IBM to acquire DemandTec.  IBM and DemandTec (DMAN) announced that the two companies have entered into a definitive merger agreement for IBM to acquire DemandTec in an all cash transaction at a price of $13.20 per share, or about $440 million. DemandTec will bring cloud-based analytics software to IBM’s Smarter Commerce initiative and add cloud-based price, promotion, and other merchandising and marketing analytics. IBM estimates the market opportunity for Smarter Commerce at $20 billion in software alone. “DemandTec has unprecedented capability to improve customers’ price and promotion tactics on a stand-alone basis and connect retailers and manufacturers for collaborative planning through the cloud,” said Dan Fishback, President and Chief Executive Officer of DemandTec. “IBM Smarter Commerce is the perfect fit for DemandTec. IBM is the only provider of price and promotion offerings within a rich solution set that supports companies’ buy, market, sell and service processes.”

Logicalis UK selects CA. CA Technologies (CA) announced that Logicalis UK is bolstering its private cloud offerings with CA Automation Suite for Clouds. The CA suite will complement the existing Logicalis portfolio of cloud solutions and help its customers optimize resource utilization and reduce costs through dynamic orchestration and workload management to automate the entire cloud service workflow and lifecycle. “Private clouds have moved beyond virtualisation and our customers want to leverage private cloud as a single platform for consistent ICT service delivery,” said Chris Gabriel, marketing director at Logicalis UK. ”After reviewing the market for a robust private cloud solution, Logicalis UK chose CA Automation Suite for Clouds to feature as part of our cloud service and solution offerings.   CA Technologies expertise in developing and supporting cloud environments helps us to help our customers to take maximum advantage, architecturally and operationally, of this new approach to IT service delivery.”

HP and Microsoft partner for global communications cloud solution.  HP (HPQ) and Microsoft (MSFT) announced a global, four-year initiative to deliver Microsoft’s communications and collaboration applications via global private and public cloud services. Under the agreement, HP and Microsoft will offer private and public cloud solutions including private cloud applications from both companies, public cloud services like Office 365 from Microsoft and hybrid solutions that combine public and enterprise cloud services. “Microsoft is committed to putting the unique and ever-evolving needs of customers at the core of cloud innovation,” said Mark Hill, vice president, Enterprise Partner Group, Microsoft. “This alliance with HP not only broadens Microsoft’s geographic reach, it gives customers maximum flexibility to choose a cloud computing solution that meets their organization’s specialized messaging and collaboration needs.”

“I am excited to be joining ServiceNow as the company prepares for its next stage of tremendous growth,” said Josefsberg. “I see many parallels with this company and in services I helped build that experienced hyper growth. ServiceNow is uniquely positioned to help companies transform the way they manage their business and I look forward to evolving our platform to always exceed customer expectations.”

Josefsberg is the second executive to depart GFS this year. Kevin Timmons departed last spring and is now CTO at colocation provider CyrusOne. So what does the new leadership look like at Microsoft Global Foundation Services? Here’s a look at the current leadership, provided by Microsoft:

Dayne Sampson
Corporate Vice President
Responsible for the strategy and delivery of the foundational cloud platform for Microsoft’s search, advertising, live, cloud, and 400+ online services including data centers, networking, security, tier 1, infrastructure applications & tools, operational management, and environmental sustainability considerations.

Christian Belady
GM, Data Center Advanced Development
Responsible for the research and development of Microsoft’s data centers. He is an originator of the PUE, CUE and WUE industry metrics used to assess the efficiency of data centers today.

Dileep Bhandarkar
Distinguished Engineer
Responsible for managing the roadmap for the application of new technologies that support Microsoft’s evolving cloud infrastructure and produce a competitive advantage.

Pete Boden
GM, Online Services Security & Compliance
Responsible for managing the security of the cloud infrastructure, driving compliance, and improving effectiveness of controls and resiliency of services.

Steven Gerri
GM, Business Group Engagement
Responsible for ensuring the delivery of cloud infrastructure services to Microsoft’s internal business groups.

Chris Hanaoka
GM, Manageability Services Group
Responsible for software development (e.g., automation, monitoring, asset management and tooling) for Microsoft’s cloud infrastructure.

Jon Plonka
GM, Global Networking Services
Responsible for managing and delivering the highly-reliable network that connects Microsoft’s cloud infrastructure globally.

Microsoft's data center design can change significantly from one phase to the next, as seen in this aerial view of Quincy, Washington. The huge building on the left is Phase 1, while the smaller building at lower right is the second phase.

Microsoft says a new design for the second phase of its data center in West Des Moines, Iowa is an evolution of the company’s modular data center design, and not spurred by challenges with the first phase of the facility. The nearly complete West Des Moines data center showcases Microsoft’s use of factory-built modules to rapidly deploy flexible, highly-efficient IT capacity.

A month ago Microsoft (MSFT) announced an expansion of the $200 million facility to double the size. Local officials told the Des Moines Register that the changes were related to  performance issues with the initial deployment. “I think they’re finding out that the individual units are not working so well in the Iowa humidity,” West Des Moines city planner Lynne Twedt told the city’s plan and zoning commission Wednesday. “They’re going to a different plan of attack with this one.”

Steel Building for Phase 2

Phase 1 of the West Des Moines facility uses modular data center components placed outdoors. Microsoft says its inclusion  of a steel building for the expansion was taken out of context.

“The decision to go with a different type of modular building form factor for Phase 2 has nothing to do with Iowa’s weather,” said Microsoft’s Christian Belady. “They are new design models that our research and development teams have determined are even more cost effective, efficient, and sustainable for the services we will be deploying from them.

“Our infrastructure designs for our modular facilities, including Phase 1 and Phase 2 in the West Des Moines facility, use outside air with evaporative cooling. They are developed, along with our servers, to address the ambient weather conditions of the regions in which they located.”

For some time now, leading players in the data center industry have been designing data centers to incorporate outside air into cooling systems. This process, known as “free cooling,” can save hundreds of thousands of dollars in cooling costs by avoiding the need to use refrigeration units (chillers).

Microsoft has been among the leaders in creating modular data centers that incorporate outside air into cooling. The company has used some modules that operate outside, and others that are housed within a a lightweight exterior, which Microsoft  compares to a “tractor shed,” filled with highly-customizable containers packed with servers, storage and power and cooling infrastructure.

The Microsoft IT-PAC

“Microsoft’s West Des Moines data center is one of three modular facilities we have announced in the past year, with the others located in Quincy, WA and Boydton, VA,” Belady said. “Each of our data centers are evolving ecosystems that need to be flexible enough to quickly meet the demands of our growing customers and the diverse business services we host. Our modular facilities continue to evolve and change as we research and develop new methods to significantly reduce water and energy use, and building costs; while increasing computing capacity and server utilization.”

An example of that evolution is seen in Quincy, where Microsoft operates two data centers. The first is a 470,000 square foot facility with concrete walls filled with traditional raised-floor space. Phase II  is a much smaller facility filled with modules. The module design has changed between facilities, evolving from fairly standard containers in Chicago to lightweight aluminum units with louvers built into the side to facilitate airflow for evaporative cooling.

In January of this year Microsoft  completed their modular “cloud farm” data center in Quincy, Washington. The facility is filled with IT-PACs (for pre-assembled components) modules that hold up to 2,000 servers each.  Microsoft recently worked with the city of Quincy to retool the city’s water treatment infrastructure to save millions of gallons of potable water for the local community.

Microsoft has not yet offered details on how the design of the second phase in West Des Moines will differ from the first phase, or Microsoft’s other modular facilities. In May Belady  told Data Center Knowledge that Microsoft is already developing new facilities optimized for this vision of cloud data centers as “data utilities.”

Belady says Microsoft will continue implementing new ways to build data centers for a changing industry. “We’re taking big steps, and we’ll learn along the way,” he said.

Data Center Knowledge contributor John Rath contributed to this story.

Some of the filtration tanks inside Microsoft's water treatment plant at its data center in Quincy, Washington. The company will lease the facility to the city for $10 a year as part of a partnership to develop a more sustainable water supply in Quincy.

In a move that will save millions of gallons of potable water for the local community, Microsoft has teamed with the city of Quincy, Washington to retool the city’s water treatment infrastructure.

As part of the partnership, a multi-million dollar water treatment plant built by Microsoft to support its data center will be leased to the city of Quincy for just $10 a year. The plant will be retrofitted and expanded to support the water reuse initiative, which will allow other nearby businesses and data centers to benefit..

Microsoft’s existing water treatment plant infrastructure was built to reuse the water from the local farming community’s food processing plant. The plant would filter that water and use it to cool the Microsoft data center. Afterwards, they would filter the water again before returning it to the aquifer.

The City of Quincy plans to retrofit Microsoft’s current reuse plant as an expanded industrial reuse system in two phases. Following the first phase, the system will generate approximately 400,000 gallons per day (150 million gallons per year) using food processor wastewater effluent. The second phase upgrade is projected to produce 2.5 to 3 million gallons per day (1 billion gallons per year), with about 20 percent being used by local industries and the remaining being used to recharge the aquifer around Quincy.

“We invested tens of millions of dollars to build our own water treatment plant,” said Christian Belady, General Manager of Data Center Advanced Development for Microsoft. “At the same time, we began a dialogue with the City of Quincy regarding a longer-term potential partnership that included the use of water discharged from the local large food processing plants.

“These companies use large amounts of potable water to wash and prepare many of the foods consumers purchase in local supermarkets,” Belady wrote in a blog post announcing the initiative. “By filtering that water after it is used by the food processing plants, we enabled a ‘reusable’ water source to use for our cooling needs.  In addition, this eliminated our need for potable water, while also significantly recharging the supply returned to ground water with 80 percent of the treated water going back to the aquifer.”

Addressing Data Center Water Usage

The enormous volume of water required to cool high-density cloud computing server farms is making water management a growing priority for data center operators. Cloud data centers can contain hundreds of thousands of servers. All the heat from those servers is often managed through cooling towers in which  hot waste water from the data center is cooled, with the heat being removed through evaporation.

Microsoft has built two data centers in Quincy. The water treatment plant supports Microsoft’s initial 470,000 square foot facility, filtering minerals out of the potable water from the city water system. Microsoft’s second data center deploys its servers in modular data centers known as IT-PACs, which are air-cooled and use a fraction of the water in the traditional raised-floor design.

Moving forward, the City of Quincy will lease the water treatment plant from Microsoft for $10 annually and will provide the company with reduced water rates. The plant will be operated, maintained and managed by the city with a right to purchase the plant after 30 years.  The lease from Microsoft was able to save the city significant construction costs for the new reuse system.

Win-Win for Quincy, Microsoft

“Utilizing this symbiotic water relationship between these industry groups to meet all the user demands while conserving literally millions of water annually, can only be described as a ‘win-win situation,’” said Quincy Mayor Jim Hemberry. “The reuse utility will substantially reduce discharge for industrial customers – food processors, cold storage facilities, shippers and data centers – and provide for increased water capacity to accommodate future planned business, industry and technology sector growth.”

Belady said he believes the arrangement is the first transfer of a data center water treatment plant to a municipality.

“We will continue to look for ways to reduce and eventually eliminate the use of resources, including water, in our data center designs,” said Belady. “Today, this project reflects our firm commitment to that vision. I hope it also sets the stage for a healthy discussion within our industry to continue to explore ways to share our investments and best practices within the industry and regions in which we do business.”

Microsoft's water treatment and filtration plant in Quincy, Washington.

Serious Server Density: Packed racks of servers in an IT-PAC at the new Microsoft data center in Quincy, Washington (Photo: Microsoft Corp.)

Microsoft will invest an additional $150 million to expand its new data center in southern Virginia, continuing a series of expansion announcements that hint at a dramatic scaling up of Microsoft’s cloud computing capacity. Microsoft will build a second data center facility and add 21 megawatts of power capacity at its new location in Boydton, Virginia, even as it is still completing the $499 million first phase of the project.

With the Virginia project, Microsoft continues to step up its data center construction program as it builds future capacity for its battle with Google and other leading players in cloud computing. The announcement comes on the heels of expansion initiatives of Microsoft data center projects in West Des Moines, Iowa and Dublin, Ireland. Microsoft has not confirmed either expansion, but is pursuing approvals and incentives from local officials. As in Virginia, Microsoft is looking to expand in Iowa even before it completes and opens the first phase of its project.

Moving Quickly To Add Capacity

Microsoft’s data centers are a key component in a major business shift at the company, which is expanding beyond its traditional desktop software business to offer cloud computing services, in which Microsoft’s applications will be hosted in its data centers and delivered over the Internet. Major Internet companies like Google, Yahoo and Facebook typically build multiple facilities at a single location, but usually deploy one phase at a time. Microsoft’s recent moves to expand in multiple sites suggests it will need more data center space sooner rather than later.

“Microsoft is excited to once again expand its cloud infrastructure and services capacities in Boydton,” said Dayne Sampson, corporate vice president, Microsoft’s Global Foundation Services group. “We greatly appreciate the work that Virginia’s Governor and local officials have done to make the Commonwealth a great place for Microsoft to continue to invest in to enable the best possible delivery of services to our current and future customers.”

Big Investment, Additional 10 Jobs

The expansion will add 10 jobs, bringing the total expected employment in Boydton to 60 positions. Data centers properties bring lots of investment, but modest numbers of new jobs, given the automated nature of their operations. Nonetheless, local officials said they were thrilled with Microsoft’s decision.

“In 2010 I announced Microsoft’s plans to establish its most advanced data center in Mecklenburg County, which represented the largest economic investment in Southern Virginia history,” said Virginia Governor Bob McDonnell. “Just one year later, the company is making another significant investment to expand the operation site and add electric power capacity. Securing this state-of-the-art data center was an important win for the Commonwealth, and additional growth will further establish Virginia as an Information Technology leader.”

“Considering this economic climate the new announcement by Microsoft is astounding,” said Glenn Barbour, Chairman of the Mecklenburg County Board of Supervisors.

Modular Deployment at Scale

Microsoft’s new facility will feature the use of its container-based design known as an IT-PAC (short for Pre-Assembled Component). The IT-PAC serves as the foundation of a broader shift to a modular, component-based design that offers cost-cutting opportunities at almost every facet of the project. They are designed to operate in all environments, and employ a free cooling approach in which fresh air is drawn into the enclosure through louvers in the side of the container – which effectively functions as a huge air handler with racks of servers inside.

“The company’s innovative data center design increases efficiency of operations, and this expansion will enhance the high-tech capabilities already in place as Microsoft continues to grow its operation,” said Jim Cheng, Virginia Secretary of Commerce and Trade.

The Boydton site has strong fiber connectivity from existing routes supporting a government data center in the region. The fiber optic network of the Mid-Atlantic Broadband Cooperative (MBC) was described as a”key component” in Microsoft’s decision to locate in Virginia. The 175-acre site features a 40-acre graded pad. The site is served by Dominion Virginia Power.

Microsoft has been operating a pair of data centers in northern Virginia, where it has been one of the largest tenants in data centers operated by DuPont Fabros Technology (DFT). The company recently indicated it will renew its leases for those sites.

EMC’s Greenplum Modular Data Computing Appliance.  EMC introduced the Greenplum Modular Data Computing Appliance (DCA), the industry’s first complete Big Data analytics platform. The DCA enables enterprises to combine a shared-nothing MPP relational database with enterprise-class Apache Hadoop in a single, unified appliance to achieve structured and unstructured data coprocessing. Deployed in quarter-rack increments, the approach to capacity management and scaling is based on processing performance or storage needs. The Greenplum DCA is a scalable data-warehousing appliance module that architecturally integrates database, computing, storage and network into an enterprise-class, easy-to-implement system. ”We are the only company enabling data coprocessing, the fast, bidirectional sharing of structured and unstructured data between relational and Hadoop modules within a single appliance, to allow each system do what it does best and achieve a whole that’s much greater than the sum of its parts,” said Scott Yara, vice president of products of Greenplum, a division of EMC. “That’s why data coprocessing is so important and so powerful, and it is the new modularity of our DCA that provides this opportunity for enterprises to get the benefits of Big Data analytics from whatever kind of data they’re working with.”

Cisco and Microsoft collaborate.  Cisco (CSCO) and Microsoft (MSFT) announced a collaboration for delivering data center virtualization solutions designed to provide improved scalability and operational control of Microsoft Windows Server “8″ virtual environments. Advanced Cisco networking features will be constant across both virtual and physical networks with the Cisco Nexus 1000V distributed virtual switch and the Cisco UCS with Virtual Machine Fabric Extender (VM-FEX) capabilities and Windows Hyper-V hypervisor.  VM-FEX collapses the physical and virtual networking layers into one virtual infrastructure, improving traffic engineering, visibility and troubleshooting capabilities for VM traffic. ”Cisco Unified Computing System scalability and memory density make it an ideal system for customers as they explore the many new virtualization features of Windows Server 8 and Hyper-V,” said Jackie Ross, vice president of Server, Access, and Virtualization Technology Group for Cisco.  “Together, Nexus 1000V and VM-FEX with Windows Server Hyper-V will provide the advanced controls and consistency with simplified management to help accelerate customers’ journey to the cloud.” The Cisco Nexus 1000V and VM-FEX solutions for Hyper-V will be available when Windows 8 Server is released to the market.

Nimsoft announces SAP monitoring.  Nimsoft announced Nimsoft Monitor for SAP, an automated solution that enables customers to optimize service levels across physical, virtual and cloud environments while reducing their technology ownership costs. As a component of the Nimsoft Monitor, it features a built-in knowledge base of key performance indicators (KPIs) and associated best-practice thresholds to help administrators proactively address potential issues and quickly identify and resolve problems before they impact service levels. “Enterprise SAP environments have become highly dynamic due to both increasingly volatile business conditions and today’s extensively virtualized IT infrastructure,” said Chris O’Malley, Nimsoft CEO. “The SAP monitoring application and Nimsoft Monitor empower customers to stay on top of these dynamic SAP environments so they can achieve superlative service levels while driving down management overhead.”

Blue Coat updates PacketShaper.  Blue Coat Systems (BCSI) announced a new version of operating software for its Blue Coat PacketShaper appliances that adds an intelligent structure to auto-discovered applications and Web content categories, making it easy to instantly understand application usage. Version 8.7 of the PacketShaper operating software adds an automated hierarchical grouping of applications and content to quickly monitor and control social media, business-critical applications, business data, Web threats and other groupings. “Application visibility and control is increasingly critical now that typical Web usage consumes over 50 percent of a company’s network, and video and aggressive applications can easily incapacitate business-critical applications,” said Steve Daheb, chief marketing officer and senior vice president, Blue Coat Systems. PacketShaper 8.7 is available now as a software upgrade for all customers with a current support contract for a PacketShaper appliance.

An aerial view of the Microsoft data center in Dublin showing the rooftop air handler units atop the first phased of the facility, as well as the vacant roof space available for additional air handlers as the remainder of the facility is built out .

Microsoft has no comment on reports that the company is planning an expansion of its huge data center in Dublin, Ireland, which serves as the central hub supporting its cloud computing services across Europe.

The Sunday Business Post reported  that Microsoft “is planning a multi-million Euro investment in an expansion of its $500 million data center in Dublin.” The paper said plans call for building a 120,000 square foot single-story data center alongside the existing 303,000 square foot facility.

Planned as a Two-Phase Project

Microsoft said it had no comment or new information on its plans for the Dublin site. But the company has previously indicated that the facility would be built out in two phases. Microsoft built a 550,000 square foot structure in Dublin, with 303,000 square feet of data center and mechanical/electrical space entering production on July 1, 2009. At the time, Microsoft indicated that it would complete the remainder of the data center at a later date.

An aerial photo of the facility (see above) shows that only half of the space on the roof contains air handlers that drive the cooling system for the Microsoft Dublin data center. These units take outside air and draw it into the data center for use in the air conditioning system. This practice, known as “free cooling” or air-side economization, allows facility owners to dramatically reduce the amount of energy used in cooling.

New Structure, or More Servers in the Same Building?

The chief question about an expansion in Dublin is whether Microsoft would build out additional space inside the existing structure using a design similar to the first phase of the Dublin facility, or build a new lightweight structure along the lines of its latest data center in Quincy, Washington, which was built around data center containers that come packed with up to 2,000 servers.

The difference could be meaningful for the local economy in Dublin, as a new structure would likely mean more construction work than an additional build-out of the interior of the existing structure.

For more on the Dublin data center, see our photo feature: Inside Microsoft’s Dublin MegaDataCenter. The facility was in the news during an outage last month.

Not necessarily. A case in point: Microsoft will renew one of its largest wholesale data center leases. Industry sources indicate Microsoft will renew a lease for a 10 megawatt data center in northern Virginia that was originally scheduled to expire in increments between 2012 and 2017. The lease will be renewed for eight years.

Need for Capacity

Microsoft has been building its own data centers throughout North America. Last year Microsoft announced plans to invest up to $499 million in a major new data center project in southern Virginia.  The company said that a 175-acre site near Boydton, Virginia would be the location of a state-of-the-art facility featuring  IT-PACs, Microsoft’s air-cooled modular data centers. That announcement raised an obvious question: Would Microsoft still need a large chunk of leased space in the same state?

Microsoft wouldn’t comment on the lease renewal, but confirmed that it is moving ahead full speed with the new data center in southern Virginia, citing stronger than anticipated demand for its cloud computing services – which in turn requires additional data center capacity.

Yahoo Migrating to New Facilities

Yahoo, meanwhile, is vacating one of its northern Virginia facilities as it shifts server capacity out of third-party facilities and into its new company-built data centers. The company told its landlord, DuPont Fabros Technology (DFT), that it will not renew a lease for 5.7 megawatts of space, which expires April 30, 2012. DuPont Fabros executives say they are already working on re-leasing the space and expect no problem filling it amid strong demand in northern Virginia.

Yahoo is in the midst of a $500 million global expansion of its data center network, with a goal of shifting its operations to newer, highly-efficient infrastructure.”We’ll be migrating the entire footprint of Yahoo to these more efficient facilities,” said Scott Noteboom, the head of data center operations at Yahoo.

What About Facebook?

Facebook says that it will gradually shift most of its server capacity from leased data centers to company-owned facilities, migrating out of many third-party facilities as its leases expire. For most of the company’s leases, those expirations aren’t until 2016 to 2022.

A first indicator of Facebook’s intentions may be its lease at a CoreSite data center in the Silicon Valley market, which expires next April. In the company’s earnings call last week, CoreSite said Facebook had not yet indicated its intentions for that lease.

An example of online cost model reports used by internal cloud services teams at Microsoft.

REDMOND, Wash. - When you think of key drivers in the growth of cloud computing, you may not think of accounting. But at some companies, the accounting team is emerging as a key player in documenting the benefits of the cloud financial model, using data to build a compelling business case for broader adoption of cloud technologies.

One example is Microsoft, which has implemented detailed tracking of the cost of IT operations for its more than 200 online services. Using data collected from the company’s data centers and cloud platforms, Microsoft has restructured its cloud infrastructure accounting system to provide each of its internal cloud services’ business units with granular data about the cost of their IT operations.

This provides Microsoft product teams with a detailed analysis of the cost and performance of their cloud applications in different production environments – including third-party data centers, in-house data centers, and the company’s Azure cloud computing platform.

Reshaping Budgets, Priorities

That knowledge is reshaping budgets within Microsoft, providing app developers with the opportunity to shift workloads to more cost-effective cloud environments, and then use the savings to invest in other facets of their operations.

“We are measuring lots of different things, and those signals give us lots of opportunities,” said Charlie McNerney, the General Manager of Business Management for Microsoft’s Global Foundation Services, who has led Microsoft’s efforts to overhaul how it accounts for IT operations. “When you can publish data and compare the productivity of different apps. It allows you to forecast in a much different way.”

Optimizing for a New Paradigm

As awareness and accountability improve, the data has driven a company-wide effort to optimize IT operations – a key goal as Microsoft’s revenue base gradually expands from boxed software to its new online services.

“It’ll move a ton of behavior in ways most companies may not realize was possible,” said McNerney. “When you can understand your current costs in this new cloud model, you soon realize the opportunity. Cloud computing enables you to completely reshape the economics of the total cost of IT and deliver significant financial savings. There’s so much more efficiency compared to running your own instance. There’s a much better rate possible in the cloud than at third-party providers or in-house.”

Thus, a metrics-driven push for efficiency that began in the company’s data centers is now permeating a much broader swath of teams developing online services.

Monitoring Drives Detailed Tracking

A critical first step was the instrumentation of Microsoft’s data centers, which are equipped with sensors that monitor power usage at all levels of their operations. GFS has been tracking energy usage for several years, using the data to track costs. The data also helps define potential savings from design improvements Microsoft has implemented, including its IT-PAC modular data centers, which can run higher-density racks while dramatically slashing the power required to cool servers.

This data provided the tools for Microsoft’s accounting team to transform how it tracks and reports spending at its online services’ and business units.

McNerney and his team set out to provide a different view of IT spending. Many companies and government agencies use traditional accounting models that measure IT spending by the number of employees in an IT department to determine the “cost per head.” The goal is to arrive at a cost of goods sold (COGs), which helps the company understand how much it is making on each sale.

The drawback of a cost-per-head approach is that it provides limited insight into differences in the efficiency of IT operations across the entire spectrum of hardware and software that powers them.

Rate-Based Tracking vs Cost Per Head

McNerney and his team opted for a rate-based approach. They worked to determine a rate for several areas of Microsoft’s IT infrastructure, including data centers, networks, and other rates for IT. These rates can then be applied to the data on usage of compute capacity, network usage and support tickets for each department running an online service.

This provides a clearer picture of which apps make the most efficient use of servers and bandwidth, and which apps trigger a greater volume of compute energy and/or support incidents.

“The bill of IT comes every month, itemized by types of assets used,” said McNerney. “Each team can review the bill and then identify areas to address.”

Data Enables Benchmarks, Incentives

This provides an incentive for business units to optimize their apps, as well as the data to help predict cost and usage patterns going forward. This information provides benchmarks to help developers make their apps more efficient – and thus cheaper to operate.

“The only way to get that behavioral shift is to demonstrate it by data and make it visible,” said McNerney. “Low utilization rates now get noticed. In their planning sessions, business units look at unit volume, design a better network, more efficient applications, and lower their incident rates. That’s been an interesting process.”

“I’m looking at every way possible to get the rate down. We think in terms of kilowatts, because that’s a big driver,” said McNerney. “Once that’s mapped, the product teams can look at programming models. You now have a competitive planning analysis. Our focus on rates has been enabled by the cloud. Do you know what you’re paying now? What factors into the rate?”

One issue is that all data centers aren’t identical. Their efficiency may vary based upon their design. For example, the local power rates’ for Apps that run in Microsoft’s newest modular data center in Quincy, Washington will be more efficient in their use of power than older data centers elsewhere.

Allowing business units to try and match apps to the most efficient infrastructure could create capacity challenges, so Microsoft has established regional rates for groups of data centers.

Over time, the cumulative effect of internal teams optimizing their apps for cloud deployment could drive rates lower, as Microsoft’s entire infrastructure becomes more efficient.

“The technology is compelling, and Azure is now a compelling offer for our customers and our internal teams,” said McNerney. “The cloud is an answer for a whole bunch of business challenges.”

An aerial view of the new Microsoft data center in Quincy, Washington, which uses a lightweight structure and modular data centers. (Photo: Microsoft Corp.)

When it comes to data center design, Christian Belady isn’t afraid to shake things up. Back in 2008, Belady and his Microsoft colleague Sean James put a rack of servers in a pup tent for eight months, with 100 percent uptime.

That experiment helped the data center industry rethink assumptions about the impact of temperature and humidity on server health – which in turn convinced many data center operators to turn down the air conditioning and use more fresh air in cooling systems.

The pup tent casts a long shadow when Belady talks about coming changes in data center design. As the director of Datacenter Research at Microsoft, Belady is pondering the next phase of change in data center design.

“Cloud computing is the utility of the future,” says Belady. “I look at it as a way to distribute energy. At the end of the day, data is energy.”

Data and Power Closely Linked

So what will the cloud computing “grid” of the future look like? At a time when Internet infrastructure closely tracks the availability of cheap electricity, Belady says the key questions will involve the relationship between data and power.

“Data is really a processed form of electricity,” Belady says. “We’re part of this ecosystem: an energy pipeline. If you started from scratch, what with that whole pipeline look like? How does that change infrastructure? How can we deploy the cloud?”

These are not academic questions. Belady is the guy at Microsoft tasked with translating these big-picture concepts into data center designs that can support tens of millions of users. He says Microsoft is already developing new facilities optimized for this vision of cloud data centers as “data utilities.”

“We’ve only started to scratch the surface of what that really means,” he said. “There’s this extreme drive to lower the cost of the cloud. There has to be a financial benefit.”

Areas for Future Innovation

Where will these savings come from? And how will they change how Microsoft builds and deploys its data centers? Belady isn’t ready to say just yet. But in a recent conversation with Data Center Knowledge, Belady discussed several broad themes that are in the mix as he ponders the road ahead for Microsoft’s data centers.

Temperature and Humidity Ranges: Belady has been a strong advocate of wider temperature ranges for data centers, arguing that servers are far heartier than once imagined. Microsoft is regularly operating at or above 80 degrees F in its data centers, and has said it can run as high as 95 degrees F if needed. “I honestly believe we should be pushing further,” Belady said.

Failing in Place: The notion of an unmanned “lights out” data centers has been widely discussed but lightly implemented. With its move to a factory-built modular IT-PAC (short for “pre-assembled component), Microsoft has taken a big step toward data center capacity that can be lightly maintained. “When a server fails, why does it need to be replaced?” Belady asks.”Why can’t the servers just fade away? What you don’t have to maintain servers, it creates opportunities.”

On-Site Power: Given Microsoft’s interest in renewable energy, Belady’s discussion of a utility model for cloud computing raises obvious questions about on-site generation for future data centers. “Clearly, our expertise is not in energy generation,” said Belady. “The objective isn’t to replace that (electric utility) infrastructure. It’s going to be a partnership between people with the right competencies.”

Geography and Site Location: When Microsoft first developed the IT-PAC modular deployment model, it considered building data centers with no roofs, but ultimately opted for a lightweight building. Belady remains intrigued by the roof-less data center, an approach that would influence its site location decisions. But the servers won’t be housed in tents.

“When we did the ‘tent city,’ we weren’t saying that’s what a data center should look like,”said Belady. “It’s saying ‘here’s an example of what’s possible’ and showed that things would be okay. We need to convince the industry that there is opportunity there.”

Belady says the industry has responded, noting the growing adoption of free cooling and slightly higher temperatures in the data center.

“I think the industry has moved quite a lot in the last three or four years. The fact that the industry started sharing woke people up that there’s different ways to do things. We can’t build data centers the way we used to.”

Belady says Microsoft will continue implementing new ways to build data centers for a changing industry. “We’re taking big steps, and we’ll learn along the way,” he said. “That’s why I get excited.”

An aerial view of the two Microsoft data centers in Quincy, Washington illustrates the evolution of ts design. The new modular data center at right deploys capacity in a more compact footprint that the previous 470,000 square foot facility. (Photo: Microsoft Corp.)