s the induced economic impact: the companies and workers who are paid at least in part because of employees of Switch and its tenants.

“There’s a lot of workers who are here all the time or at least a portion of time” who wouldn’t be if not for Switch, Aguero said. “How many of those wage dollars (for other businesses) are being generated by employees working at the data center?”

Switch has generated a lot of ancillary development and helped to attract other companies to the Las Vegas area.

The Las Vegas Sun detailed the area’s growing technology sector in January 2015. Switch announced $2 billion worth of investment in Nevada last year, expected to create more than 4.5 million square feet of warehouse space in Reno and Las Vegas.

Other examples:

  • In November, the Las Vegas Review Journal detailed eBay’s announcement of a $412 million investment in Nevada, including 50 jobs.
  • In March, Barrick Gold Corp. consolidated five data centers from across the globe to Switch’s Las Vegas campus, according to the Review Journal. Barrick, the world’s largest gold mining company, moved its IT operations to Las Vegas from its Toronto headquarters last year to be near Switch. The company expects to expand its data management staff of 55 to 75 by the end of 2016, according to the newspaper.
  • The Las Vegas SuperNAP also is home to University of Nevada-Las Vegas’ supercomputer, a partnership with Switch and Intel.
  • The business journal Vegas Inc. detailed a $25 million project between Switch and the Nevada Hospital Association to install and operate a fiber network among health care facilities, government agencies and private businesses.
  • Switch provided the $10 million seed fund for Planet3, a digital platform using games to help immerse students in data analytics to learn and solve problems, according to education publication THE Journal. The platform will be tested by 25 middle schools in six Nevada school districts, according to Switch also invested an additional $3 million into the platform.

The company has also worked closely with UNLV and other area educational institutions to help further technological learning, Aguero said.

All things considered, does Aguero think Switch could be pulling a fast one on Michigan residents?

“No one can tell you whether their projections (for Michigan) are accurate, and it’s dependent on who’s going to be housed there and what are the objectives,” Aguero said, but “do I believe them? Absolutely, and it’s probably conservative.”

Recent Articles by Pat Evans

Editor's Picks

Comments powered by Disqus