Data centers and the cloud

04.22.17

This month Amazon.com announced plans to plunk down a massive collection of data centers in Stockholm, according to the Wall Street Journal.

It is the latest move in a high-stakes race to own the biggest piece of a market that is expected to reach into the hundreds of billions of dollars. Amazon and its chief rivals— Microsoft and Google—are aggressive players in so-called hyperscale computing, which provides digital horsepower that scales quickly when needed in real time, like when NFL fans crush a fantasy-sports site before kickoff.

Combined, Amazon, Microsoft and Google doled out $31.54 billion in 2016 in capital expenditures and capital leases, according to company filings. That is up 22% from 2015.

Not every dollar of that is spent on data centers that deliver infrastructure as a service, but each company describes the cloud as a major investment area. Amazon, the leader in providing such web-based, on-demand resources, didn’t disclose the cost of the new cluster of data centers in Stockholm, known in industry-speak as a “region.” Analysts peg the price tag of a region at several hundred million dollars.

Investors are willing to tolerate the hefty tab, as they often do for energy exploration by oil business or infrastructure investments by telecommunications companies. That’s because the potential payoff is enormous: businesses spent roughly $500 billion last year on computing, storage, networking, database technology and more, according to research firm Gartner Inc.

The massive investment is creating a barrier for would-be rivals that would need to spend tens of billions of dollars to match the computing capacity Amazon, Microsoft and Google already have. (Source: The Wall Street Journal)


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