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June 14, 2006

So that’s where all the CAPEX dollars are going

Posted by David Hunter at 10:23 AM ET.

Actually, it’s no surprise that Microsoft, Yahoo, and Google are laying out big bucks to expand their infrastructures to support online services, but John Markoff and Saul Hansell put a down-to-earth face on it at the New York Times:

THE DALLES, Ore., – On the banks of the windswept Columbia River, Google is working on a secret weapon in its quest to dominate the next generation of Internet computing. But it is hard to keep a secret when it is a computing center as big as two football fields, with twin cooling plants protruding four stories into the sky.

The complex, sprawling like an information-age factory, heralds a substantial expansion of a worldwide computing network handling billions of search queries a day and a growing repertory of other Internet services.

And odd as it may seem, the barren desert land surrounding the Columbia along the Oregon-Washington border — at the intersection of cheap electricity and readily accessible data networking — is the backdrop for a multibillion-dollar face-off among Google, Microsoft and Yahoo that will determine dominance in the online world in the years ahead.

Microsoft and Yahoo have announced that they are building big data centers upstream in Wenatchee and Quincy, Wash., 130 miles to the north. But it is a race in which they are playing catch-up. Google remains far ahead in the global data-center race, and the scale of its complex here is evidence of its extraordinary ambition.

Google, Microsoft and Yahoo are spending vast sums of capital to build out their computing capabilities to run both search engines and a variety of Web services that encompass e-mail, video and music downloads and online commerce.

Microsoft stunned analysts last quarter when it announced that it would spend an unanticipated $2 billion next year, much of it in an effort to catch up with Google. Google said its own capital expenditures would run to at least $1.5 billion. Its center here, whose cost is undisclosed, shows what that money is meant to buy.

Much more by following the link. These data center construction stories have been popping up quite frequently lately – here’s one on Microsoft’s Quincy, Washington data center and one on a Microsoft exploration party looking for a site in Texas. Undoubtedly, there will be more to come.

Filed under Coopetition, Financial, General Business, Google, Microsoft, Online Services, Real Estate, Yahoo

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3 Responses to “So that’s where all the CAPEX dollars are going”

  1. Rising CAPEX floats a lot of boats -- Microsoft News Tracker Says:

    [...] And it’s not just building big buildings in rural areas as Om Malik describes in Silicon Valley’s next payday: Three years ago, Force 10 networks faced a bleak future. Telecoms, the major customers for its high-speed data switches, were collapsing. Then Google ordered a batch of switches for a major expansion of its data centers – and has been buying ever since. “It put the company on the path to the big time,” says Gary Morgenthaler, general partner at Morgenthaler Ventures, an investor in Force 10. The startup is reported to have hit $60 million in revenue in 2005 and is expected to file for an IPO soon. [...]

  2. Web 2.0 brings operations back -- Microsoft News Tracker Says:

    [...] The arcane science of IT operations never really went away, of course, but the transition from raised floor glass house to client-server to Internet seemed to make it less visible and deemphasized physical plant in favor of the management of numerous servers. Now, however, the advent of online Web services with the vast server farms required has brought operations back to prominence again, but with a completely different slant. Tim O’Reilly: I spoke last week with Debra Chrapaty, the VP of Operations for Windows Live, to explore one of the big ideas I have about Web 2.0, namely that once we move to software as a service, everything we thought we knew about competitive advantage has to be rethought. Operations becomes the elephant in the room. Debra agrees. She’s absolutely convinced that what she does is one of the big differentiators for Microsoft going forward. … People talk about “cloud storage” but Debra points out that that means servers somewhere, hundreds of thousands of them, with good access to power, cooling, and bandwidth. She describes how her “strategic locations group” has a “heatmap” rating locations by their access to all these key limiting factors, and how they are locking up key locations and favorable power and bandwidth deals. And as in other areas of real estate, getting the good locations first can matter a lot. She points out, for example, that her cost of power at her Quincy, WA data center, soon to go online, is 1.9 cents per kwh, versus about 8 cents in CA. And she says, “I’ve learned that when you multiply a small number by a big number, the small number turns into a big number.” Once Web 2.0 becomes the norm, the current demands are only a small foretaste of what’s to come. For that matter, even server procurement is “not pretty” and there will be economies of scale that accrue to the big players. Blaine Harden at the Washington Post had more last Sunday on the odd history of low cost power in Quincy, WA and on the subject of server provisioning, see what David Carr and the CIO Tech Informer have to say how about how Google builds its custom server infrastructure. [...]

  3. Microsoft headed for San Antonio? -- Microsoft News Tracker Says:

    [...] The rumor that Microsoft is planning on building one of the new breed of mega datacenters for online services outside San Antonio, Texas is back with more details: Microsoft Corp. confirmed Friday that it’s looking at San Antonio for a new building, and people close to the deal say the software giant is close to announcing plans to build a huge $980 million data center in Westover Hills. [...]

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