Report - 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.

A few months back, I wrote an article for a trade publication called Serial Storage Wire that was entitled "Data Center's Green Direction is a Dead End", the audience for which was the data storage industry.  In this piece, I concluded that product strategies that center around energy efficiency were a bad move for the enterprise storage market, and that such a heavy emphasis on "green" issues was a strong indication that the industry's potential had peaked.  Naturally, the topic generated a healthy volume of polarized discussion, particularly since the subject matter implied a dire future for the data storage industry and also carried political overtones, both of which made for a fiery debate.  I have had many requests to expand the discussion to include the data center, as a whole, particularly since the article made a reference to virtualization as being in the late innings in terms of its stage of deployment.  I jumped at the opportunity, because I suspected that the deployment of "green" infrastructure in the data center was more of a tactical rather than a strategic decision, based upon my previous thesis.  After a few months of research, my findings were quite alarming, and I've published them here.

Here's the bottom line:  the end game in computing is being pursued right now.  The heavyweights of the computing industry are constructing enormous data centers of their own, and their goal is to sell data services to the many companies who have been their customers.  These vendors aim to centralize the vast majority of IT resources, both product and personnel, by raising the competitive bar to such a degree that companies have no choice but to purchase their data service needs rather than support them, internally.  For those customers who aren't willing to relinquish the fight, there's not much hope, because the cost advantages that these computing vendors are gaining as a result of their size and influence are enormous.  In addition, the weakening conditions in the financial markets are allowing these behemoths to further distance themselves from would-be competitors who don't have access to enough capital to build facilities of their own.  But the principal control point that these vendors are pursuing relates to electricity, particularly since this is the expense that is rapidly becoming the most significant in running a data center.  Although the computing vendors that are building these data centers are adamant about utilizing the cleanest forms of energy to run them, to say that their primary interest in doing so is their "environmental responsibility" is extremely not, in my opinion, correct.  In fact, as I will demonstrate in this report, long-term access to renewable energy has the potential to create monopolies within the data center services industry.

Defining the Situation

The computing vendors who are already down the path of constructing their own data centers are exploiting a colossal problem.  A 2007 study by Gartner estimates that a whopping 70% of the Global 1000 must "modify their data center facilities significantly" by 2012 in order to make them sufficiently cost-effective from an energy standpoint.  All the while, these same data centers must also massively increase the amount of energy that's available per square foot of floor space:  from 35 to 70 watts per square foot, in many cases, to 300 watts or more per square foot, by Gartner's assessment, although in my view, data center power density needs to be much higher than this.  In order to adequately address the problem, the Gartner study recommends monitoring the data center's energy use, quantifying all necessary capital and operational modifications, and deploying virtualization and workload management wherever possible.  But, as will later be demonstrated, these steps will only temporarily solve the problem at hand, because energy costs will have to be cut by more than 50% in order to keep up.  And as long as the typical Global 1000 company is exposed to upward pressure on utility costs that come as the result of higher prices for fossil fuels, it will become increasingly more difficult to justify running their own data centers.  Over the long term, data centers must find a way to keep scaling at the necessary pace while maintaining their utility costs at their current levels, an almost insurmountable challenge.  The key message is this:  given that the giants in the computing industry have the ability to run their own data centers at such ultra-low cost structures that only a scant few will be able to duplicate, the pursuit of a sufficiently "green" data center is an unending and impossible mission.  The computing companies who are building their own data centers know this, which is why they are jumping into the game.

So Who Is Building Their Own Data Centers?

Any vendor who is considered a lead player in the forthcoming trend toward "cloud computing" wants to make it increasingly difficult, over the long term, for companies to justify the management of their own compute infrastructure.  The way they do this is by renting compute resources, by selling software applications as a service to customers, or by offering a full solution set of data services at prices that are far below what it would cost a company to provide through their own IT efforts.  The leading players thus far are Microsoft and Google, although others including Amazon, Yahoo, and IBM want a piece of the action.  Along with these well-recognized companies, at least fifty other companies are offering "cloud computing" by hosting an assortment of storage, database, application, and compute services.  The idea is to rent these resources to those who are less interested in owning and managing the physical hardware and system-level software but would rather focus their attention on the applications that run on top of them.

In my view, however, the concept of "cloud computing" will be forever remembered as the access road that brought computing to the finish line.  For since it is now being proven more and more that web computing is sufficient to handle the gamut of IT workloads, and because these tasks can be sold very cost-effectively, the race is on to see who can offer the greatest degree of compute scale at the lowest price.  Microsoft and Google, in particular, are taking advantage of massive compute scale to construct a number of "mega" data centers that are as large as a million or more square feet in size and house hundreds of thousands of servers in order to support a large number of customers in any single facility.  This strategy that Microsoft, Google, and others are pursuing would be better described as "utility computing", a term with which many are familiar.  However, in a slightly different twist to how this term has been defined in the past, "utility computing" appears precisely consistent with the electrical power model, even in the way providers will charge for their data services.

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