Microsoft takes rent-to-own route to add datacentres

Microsoft currently leases two facilities under a collocation agreement, scheduled to expire in 2010

There are a number of ways to get more datacentre space. One is to be like Google, which is building new datacentres in Iowa and other states at a cost of US$600 million each. Another is to lease some space first and then buy it if you like it — and that's what Microsoft appears to have done via a deal with Savvis.

St. Louis-based Savvis, which provides hosting and other IT infrastructure services, announced last Friday that Microsoft is paying it about US$200 million to buy two datacentres located adjacent to one another in Santa Clara, Calif.

Microsoft currently leases the two facilities under a collocation agreement with Savvis that was scheduled to expire in 2010. The software vendor is the sole user of the datacentres, which together have about 250,000 square feet of raised-floor space, according to Savvis.

Charles King, an analyst at Pund-IT in Hayward, Calif., said that it may have been less expensive for Microsoft to buy existing facilities in Silicon Valley than it would have been to build a new datacentre because of the tight office market there.

King also said that in California, in particular, companies typically need to get electricity provisioning guarantees from a utility for new datacentres. Having an existing agreement in place for the two Savvis facilities may have been another incentive for Microsoft to buy them, he said.

But Microsoft isn't just in buy mode when it comes to new datacentres. Earlier this year, the company said it would spend about US$550 million to build a datacentre in San Antonio that will occupy 44 acres of land and include more than 400,000 square feet of space.

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