The Hindu : Opinion / News Analysis : Software firms spending on land, buildings

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Friday, Jun 29, 2007
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Software firms spending on land, buildings

Nick Carr

Up till now, software businesses have had the luxury of not having to worry about the big investments in physical capital that have always characterised their industrial-age counterparts.

At dozens of sites around the world today, construction crews are erecting vast, windowless buildings, each designed to hold thousands of computers. Connected to the internet through thick bundles of fibre-optic cables, these data centres, or server farms, promise to be the power plants of the information age — and to usher in a new era in the software business.

Google has been the leader in the building boom as it strives to keep up with the booming demand for its search engine and other web services. The company already operates scores of data centres around the globe, reportedly holding as many as two million or three million computers altogether, and it continues to spend billions of dollars a year to put up new ones. It has centres under construction in Oregon, North and South Carolina, Oklahoma and the Dutch port city of Eemshaven, and last week announced plans for a $600 million facility in Iowa.

But Google is far from the only computing company laying lots of bricks and mortar. Its arch-rival, Microsoft, is building a mammoth data centre on a former bean field in the farming town of Quincy, Washington. It expects that the site will ultimately hold six warehouse-sized buildings encompassing 140,000 square metres of computer-packed space. Also rushing to build or lease data centres are Yahoo!, Ask.com, Intuit, Salesforce.com, and Deutsche Telekom’s T-Systems unit, among many others.

What’s behind this land grab? It stems from a change in the nature of the software business. In the past, software companies only had to concern themselves with writing code, copying their programs on to discs and selling them. It was up to the buyers of the software to maintain the computers, storage drives, and all the other hardware needed to run the programs.

But the spread of the broadband internet, with its enormous capacity for transmitting data, is changing the way we think about and use software. We’re not installing as many programs on our own computers as we used to. Instead, we’re tapping into programs that are delivered through our web browsers. Facebook, YouTube, Wikipedia, World of Warcraft, Yahoo! Mail, Google Spreadsheets — those are just a few examples of the popular software programs that run mainly in distant data centres, on computers owned or leased by software companies.

This trend, which started in the home, is now moving into businesses. Instead of installing pricey and finicky software on their own computers, companies are beginning to rent programs over the net for a monthly fee. Even sophisticated applications for maintaining customer accounts, tracking finances, managing workers and performing other complicated tasks are now being offered as web services. The burden of running software is shifting from the buyer to the seller.

An irony

To be a successful software company today, you increasingly have to worry not just about writing code but about assembling and maintaining big, complex hardware systems. There’s an irony here. Since the arrival of the web nearly two decades ago, the pundits of information processing have told us that the future will be created not out of the atoms of the physical world, but out of the bits of the digital realm. The software business, conjured out of immaterial lines of code, has been held up as the herald and symbol of this transformation.

But today’s software companies are finding that, as more computing tasks move online, they have to compete not just on the elegance of their programs, but on their ingenuity and efficiency in buying and deploying physical assets — land, buildings, computers, and other gear — as well as managing the huge amounts of energy required to keep all the machines running. The management of atoms is becoming as important as the management of bits.

Up till now, software businesses have had the luxury of not having to worry about the big investments in physical capital that have always characterised their industrial-age counterparts. But that’s changing. The software business is coming down to earth. —

Guardian Newspapers Limited 2007

(Nicholas Carr’s next book will be The Big Switch. He blogs at roughtype.com)

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