Data center construction to grow to $18B in 2020

The amount of money that will be spent to build data centers in the U.S. may not be as big as people assume. Microsoft did some research on the growth of data centers and expects construction spending will increase from $15 billion this year to $18 billion in 2020. That's an increase of 20 percent over nine years.

There will be far more growth outside the U.S. Microsoft estimates global construction spending for data centers will increase to $78 billion in 2020. Chief Executive Steve Ballmer has said that one of the most frequent questions he gets from foreign governments is a request for Microsoft to build a data center in their countries.

The Washington state legislature passed a tax break for building data centers last year to attract tech companies to establish new data centers in Grant County. The growth of data, the Internet and cloud computing is driving the construction of data centers, buildings filled with servers that do such things as stream Netflix videos and update Facebook statuses.

Christian Belady, general manager for Data Center Research at Microsoft, wrote a paper that Microsoft published on Wednesday about data center construction.

He called his projections "some sort of a stab with where the market opportunity is," a starting point for discussion and debate in the industry.

To support its push into cloud computing, Microsoft is researching and designing data centers that cost less to run and use less power. The company has built a modular data center that looks like shipping containers inside a warehouse in Chicago. The dip in the above chart on construction growth between 2010 and 2015 accounts for design changes that are reducing construction costs.

A large data center generally costs about $250 million to build. Washington state is building a $255 million data center and office in Olympia that some lawmakers are complaining is too big for the state's needs. Here is our earlier Seattle Times story on the state's new data center by Queenie Wong.

Based on Microsoft's estimates, a $255 million data center would have made up 1.6 percent of the total U.S. data center construction in 2011.

Belady said he put together the estimates because he could not find reports from research analysts and he was seeing market projections from niche startup companies that seemed too enthusiastic. "They are estimating these huge market opportunities for these businesses," he said. "If every business met all of their market potential, it?s not clear to me if there would be enough money on the globe to finance it all."

"Part of the purpose of this white paper is to throw this out and even get the industry to start dialoguing about this," Belady said. "I?m not married to this. I want to get stuff out there and get the industry to dialogue and vet the concepts and perhaps in a year or two have someone come up with a better estimate."

Here is a link to Belady's blog item with more details about the study. And here is our earlier story about Microsoft's efforts to build a cheaper, greener data center.

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