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 NEWSCalifornia energy woes affecting high-tech By Brian Fonseca , Ed Scannell , and Dan Neel January 19, 2001 1:01 pm PT CALIFORNIA'S energy crisis could be the straw that breaks the camel's back in the state's high-technology-driven economic boom.
"Over the past few months, we have had quite a few companies inquiring about expansion into our area," said Clinton Pope, a vice president of the Nevada Development Authority, in Las Vegas. Inquiries from the San Francisco Bay area have been prompted by high property costs, quality of lifestyle, "and, now, the power issue," Pope said. The most notable company expressing interest in expanding in southern Nevada has been San Jose, Calif.-based Cisco Systems, he said. In the past six months, according to Pope, 15 companies have relocated all or part of their operations to southern Nevada, the majority being high-tech concerns from the Bay area. Companies "are no longer willing to expand in the Bay area because they can't afford to," Pope said. The power shortages, which led California Gov. Gray Davis to declare a state of emergency last Wednesday, had nearly everyone involved in California's high-tech sector rethinking West Coast strategies. At Intel, spokesman Bill Calder reiterated earlier statements from Intel CEO Craig Barrett, saying that the Santa Clara, Calif.-based chip giant "would not expand or build another factory in the state of California because of the current power situation." Officials for companies such as computer maker Sun Microsystems, based in Palo Alto, Calif., and Broomfield, Colo.-based ISP Level 3 Communications, which has several facilities in California, each used the crisis to illustrate the importance of distributing their company locations across multiple geographic regions. "We think it's good business planning not to have all your eggs in one basket," said Peder Ulander, a group product marketing manager at Sun. Venture capitalists also understand the implications of California's energy woes. Joe Schoendorf at Accel Partners, a Palo Alto, Calif.-based VC, said his firm recommends that Silicon Valley startups contract their manufacturing facilities outside of California when possible. Because the energy crisis in California extends beyond just electricity consumption, Dan Miklovic, vice president and research analyst at Stamford, Conn.-based Gartner, said power-dependent companies -- such as Internet hosts using gas-powered backup systems -- will be wary of setting up shop in the Golden State. Miklovic said the mind-set to relocate businesses outside of California has already caught hold, leading to development spurts in Denver; Seattle; the Washington D.C. area; Austin, Texas; and the state of North Carolina. "Having your machine geographically close to you is really becoming less and less of a necessity," agreed Scott Dunlap, vice president of marketing at Loudcloud, an ISP based in Sunnyvale, Calif. Dunlap said he predicted the energy crisis problem could force Web hosts and other electricity-consuming IT companies to forage in someone else's backyard for needed long-term power supplies. "I think what we're going to end up seeing is the next bunch of datacenters built in available power grids like Kansas or something. I think we'll see a lot of that," Dunlap said. As companies prepared for the sudden blackouts, San Diego-based storage service provider SkyDesk said the crisis served as proof-of-concept for the reliability of their service offering. "We build for these emergencies, so the rolling blackouts are good advertising for us," said Vince Gordan, senior vice president of corporate operations at SkyDesk. Companies test emergency backup plansWith rolling blackouts sweeping through California as a safety measure during a major energy crunch this week, companies are finding their long-planned disaster-recovery and emergency-response procedures being put to the ultimate test. Months and even years of drills and systems checks will pay big dividends if power shortages continue unabated, said Dan Miklovic, vice president of research at Stamford, Conn.-based Gartner. "Clearly, those companies that have good disaster recovery plans, should the problem get worse, are the companies that will conduct business as usual," Miklovic said. "This just proves how important sticking to the basics and fundamentals can be." Scott Dunlap, vice president of marketing at Sunnyvale, Calif.-based Loudcloud, said 10 percent of his company's contingency planning involves a diesel-fueled backup generator, whereas the remaining 90 percent is devoted to employee processes of preparation and execution. Loudcloud relies on its oft-tested generator to keep its network operation center up and running, giving users an up-to-the-minute window on how their machines are running in seven co-location hosting facilities (four of which are in California). Core systems and phone lines also are generator-supported, Dunlap said. To ensure that the generator can run well beyond its 36-hour capacity, Loudcloud has trucking companies on standby to deliver diesel fuel for the system. But Dunlap said the recent blackout left traffic gridlocked for hours -- a factor for which the company had not planned.
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