Microsoft Spending $1 Billion On New Data Centers

Prepping for growth in the Internet era can be costly, as Microsoft is finding out. The software company is ponying up more than $1 billion for two new data centers near Chicago and Dublin, Ireland, Microsoft confirmed this week.

These new investments only add to the hundreds of millions of dollars Microsoft's already spending on server farms around the world to keep pace with online competitors like Google and to make sure it has the capacity to handle a growing online world, which daily checks millions of e-mails, downloads millions of software updates, and shares millions of photos. In each data center, there might be "tens of thousands" of machines, according to Microsoft. The Chicago facility will sprawl over more than 12 acres and draw tens of megawatts of power.

"With this software plus services strategy that [Microsoft chief software architect] Ray Ozzie has outlined, all of the business groups, all of the properties within Microsoft are driving toward an online component to every product that we have," Mike Manos, Microsoft's senior director of data center services, said in an interview. "With all of these various groups driving toward online services, that's driving additional growth for us."

Microsoft's Online Services Business operated at a loss of $264 million last quarter, driven largely by increased data center costs to prepare for future growth. That may be due to the speed at which Microsoft is building. The company broke ground on a massive Quincy, Wash., data center in June 2006, and completed the project this February. Another facility in Quincy is due to open soon, Manos said. The company's also spending approximately $500 million on a data center in San Antonio.

The new data centers in Chicago and Dublin are also being built on an accelerated schedule that will see the one in Chicago up and running by April 2008, even though ground has only recently been broken there. Manos said that, in order to scale, applications need to be spread out across different data centers rather than be limited to a single physical location. "The applications have to have a fairly significant component of geodiversity built in." he said.

Microsoft doesn't have much to say about exactly how many data centers it is operating; Manos will only say the number is "more than 10 and less than 100" worldwide. The company operates three classes of data center, the Quincy Class, the Chicago Class and the Dublin Class, Manos said. These differ in density, the number of servers, localized design, and energy efficiency.

Microsoft uses 35 factors to determine where to build, and Chicago, where Microsoft is working with Ascent Corp. to build and maintain the data center, provides a good blueprint. "We prospected the site and found that unique intersection of available land with a lot of power, a lot of water, and close proximity to bandwidth," said Vince DiMemmo, Ascent's chief strategy officer, in an interview. Dublin, Microsoft's Manos said, has similar draws.

The Chicago site is in direct proximity to a city water pumping station, so cooling servers won't be too much of a problem. Chicago has relatively cheap power compared to some other big cities, and an electric substation on site will drive electric transmission and delivery costs to near zero. Significant bandwidth flows through fiber-optic cables laid alongside an adjacent Interstate and nearby railroad. Chicago's weather will let Microsoft cool servers somewhat with outside air. City agencies move quickly in Chicago for this type of project. Chicago's population means proximity to lots of users and a good choice of Internet carriers.