I’ve read several articles about the increasing price for real estate to build data centers in “resource-rich” location. A corollary to that with a short reference in this article is the increased stock value of companies that provide efficient hardware:
Rackable Systems Inc. (RACK ), which sells highly efficient servers and data storage equipment, has more than tripled its stock price since going public in June, 2005. And a surge in demand for Advanced Micro Devices Inc. (AMD )’s power-sipping server chips is one reason it is humbling rival Intel Corp. (INTC ).
It then struck me as I was reading this:
Microsoft already owns server farms that are equal in size to a dozen Madison Square Gardens and consume as much power as 100,000 homes. The company deployed more new servers in the first quarter of this year than in any full year in its history.
that their cost of services vs Google will make it much more difficult for them to compete, and ultimately might drive them out of business.
If they require twice as much hardware to provide the same service at the same price to the end user, then the only way you stay in business long-term is finding the money from elsewhere. Either by a different end-user price for the same service or cross-subsidizing. The former will eventually (unless you cheat) drive your customers to other suppliers and the later probably not helped by the new business which is driving income from other sources to the new online destinations.
Of course, I think given Microsoft size that being driven out of business is not likely, even in the medium term. However, it is interesting to note that even though Microsoft has cheated in the past new technology is making it much easier for market forces to generate better value for the end-user.