How Virginia – and Loudoun County – Built an Economic Base in the Cloud

John Wood - Telos Blog
John B. Wood
October 14, 2021 • 5 min read

Over the past several decades, the Northern Virginia region – with Loudoun County helping show the way – has become a global technology leader via the enormous growth in forward-looking technology companies operating here. Much of the credit for this is due to one sector – the cloud. 

Cloud computing was born in this area in the mid-2000s, and now 70 percent of global internet traffic moves through the Commonwealth daily. Currently, Virginia hosts the single greatest concentration of data centers in the entire world. Here’s how that happened.

Fifteen years ago, few people knew what commercial cloud computing was, let alone how it would transform the world. Corporations ran their own data centers and viewed them as corporate crown jewels. Data centers may not have been core to the mission of most companies or government agencies, but they were as essential, just like telephone switchboards and electrical transformers.

Then along came Amazon. Having built its network of data centers to support a growing global retail business, Amazon decided in 2006 to offer computer infrastructure on a pay-as-you-go basis. At first, some wondered whether one private company would trust another company with its data and critical business processes, and the same was true of federal agencies. But once they fully understood the concept and the corresponding benefits, organizations were willing to move to the cloud. 

Telos Corporation was one of the first companies to really grasp the linkage between using automation to secure good cyber hygiene and rapid cloud adoption. We started telling anyone who would listen that the cloud is fundamentally more secure than on-premises systems, and in the years since then, the company has designed and implemented scalable, durable, cost-efficient, and secure cloud environments. 

At about the sae time that Amazon was beginning its push for cloud services via Amazon Web Services (AWS), corresponding developments at the state and local level helped bring AWS and others to the region. The General Assembly helped pave the way for data centers to locate in Virginia by providing certain targeted tax incentives, which gave the Commonwealth a competitive advantage over other states. In the years to follow, other companies seeking data center locations to meet the soaring demand for cloud computing services were also attracted by these incentives to look at Virginia.

Simultaneously, Loudoun County was continuing its years’ long quest to diversity its tax base.  For several decades, Loudoun had been the fastest-growing county in the Commonwealth (and one of the fastest-growing counties nationwide), but the business growth, and thus growth in business tax revenues, was still lagging. As such, homeowners continued to bear the brunt of the cost of those years of population growth through higher residential taxes needed to provide services for existing and newly arriving residents. So the Loudoun County Economic Development Commission, which I chaired at the time, began exploring ways to attract to our county much of that data center growth that the General Assembly was working to bring to Virginia. The Commission took the initial steps to make sure cloud providers were aware of the vast potential of locating more data centers in Loudoun, where there was already the land, water and fiber capacity they needed. We worked with the county’s Department of Economic Development to market these Loudoun advantages, and we worked with the Board of Supervisors, which provided additional local tax incentives for data centers to operate here.

As a result, the commercial sector’s share of the tax base in Loudoun County has more than tripled, and the data center industry alone is responsible for nearly $600 million in annual revenue to the county. According to a report last year by the Northern Virginia Technology Council (NVTC), it was estimated that “for every dollar in county expenditures that the data center industry caused in 2018, it generated $15.10 in local tax revenue in Loudoun County, and property taxes here would have had to rise by 21 percent without the data center induced tax revenue.” Having a 15:1 cost/benefit ratio is something the cloud sector is to be lauded for, and is the envy of jurisdictions around the country.

Other states have seen what works in Virginia and are starting to catch on. To maintain an edge and attract future data center construction, Virginia must:

  • Continue to build on what it has done so far that made it Number 1 in the cloud;
  • Invest in an educated workforce;
  • Incentivize construction of underlying infrastructure such as power grids and fiber-optic networks, and;
  • Maintain policies that support additional information technology investment, including data centers.

None of this just happened by accident. Virginia became the cloud capital of the world because government and industry worked together to create growth opportunities. Sustaining that growth means continuing to commit to that collaborative spirit, making the most of every opportunity and thus allowing forward-looking technology companies to expand their horizons.

John Wood - Telos Blog
John B. Wood
CEO of Telos Corporation
John B. Wood is the chairman and CEO of Telos Corporation.
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