Microsoft Postpones Iowa Data Center

Microsoft said today that it will postpone the construction of a $500 million data center project in West Des Moines, Iowa as part of the company's broader cost containment moves. The Iowa project was announced in August, but Microsoft never outlined a firm construction timetable, and rumors have circulated for months that the project was on hold.

Microsoft said it would continue work on two other huge data center projects in Chicago and Dublin, Ireland, but would bring them online "as customer demand warrants" based on quarterly reviews of data center capacity. The company also said it would continue to expand capacity in some places, including an existing colocation facility in Amsterdam.

The changes were detailed today in a blog post by Arne Josefsberg and Mike Manos of Microsoft Global Foundation Services, which detailed the steps Microsoft has taken to keep its data center operations lean and minimize the impact of the economic slowdown.

"Thanks to the efficiencies we’ve gained through these ongoing efforts, we will be able to delay the construction and opening of some of our facilities, which will save Microsoft and its shareholders significant operating expenses, going a long way towards meeting the goals that Microsoft announced this week," they wrote. "For instance we’re postponing construction of the data center in Iowa that we recently purchased land for. We are still continuing construction of our facilities in Chicago and Dublin, and are planning to open them as customer demand warrants."

Microsoft said in October that it would reduce its investment in its data center expansion, citing the economic slowdown and the need to cut expenses. Microsoft CFO Chris Liddell said the company will reduce its projected capital expenditures for 2008 by $300 million, all of which will come from planned data center spending.

The West Des Moines project is slated to create 50 to 75 jobs paying $70,000 a year, and take 12 to 18 months to complete once construction begins, the company said. Microsoft bought land southwest of Booneville Road and Xavier Place in West Des Moines near Interstate 35. “Microsoft selected Iowa after evaluating a number of locations across the country," Manos said at an August press conference with Gov. Chet Culver. "Iowa provided the best all-around combination of attributes that we evaluate in an important selection such as this."

The construction slowdown follows a similar move by Google, which recently halted work on its data center in Pryor, Oklahoma. The $600 million facility was scheduled to be completed in early 2009, but instead will go online sometime in 2010.

That decision, along with the completion of centers in North Carolina and South Carolina, helped Google reduce its capital expenditures to $368 million in the fourth quarter of 2008, less than half the $842 million Google spent on its data centers in the first quarter of the year.

Microsoft says it will continue to evaluate its infrastructure spending on a quarter-by-quarter basis, and stay focused on cost efficiency in its data centers.

"We have been busy 'building a better mouse trap' for these type of scenarios and are now turning up the dial on our efficiency efforts," wrote Manos and Josefsberg. "The bottom line is that despite the problems the economy is going through, our online services businesses are growing. ... This recession is the ideal backdrop to implement small changes that target big needs. Frugality drives innovation, and limited resources are just another forcing function to develop creative solutions to infrastructure needs."