Abstract - Microsoft & Google: Cloud Computing Dominance Through Renewable Energy

By Steve Denegri
published: Thursday, October 30 2008

This report reflects the opinions of the author and not necessarily those of Virtual Strategy Magazine. All rights reserved. 

However, this mindset is nothing more than groupthink gone awry.  A closer look will reveal that users' prevailing need to conserve energy in the data center is actually the foundation for a momentous inflection point in data center computing, whereby the most recognized vendors in computing can build their own data centers and sell IT services at prices far below what it costs most organizations to support, themselves.  Microsoft and Google, in particular, are leveraging the energy conundrum in such a way as to bolster their own individual data center strategies, and they are using their enormous leverage to create formidable barriers to entry that will increasingly make the "build versus buy" decision an easy one.

The aforementioned barriers are allowing Microsoft and Google to establish data center cost structures that are so low that they could potentially eliminate competition. Examples include multi-year abatements on property taxes for mega-sized facilities, permanent absolution from sales taxes on new equipment within these data centers, and, most importantly, power purchase agreements (PPAs) from suppliers of emission-free renewable energy that guarantee multi-year power supply at a fixed cost per kilowatt-hour (kwh).  Furthermore, Microsoft has said publicly that it is authoring software in collaboration with the largest municipalities across the globe that will help each city monitor its carbon emissions, giving each the ability to implement a tax system based upon environmental sustainability.  Since those data centers that are not powered by renewable sources are among the biggest emitters of CO2, such taxes will further elevate the cost of running a data center.  If they are powered by renewable energy, the data centers being built by Microsoft and Google would benefit, enormously, because they would avoid such sustainability taxation.

The end goal that Microsoft and Google are aiming to achieve seems to be to "get off the grid," meaning that they desire for their data centers to have their own dedicated supply of energy rather than connect to the public power grid.  In fact, this report hypothesizes that data center computing is likely to become controlled at the local level, whereby data services become another product offered by the local power company.  Indeed, municipalities are actually welcoming the construction of mega-sized data centers from these two vendors, despite the fact that they absorb a massive amount of resources and on the surface, appear to contribute very little to local economies.  Furthermore, recent presentations by Microsoft reveal that it now charges for data center services on a per-watt basis, since its internal cost analyses demonstrate that growth scales most closely to power consumed.  Therefore, municipalities are likely salivating at the thought of owning and incorporating compute utilities into their city's budget structures, since such facilities have the potential to contribute hundreds of millions of dollars to the municipal coffers each year. 

Is Power The Key To Controlling The Cloud?, Microsoft and Google Controlling Cloud Computing Through Power?, Is Hyper-V Nothing More Than A Distraction?