Microsoft Confuses Economies of Scale with Next Generation Data Centers | Gaining Altitude in the Cloud

Posted On June 1, 2011

In a recent article in Information Week, a Microsoft executive made the claim that the economies of scale of cloud data centers were so compelling that few companies, if any, would want to continue to operate their own. He went on to offer Microsoft’s cloud data centers as the proof point. He stated the Microsoft cloud data centers operate on next generation architecture. Instead  of housing servers in hardened data centers, which are expensive to build, cool and maintain, Microsoft utilizes new hyper-scalable architecture that jam packs servers and storage into vapor-cooled containers similar to those you see on the interstate being pulled by semi trucks. Microsoft achieves resilience exceeding that in the hardened data centers by duplication of assets in multiple locations. And when combined with the flexibility of virtualized cloud offerings, the net result is dramatically lower cost – to the tune of as little as 25 percent of the cost to build and run their level 4 hardened cousins.

Our counterpoint: we have been conducting extensive research, and our analysis confirms that many next generation data centers are significantly less expensive than many cloud offerings. Further, they are mature enough to support enterprise-class computing today, and are far more flexible than traditional legacy data center infrastructures. When enterprises combine these benefits, they can indeed achieve dramatically lower computing costs. It’s important to recognize that these are not driven by economies of scale; rather, they arise from the advantages of radical new architecture and technology. Everest Group’s work strongly suggests that whereas economies of scale do exist in next generation data centers and their related cloud offerings, most of the benefits are reached quite quickly.

A vital distinction – next generation data centers and private cloud are available to most mid to large enterprises at a cost comparable to that of mega Microsoft. Enterprises seeking to capture these benefits should not be seduced by claims of massive gains provided by ever increasing size,  but should instead focus their attention on how to leverage the architecture and next generation technologies while adapting their applications and organizations to take advantage of these dramatic new opportunities.

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