Implications of Ballmer's Cloud Announcement

Microsoft revealed this week plans to lower its data center budget from $500 million per project to $250 million or less, according to a report by Data Center Knowledge.

Kevin Timmons, head of Microsoft's data center operations team, says the company is currently on track to "reduce costs by 50 percent or more in the next-generation builds".

The announcement comes a week after the company unveiled its container-powered cloud services vision, where CEO Steve Ballmer said "when it comes to the cloud, we are all in."

Driven by the company's container-based data center design, the goal is to build its data center network to be "incredibly scalable at awesome cost effectiveness," says Timmons.

The container is titled IT-PAC, which stands for pre-assembled component. Using a free cooling technique, the containers are designed to run in all kinds of environments.

With this innovative design, Microsoft can opt for a steel and aluminum structure built around a central power spine instead of the concrete bunker exterior that other data centers normally use.

After the company builds the data center's framework, it can add groups of data center containers in phases as needed to bring new capacity online to meet the needs of its growing cloud computing operation.

The method will be less costly for Microsoft, in that it will allow the company to start with smaller upfront construction costs, and distribute the expansion costs over time using a just-in-time model.

This approach is made possible by the containers, which are assembled and shipped onsite with the included servers.

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