Google: Putting Capex on a Diet
December 8, 2008
The point to keep in mind is that Google has been working for a decade to build out its infrastructure. One of the benefits of the company’s willingness to tackle hard engineering problems is that Google obtains a better return on its hardware dollar. Data included in my 2005, The Google Legacy suggested that Google can spend a dollar and get as much as five times to performance that a non-Googlized data center would get. The data appeared in Google technical papers. Some of these papers were written by big Googlers; others by small Googlers. What the performance data share is information that provides a glimpse of the computing capability in Google’s data centers. If we flip the performance data around, a competitor would have to invest as much as five times what Google spends to get comparable performance. Is Google’s engineering that cost effective? Well, a five hundred percent performance boost may be optimistic, but when a data center can cost $600 million the implications are interesting. A competitor would have to spend more than Google to match Google’s performance on data manipulation, disk reads, and queries per second. Let’s assume that Google gets a 25 percent boost. For a competitor to match Google’s performance, the competitor would have to have the known bottlenecks under control and then spend another $125 million which makes a $600 million data center hit the books at $725 million. If you pick a larger performance boost such as two hundred percent, the $600 million data center will require $1.2 billion in capex to match Google’s capacity. Of course, no one would believe that Google wrings such a performance advantage from its commodity hardware. Competitors prefer branded equipment. What’s in the back of my mind is that Google may be keeping its cards close to its chest.
The Washington Post’s “Google Turns Down Some of NC’s Tax Incentives” explains that the economic downturn, among other factors, may be causing Google to trim its capital expenditures. The Washington Post here quotes a letter Google sent to North Carolina officials. For me the key phrase was:
While Google “remains pleased and committed to its Lenoir operations,” economic conditions make it too difficult to be sure the $600 million data center complex will expand as fast as previously thought, the letter said. “Yet the company fully expects to achieve employment and capital investment levels that are consistent with those that the state announced in 2007,” Charlotte attorney John N. Hunter wrote on behalf of Google.
The Google capex expenditures are going to become more important. The economic downturn is affecting most organizations, and I think the GOOG may be battening down its hatches. Good Morning Silicon Valley takes this position. You can read its take on the capex shift here.
What happens if Google does trim its capex for data centers? Maybe Microsoft’s new data centers will leap frog over Google? Google could find itself on the wrong side of high performance if Microsoft builds its own super performance innovations into its data centers. What the Washington Post makes clear is that Google is slowing down at least in North Carolina. The Google may be trying to trim costs by rethinking certain investments. This is another sign of Google’s increasing maturity and could indicate the opening that Microsoft needs to hobble the search Googzilla.
Stephen Arnold, December 6, 2008
Comments
-
- Subscribe to Beyond Search
Feature archive
News archive
-
