Google vs. Microsoft in Data Center Economics

If you're an economic development official focused on developing a data center cluster in your area, you should be chasing Microsoft (MSFT), not Google (GOOG).

Rich Miller

April 16, 2008

3 Min Read
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There's been some interesting reaction around the web to the Google Data Center FAQ and Pingdom's wildly popular map of Google's network. Dave Ohara at the Green Data Center Blog asks an interesting question: "Does anyone say 'hey look where Google went, let's follow them?' "

Many state and local governments have passed tax incentives to attract a Google data center, hoping it will convert struggling regions into high-tech hubs. It's part of a trend in which more economic development agencies are pursuing data center projects. There's no question that favorable environments can create data center clusters, a trend seen in many technology corridors. But here's the secret: If you're focused on developing a data center cluster in your area, you should be chasing Microsoft, not Google.

For evidence, look no further than a story published Saturday about Microsoft's data center project in San Antonio, which has triggered a big spike in data center development. A similar boom occurred after Microsoft (MSFT)announced plans to build a data center in Quincy, Washington.

The article in the San Antonio Express-News profiles Microsoft's "green" approach to the facility, but also notes its impact in attracting additional companies. "When you're touted as one of the premier sites for data centers, it sends a message to other companies," said Mario Hernandez, president of the San Antonio Economic Development Foundation. "It's doing wonders for us around the country as far as our profile goes." Here's a look at the timeline for San Antonio data center projects:

  • Jan. 2007: Microsoft announces plans for a $550 million square foot project in the Westover Hills area of San Antonio

  • April 2007: The National Security Agency says it will locate a data center in San Antonio

  • April 2007: Stream Realty Partners buys 33 acres in Westover Hills for a data center

  • May 2007: Christus Health Systems announces plans for a new data center in Westover Hills.

  • Nov. 2007: Power Loft LLC announces plans for Power Loft@Westover, a 150,000 square foot data center project in the Westover Hill business park, right next door to Microsoft's site.

That closely tracks developments in Quincy, Washington, where Microsoft's announcement of a major data center was followed closely by projects from Yahoo, Sabey Corp., Intuit, and Base Partners which will add a total of nearly 2 million square feet of data center space in the area. The companies are lured by cheap hydroelectric power from the Columbia River, which is priced as low as 1.8 cents per kilowatt hour.

Google (GOOG) data centers, on the other hand, haven't been a magnet for facilities clustered nearby. That's not to say they haven't had an impact. Several states - notably Oklahoma and Iowa - have seen a clear uptick in statewide projects since Google announced facilities in Pryor and Council Bluffs, respectively. But there has been little sign of any non-Google data center activity near Lenoir, North Carolina or Goose Creek, South Carolina.

Why the difference? Given its interest in secrecy and competitive advantage, Google isn't necessarily keen on rubbing shoulders with other data center operators. It has also purchased large tracts of land, which gives it the flexibility to create buffer areas around its facilities - a common feature of data centers for government tenants. Google is mindful of its economic impact in its local communities, and is working to hire local residents and supporting area educational programs.

Google may have the world's largest computer cluster. But when it comes to developing data center clusters for economic development, Microsoft is the clear leader.

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