So what makes Dresden-based AoTerra such hot property? The fact that it does just that: heats properties. And these are no ordinary heaters. These are heating systems with servers inside them.

AoTerra’s system comprises a server unit connected to a heat exchanger or heat pump, which is in turn connected to the property’s ventilation system, and a hot water tank. It’s intended for new-build and renovated properties that meet modern energy efficiency standards and, according to the company, efficiency is nearly 100 percent (the company also only uses “green” energy for its devices).

Each system has a broadband connection and forms part of a distributed, OpenStack-based data center. The result is AoCloud, which offers compute, block storage and object storage (all are currently in beta). Customers can be pretty sure their cloud is as green as it gets, but there are other benefits too – the distributed nature of the cloud could mean low latency, and AoTerra is touting security as a plus, too.

AoTerra is also involved with a couple of Europe-funded projects, namely LEADS (trying to create a “data-as-a-service” model on top of geographically distributed micro-clouds) and ParaDIME (trying to making computing more energy-efficient).

This isn’t the first time we’ve seen the idea of using waste heat from data centers to heat homes — London’s Telehouse West data center was going to do that, although the local council never set up the distribution network and the housing development never got built due to the recession. Telus is planning something similar in Vancouver. But those were about data centers heating nearby developments; what AoTerra has come up with is a step beyond.

Property owners or developers pay €12,000 for the system (about the same as a normal heating system), but they don’t have any ongoing operating costs – from that point on, they get free heating and hot water. And AoTerra gets out of having to pay for air conditioning, which is a pretty major chunk of the cost of running a traditional data center.

Overall, AoTerra claims, its distributed data center costs the company about a tenth of the normal set-up costs for a data center, with its running costs being less than half and CO2 emissions around a third. The company has only been going for a year, and it already has 20 AoHeat devices with over 200 servers installed. It had a turnover last year of €100,000, and has already signed contracts worth €400,000 this year.

AoTerra says it’s negotiating €1.6 million worth of contracts at the moment, and has another €3.1 million worth in the pipeline. This year it wants to sell 100 AoHeat devices, and next year 500 – at that point, it would be one of Germany’s biggest cloud providers. They need the crowdfunding investment to grow the team to match demand, they say.

I’ve yet to see one of these units in action, but the pitch is intriguing to say the least.

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The company has come under criticism for not having a European data center in the past, largely due to compliance issues – Salesforce is part of the EU-U.S. Safe Harbor framework, which means it’s allowed to handle European citizens’ personal data, but many customers would prefer the certainty that a locally sited data center allows. (We will be discussing such issues at our Structure:Europe conference in London on 18-19 September, by the way.)

Salesforce said last year that it hoped to open a data center in the UK in 2013, but this appears to have been pushed back a little now. According to a statement today, the new data center – the firm’s sixth — will be completed in 2014 in partnership with NTT Communications’ local arm, NTT Europe.

In a statement, Salesforce CEO Marc Benioff said Europe had provided the greatest revenue growth – 38 percent — for the company in the 2013 fiscal year:

“We are doubling down on Europe with the announcement of our new data centre in the UK, which will support continued customer success in EMEA.”

Robin Balen, NTT Europe’s wholesale data center business chief, added that the new facility would be “powered 100 percent by renewable energy sources.”

Innovation Challenge

Meanwhile, Salesforce has also teamed up with a group of European venture capital firms – Notion capital, Octopus Investment and MMC Ventures – to launch a €5 million ($6.6 million) Innovation Challenge for startups.

Startups are invited to pitch their enterprise cloud apps that could run (surprise!) on Salesforce’s platform. There will be pitching events through Europe between September and November, and the winners will get seed funding. Apps will need to be at least in the beta stage, with demonstrable “traction, customer success and user adoption.”

“This is a unique opportunity for innovative start-ups in the enterprise app market here in Europe to receive commercial support to allow them to compete on a global stage,” Octopus principal Luke Hakes said in a statement.

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Google bought an old paper mill in Hamina several years ago, and converted it into a data center that is, interestingly, cooled by seawater. Now, the company is extending the facility at a cost of €150 million ($196 million) — design nerds should note that this is being done by converting a machine hall originally designed by the architect Alvar Aalto. And now Google has also struck a deal with Aalto University and regional development agency Cursor.

According to a Google blog post, Google’s backing will allow Aalto University to better support local startup accelerators, and help “improve the use of the internet” by small businesses in the region. The university is already a backer of the Startup Sauna program and various other entrepreneurial initiatives, so we can now expect to see more in this vein.

Google’s push is supposed to “show the way from our industrial past to our digital future,” according to the post, and indeed both the Belgian and Finnish data centers are sited in areas left somewhat depressed after the death of older industries – mining in the case of the St Ghislain facility and paper milling in the case of Hamina.

It’s good PR for Google, of course, but there is validity to the conceit — and it’s also quite a clever way to keep an eye on  ideas that local developers and engineers are coming up with.

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But the servers, storage and networking gear inside the millions of square footage that Facebook has dedicated to data centers are where the bits that comprise Facebook’s online products are assembled. Every click, every upload and every message sent via the web passes through a data center somewhere.

An economy built on digital bits

And the relationships are getting more complicated with the rise of cloud computing and federated applications comprised of multiple services wrapped up in one program. So a data visualization service that ties your company’s Salesforce data with internal business data relies on servers hosted by Salesforce, possibly located in-house or, if the data visualization app is using Amazon as its back end, one of Amazon’s data centers.

Facebook data center in Prineville, Ore.

This is no longer a call-and-response approach, where I call up a web site and a server sends it to me. And the value of those services is increasing in line with their complexity. Intel’s purchase of Mashery last week, for example, was evidence of the chip giant realizing that this web of relationships is the new digital supply chain. And the ports of call are the data centers, as Mark Thiele an EVP of technology at Switch, told me.

So what does this have to do with Facebook? Or Google? In many ways they have pioneered the creation of a new model of data center and computing, where the data center is the computer. They did this because when offering a web-based service, their cost of goods was directly tied to their infrastructure. Knowing how much it costs servers to perform and deliver each search result is as important for Google as knowing what the cost of gas is for an airline.

And yet… for the most part, how we discuss and think about data centers has not become more sophisticated beyond saying it’s a room full of servers. Yes, we have data such as power usage effectiveness ratios, but that’s not the most important metric for everyone. If data centers really are going to be the manufacturing floor of the digital economy, we need to start thinking about them at a higher level.

Fortunately, some people already are. Here are two places we can start: understanding the operators and defining the metrics associated with success.

Understanding the market

All data centers are not equal. For years people have broken down data centers based on their redundancy and security, with a Tier-1 class of data center defined as a high-availability data center that has lots of redundancy and secured premises. This is where you host your financial information and NSA files, and it’s also the most expensive to build.

But there’s another breakdown worth exploring. Just like there are different types of computing out there requiring different gear and performance, there are also different types of data centers. I’ve broken it down into three categories, but I am on the fence if there should instead be four.

• Master of their domain: This includes Google, Facebook and even enterprise customers. These operators control the hardware, the building and the apps running on the hardware so they can optimize the heck out of their infrastructure. Facebook and Google are the best known for doing this, but there’s no reason anyone who has the ability to control everything at a big enough scale can’t learn from Facebook and apply its techniques to their corporate operations. In the case of banks looking at Open Compute, this is already happening.
• Master of their servers: This includes most hosting companies, like Peer1, Rackspace and others, who can build out their own hardware and servers but can’t control what people run on them. I’m struggling a little with this category because I’m not sure if Amazon Web Services or Microsoft Azure fits into this category, because they don’t control the end applications. However, they are able to limit the services they offer in such a way that their infrastructure is optimized for them, putting them on similar footing as the masters of their domain.
• Masters of their cages: Companies such as Equinix, Switch and Digital Reality Trust that operate co-location space fall into the last category. These companies operate huge data centers that are like server hotels. People lease space, buy connectivity and pop their own gear into the space. They tend to offer customers multiple providers for connectivity or easy interconnects to other data centers. For example, Equinix has a program where it can offer a direct connection to AWS. This cuts the distance digital goods have to travel and can also offer some additional guarantees.

Defining the metrics for success

Once you break out the different builders of data centers, it’s possible to try to figure out the right metrics associated with how they run their data centers. David O’Hara, a GigaOM Research Analyst and consultant in the data center space, breaks this down into three sections:

• Capital expenditures: How much does this data center costs to build a data center, per megawatt?
• Operational expenditures: How much does it it cost me to run the data center, per megawatt?
• Availability and redundancy: What is the availability in the data center in terms of networking, power and cooling?

He suggested companies start thinking of data centers as a portfolio that should match the value and needs of the services they are trying to run. For example, he pointed to Apple’s data center in Maiden, N.C. as a beautiful, state-of-the-art data center with high reliability. However, building such data centers is expensive, so a service that doesn’t need high availability doesn’t need to be hosted there. So showing someone a trailer for an iTunes movie might be better off served fromm a less reliable data center while transaction processing should occur in Maiden.

A company that is way ahead of the pack on this front is eBay, which has broken down its applications into specific workloads and assigned values to them to develop its miles per gallon or MPG for data centers. While the rest of the industry is obsessing over power usage effectiveness ratios (which matter to the companies operating their own data centers for cost reasons), eBay is tracking code, servers and overall infrastructure efficiency related to transactions (specifically URL requests) associated with users’ buying and selling on the site.

So if Facebook is prepping to spent 30 percent of last year’s revenue on a new data center in Altoona, as the Iowa legislators maintain (Facebook didn’t return my request for comment), let’s start talking about data centers not just as a room full of servers, but as the manufacturing floor for the digital economy. To do that, we need to develop a better understanding of the different operators, the right metrics for each business and start collecting more data on them overall.

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Lobby at Verizon office at 140 West Street, New York post-Sandy

According to a new survey for data center service provider Digital Realty Trust, 65 percent of the 148 companies surveyed that definitely plan to expand their data centers want to do so in New York City or its environs. This flies in the face of speculation that big New York companies would put more of their new data center firepower far from the coast. (GigaOM’s Jordan Novet has more on the research here.)

Financial services companies and exchanges clustered in New York obviously need some compute power nearby to reduce latency on trades, but data center experts said those capabilities could be parcelled out judiciously to local data centers while most of the other heavy lifting could be shipped off to facilities far from the coastal flood plain.

According to the new research:

“The majority of respondents who definitely plan to expand in 2013 would prefer to locate a new or expanded data center in New York City (65%); Los Angeles (47%), Dallas (36%), Chicago (31%), San Francisco (30%) and Phoenix (28%) are other U.S. cities mentioned often.”

Other highlights:

• Security was cited as the most important factor on decisions about location.
• Folks tend to opt for a site close to their current work location. 69 percent choose their home city as one of their expanded data center locations.

Of course, when two 100-year storms hit the same area within two years of each other, you might start evaluating new locations and then the question becomes what areas are not susceptible to natural disasters. But, as Chris Perretta, CIO and EVP of State Street told GigaOM last year: ”In the Midwest you get tornadoes, on the coast you get surge, in Florida you get hurricanes, in the west you get wild fires, in California you get earthquakes.” Finding safe harbor is not easy.

Given that, maybe these findings are not such a surprise after all.

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My first guess was that Houston has a lot of data center space, but data from Telegeography shows the city has roughly 400,000 square feet of retail co-location space in the entire metropolitan area, which is a far cry from the 3 million square feet the San Francisco Bay area has, or even the 1 million that Austin, Texas has. So now, I’m frankly stumped.

Houston is home to 50,598 of the top million sites (as measured by Alexa), and it’s followed by Mountain View Calif. at No. 2 and Dallas at No. 3. In total, those million websites are hosted in almost 8,000 cities — 7,936 to be exact, so it’s possible that there’s one near you. But, as the chart below shows almost a quarter of the web’s sites are located in the top 10 cities.

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“I don’t want to say this, but … we are panicking a bit,” said Colette Maloney, head of European Commission’s smart cities and sustainability unit, during the Green Grid Forum in Santa Clara, Calif., on Wednesday. “We are way off target.” The commission aims to see its member countries cut their energy use by 20 percent — compared to the 2005 levels — by 2020, and the European Union has only hit a 13 percent reduction.

To meet its 2020 target, the commission is counting on the information and communication technology industry to do its part, and is focusing attention on data centers in particular, given that data centers account for about 25 to 30 percent of the energy use by the IT industry, Maloney said.

CTO, Verne Global, Tate Cantrell and Eirikur Hrafnsson, Founder GreenQloud at Structure Europe 2012

Not only that, the number of data centers will likely mushroom if the idea of “smart cities” becomes a reality. The term is really about the use of technology to help people use and manage resources – from water and power to transportation and communication systems – much more efficiently (see  this GigaOm Pro report, subscription required, called “Key technologies for the future of the smart city”). Using sensors to collect data and computers to analyze and disseminate them will be a big part of running a smart city, and that will require the construction of more data centers.

Figuring out how to measure and analyze energy savings and what data is acceptable to use for those calculations are among the big challenges for making data centers more efficient, Maloney said. And getting at least the majority of the IT industry to agree to a set of methods and data won’t be easy. The commission has been working with many companies and trade associations, but they haven’t reached a happy compromise yet. Implementing those standards once they are set will pose a new challenge, she noted.

Some of the standard-setting industry organizations are looking to adopt rules for promoting energy savings. The Green Grid, an IT industry association, came up with PUE (Power Usage Effectiveness) to gauge the energy efficiency of data centers. Companies such as Google have promoted the use of PUE, which has some notable limitations.­­ EBay has a new metric for the MPG of a data center, too.

Maloney said PUE is useful, but the commission is looking at other metrics as well, especially since it wants to promote new business opportunities while achieving its energy savings target. Some of the opportunities it hopes to promote will involve making and selling efficient equipment and related services, but what constitutes green products and services has yet to be clearly defined.

In the mean time, the commission is funding research projects, such as Fit4Green and All4Green, that will come up with new ways to run data centers more efficiently. Later this year, the commission plans to call for research proposals on building and running green data centers in smart cities, Maloney said.

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Kava laid out these tenants, and connected them to Google’s data center design strategy, during the Green Grid Forum in Santa Clara, Calif. on Tuesday:

1). Focus on the users and all else will follow: Google’s audience is global, so it’s not surprising that the search giant is looking to build data centers across the globe to serve different regions of the world. By placing servers as close to users as possible, Google cuts down on the time it takes for users to use its tools and do search queries. Kava said Google processes 1 billion search queries across its global users per month. Picking locations, and constructing data centers, is ultimately a UX issue for Google.

Google’s data center in Lenoir

2). It’s best to do one thing really, really well: Google by some guesses has built as many as 40 data centers, so it’s safe to say that Google has the process of finding a location and building a facility down pat. Over the years, the company has included in its criteria things like finding a good local workforce and accessing a robust electric grid as key qualifications. More recently, Google has increased the importance of greener issues like finding a location where the utility offers a significant amount of renewable energy.

3). You can be serious without a suit: Even though Google doesn’t care about how data centers look from the outside, it aims to bring a piece of the alternative Google culture from its HQ to its server farms. Kava showed a slide of a colorful recreation room at a data center to emphasize the company’s “work hard, play hard” philosophy.

4). The need for information crosses all borders: This philosophy relates to at least two aspects of Google’s data center operations. First the move to putting data in the cloud makes it easier for users to access data wherever they are. Second, Google is looking to be transparent about the metrics for its data centers. Given the importance of energy in designing and running data centers, Google has opted to make public some of its internal energy consumption data.

5). You don’t need to be at your desk to get answers: Google searches for interesting and unusual solutions for some its data centers across the globe, and far outside of its Silicon Valley roots. For example, Kava highlighted its data center in Finland that uses the cold outside air and sea water to cool its servers. The data center is inside a former paper mill, and Kava noted that Google has re-used pumps and other electrical equipment from the mill to operate its servers. It’s a highly unique design and one of the only ones like it in the world.

6). Faster is better than slow: In Google’s philosophy, the term efficiency doesn’t just refer to how Google wants to use electricity to power servers. How quickly Google designs and builds data centers is equally important, Kava said. He pointed to a data center in Georgia that took 16 months rather than 2-3 years as an example of how the company has created a set of standards for designing and building data centers.

7). Great just isn’t good enough: This rule has to do with setting higher goals, and Kava used it to describe how Google also allows room for customizing data center designs to make better use of local resources. For example, the company relies on the cold outside air instead of a chiller to cool its data center in Dublin, Ireland.

8). There is always more information out there: Google is currently on the fifth generation of its data center designs, but Google still continues to learn and improve its process. Sometimes that means that Google has to learn techniques and skills outside of its core competency. The need to cool servers and reduce wasteful energy consumption has forced Google to develop an expertise in designing systems to transfer and use energy more efficiently. In addition, to make the most use of the indoor space of its data centers, Google has designed the layout of its servers to maximize the effectiveness of cooling systems.

9). You can make money without doing evil: Reusing waste water is a good example of something that Google can do for both economic and eco reasons. In Belgium, Google has built its water treatment plant to take water from a canal nearby suitable for industrial use. The company also uses treated wastewater for its data center in Georgia.

10. Democracy on the web works: O.K. this one is a bit of a stretch. Yes, democracy does work, indeed, Kava said, but it’s hard to draw a connection between this last rule and Google’s data centers.

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And just who has built storage systems using the Backblaze specifications? Netflix is probably the most-famous adopter — it uses storage pods as part of its content-delivery network infrastructure — but others include Vanderbilt University, Crispin Porter + Bogusky, Rensselaer Polytechnic Institute and NASA’s Jet Propulsion Laboratory. Popular online photography service Shutterfly stores petabytes worth of users’ old photos on BackBlaze’s storage pod architecture.

Gleb Budman

Their uses are as diverse as their organizations are. There’s Netflix’s CDN and Shutterstock’s consumer cloud storage, while many are using pods as giant NAS devices that everyone can access. “Its more data than they ever thought could be possible for their company,” Backblaze Founder and CEO Gleb Budman told me. ”They just RAID them and they go.”

Oh, and he added, “I know of at least one individual person who built one of these for himself for his house.” It stores his media collection and helped his marriage. It appears some wives don’t appreciate sprawling hard-drive farms sucking up energy and taking up all the garage space.

Disrupting the storage industry 1 terabyte at a time

That the Backblaze design has caught on so broadly shouldn’t be surprising, Budman said. For years, storage vendors have been protecting their margins by loading even customers’ “write once, read very rarely” systems with enterprise-class features that often weren’t necessary. If you wanted an enterprise-class storage system, “you bought a NetApp,” he joked, and if you wanted just to house some non-critical data, “you bought a NetApp.”

So, in the world of high-volume storage, we’ve come to a place similar to the PC market decades ago when it was cheaper to just buy the parts and build your own than it was to buy a pre-assembled computer. “Dell basically killed the homegrown computer market because they really, really focused on optimizing costs,” Budman explained. “No one did that for storage equipment. [Storage vendors] said, ‘Hey, we’re selling a million-dollar design, why would we change that?’”

Backblaze’s data center full of storage pods.

Thanks in part to Backblaze, though, this system is changing. Ceaseless demands for parts led Protocase, the Canadian sheet-metal fabricator that makes Backblaze’s pod enclosures, to create a whole business — the aptly named 45 Drives — around selling pod parts or even wholly pre-assembled pods (second-generation ones start at $5,395 without the 45 hard drives they hold). Where it used to struggle to get business outside of Canada, Budman said, Protocase has sold Backblaze units to places as far away as China, Russia and Brazil.

Global electronics fabricator and supply-chain specialist Sanmina sells a modified version of the Backblaze pod design, as do a handful of value-added resellers and components companies around the world.

Interestingly, one place you won’t see Backblaze designs is in the other famous open source hardware effort — the Facebook-led Open Compute Project. Budman said he’s had conversations with the organization and some of its leaders and there has been interest in getting Backblaze involved, but that “for the most part what they want is help making their Open Compute system work.” He said he’d love to do it in theory, but there’s only so much time for a small company like Backblaze to spend on missions aside from improving its business.

Version 3.0: Now with 180TB and a lower cost

As for those third-generation storage pod designs, Open Compute Project, 45 Drives, guys with huge digital media collections and anyone else interested in building their own gear should have a lot to be excited about. Total capacity has been boosted to 180TB thanks to the prevalence of 4TB hard drives, and Backblaze has certified a few more types of hard drives because of the harsh lessons it learned about reliance on a single model during the hard drive shortage in 2010. The company has also replaced a bunch of the components it uses, everything from motherboards to memory to SATA cables.

Budman explains all the changes and the rationale behind them in a blog post published Wednesday morning, but the general theme is improved reliability and ease of management at a lower cost. All told, the new designs cost $1,942.59 — $37.41 less than the second-generation ones. Because of that recent shortage, though, hard drives still cost a little more than they did a few years ago.

Whatever comes of its efforts to be transparent about storage system design, Budman hopes it at least has a lasting effect on the availability of affordable storage. Organizations, he said, should “no longer have to make the decision between an expensive piece of equipment and not storing data.”

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