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Microsoft (MSFT) Keen on Building Subsea Data Center Network

Microsoft MSFT recently labelled its Northern Isles experiment a success, as the subsea data center was found to be cost and energy efficient as well as reliable.

The tech giant retrieved its submerged data center for analysis from the seafloor in July this year. The data center was submerged 117 feet deep in the sea off the Orkney Islands in Northern Isles, the U.K in 2018.

After pulling out the data center, the tech giant collected air samples from data center to study the modified environment due to gases released by the equipment and cables. Before submerging it, the data center was filled with only nitrogen as it is less corrosive than oxygen.

Microsoft Corporation Price and Consensus

Microsoft Corporation Price and Consensus

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Ben Cutler, who leads Project Natick, stated that the failure rate of subsea data center servers was significantly less than the servers on land. Though no exact reason has been pinpointed, the team has cited that absence of human intervention, oxygen and humidity may have contributed to the higher performance of the servers.

Following the success, Microsoft is now focusing on increasing the size and performance of subsea data centers to fuel its Azure cloud platform requirements while reducing carbon emissions.

The Experiment in Detail

The data center retrieved is a 40 feet long air-tight steel container that has 864 servers with an in-built cooling mechanism. It was manufactured by France-based Naval Group while  Scotland-based Green Marine aided with the on-site deployment, monitoring and maintenance for the data center.

This experiment was phase two of Microsoft’s Project Natick that is aimed at studying the viability of underwater data centers. The first phase involved submerging a data center for five months off the coast of California in 2015.

Also, the data center was powered by the region’s power grid which only uses renewable sources of energy. Moreover, the naturally cool subsea environment kept the heat in check inside the data center, thereby eliminating substantial energy required to keep the data center cool.

On the heels of aforementioned benefits, Microsoft intends to set up subsea data centers mostly at the coastal areas as majority of the world’s population resides there. The tech giant believes it will enhance data transmission and will improve the quality of internet surfing as well as streaming.

Notably, Microsoft’s plans to build subsea data centers are likely to be set in regions that are powered by renewable energy, also keeping the carbon footprint in mind.

Higher Adoption of Cloud Fuels Demand for Data Centers

The data center business is booming owing to growth in adoption of cloud-based solutions and 5G network deployment. Also, the exponential growth in digital data boosted the demand for data centers. Coronavirus crisis triggered work from home, stay at home and online learning trend has led to a massive demand for cloud storage.

Per a Technavio Report, the global data center market is projected to witness a CAGR of 16% between 2020 and 2024.

Microsoft is building data centers across the globe to support its cloud platform, which trails only behind Amazon’s AMZN Amazon Web Services (AWS). Per a Canalys Report, for the second quarter of 2020, Microsoft’s market share in the cloud services space increased to 20% from 18% in the prior-year quarter. AWS market share remained unchanged at 31% for the second quarter of 2020 on a year-over-year basis

Earlier this year, the company announced that it would invest $1.5 billion to open its first data center in Italy. Prior to that, the tech giant had stated that it would spend $1 billion to create a data center in Poland.

The competition has heated up as all the major cloud service providers are expanding their data center footprint. AWS recently opened a new data center in Italy and plans to open data centers in Brazil and India.

International Business Machines Corporation IBM also has 60 data centers located all over the world. In August 2020, Oracle ORCL established a cloud region in San Jose, its 25th such region globally, and plans to have a total 36 cloud regions by end of 2020.

Tech Majors Focus on Carbon Neutrality

In this backdrop of booming data center business, it has become imperative for technology companies to adopt sustainable practices for business expansion as climate change becomes a serious concern.

Microsoft is committed to building environment friendly data centers. Data centers consume huge power roughly around 1% of the global energy requirement. The increasing number of data centers will add to the carbon emissions problem which is linked to global warming. This has compelled the tech bigwigs to devise new energy efficient methods to cap data center power consumption.

By innovative technologies like underwater data centers, hydrogen fuel cell technologies, and liquid immersion cooling projects, Microsoft is looking to support Azure growth and maintain its carbon neutral stance. Microsoft currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

On the other hand, Amazon has set goals of using 80% and 100% renewable energy by 2024 and 2030, respectively. Alphabet’s three-pronged approach that includes renewable energy procurement, energy efficiency and carbon offsets underscore its commitment to reduce carbon emissions.

Moreover, iPhone maker, Apple also focuses solely on renewable energy to power its data centers.

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