Microsoft’s Ballmer to Invest Billions in Cloud Data Centers

Microsoft Corp. will invest “billions” in data centers to handle increased use of cloud services, where information and software are stored remotely and accessed over the Internet, Chief Executive Officer Steve Ballmer said.

“The good news is that the cost of data centers is coming down,” Ballmer said at a joint press conference with Deutsche Telekom AG CEO Rene Obermann in Cologne, Germany today. Deutsche Telekom is investing about 700 million euros ($971 million) to 800 million euros in data centers every year, said Obermann.

“We’re excited,” Ballmer said. “I’d have a hard time coming out here and being all pumped up for our customers, if I didn’t also think that it will be good for our shareholders. I still won’t give you a forecast” for how much Microsoft hopes to benefit from the trend for cloud technology.

Cloud technology lets users and companies store data in remote storage centers that can be accessed online anywhere in the world. It is commonly used for Internet-based electronic mail and business software as an online service. In September, researcher Gartner Inc. said cloud computing will represent an estimated 10.2 percent of organizations’ spending on external information technology services in 2010.

In a survey, 46 percent of respondents who had a budget for cloud computing indicated they would increase use of cloud services from external providers, Gartner said.

Revenue Potential

In Germany, the revenue potential from cloud computing services is expected to grow to 8.2 billion euros in 2015 from 1.14 billion euros now, Obermann said, citing data from German high-technology industry group Bitkom.

Deutsche Telekom, Europe’s largest telecommunications company, based in Bonn, predicts its T-Systems business-customer unit will increase external revenue from 6 billion euros in 2009 to 8 billion euros in 2015 “and cloud services will contribute an increasing share of that,” Obermann said.

Both Ballmer and Obermann addressed concerns voiced by companies and governments that cloud computing on the Internet compromises security.

“We can’t have security standards in Europe that are different from for instance in the U.S.” Obermann said, calling for harmonization of regulations and industry-wide standards to accelerate take-up of cloud services.

Ballmer said harmonization is needed to encourage governments to use cloud technology.

“As much as 25 percent of the IT landscape is the government as a user and serving citizens and it is going to be hardest for that to lift off without some level of harmonization,” said the CEO of Redmond, Washington-based Microsoft.

Compared with three years ago, there is no longer any question about “whether” users are moving toward cloud-based services, Ballmer said. “Now we know it’s inevitable,” he said. “When the curve explodes, it will happen quickly.”

To contact the reporter on this story: Ragnhild Kjetland in Frankfurt at rkjetland@bloomberg.net

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net

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