Google announced in early February that it had completed yet another record-setting year for data center infrastructure spending. The company reported spending more than $3.5 billion on “real estate purchases, production equipment and data center construction” in the final quarter of 2014 and almost $11 billion for the year.
While significant spending on data center infrastructure is necessary to build a successful Web company, Google’s expenditures are dramatic even among similarly sized service providers. For example, in the fourth quarter of 2014, Amazon spent just $1.1 billion and less than $5 billion for the entire year. Microsoft spent only slightly more than that, with $1.5 billion in the final quarter and $5.3 billion for all of 2014.
In fact, Google has been spending so much money on enhancing their data center infrastructure that they have outpaced Intel, the world’s largest manufacturer of computer chips. Last year, Intel spent $10 billion on property, manufacturing plants and equipment, $1 billion less than Google.
“What has happened in the last 10 years is that the players thought to have no capital expense are actually spending more than those, like Intel, that were held up as the most capital intense,” said Horace Dediu, a tech financial analyst with think tank Clayton Christensen Institute. “As things move to the cloud, the effect is on Intel and HP and Dell and on the IT departments of the world— an entire power-base for how IT decisions are made.”
As industry giants like Google, Microsoft and Amazon look to increase their market share, their spending on data centers, devices and hardware necessary to support an expanded infrastructure will continue to grow at a rapid pace. With a greater push into the cloud, this type of investment will start to become increasingly disruptive for companies like Intel, Dell and HP.
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