Microsoft to build own datacenter in Korea
Microsoft Korea CEO Al Koh answers questions during a press conference with local media at the company’s headquarters in Seoul, Wednesday. / Courtesy of Microsoft Korea
Company still prefers to spend money over long periods of time
By Kim Yoo-chul
Microsoft Korea said Wednesday that the Korean subsidiary of the U.S.-based licensing giant plans to construct its own datacenter in Korea by 2019.
As the build-versus-lease strategy in constructing datacenters is influenced by cash-flow preferences, Microsoft’s Korean affiliate is expected to maintain the so-called “not-that-aggressive” strategy by making small amounts over the long haul.
“Microsoft plans to build its own datacenter in Busan on a tract of land owned by the company. The new datacenter, the company’s third in Korea but first that will be wholly owned by the company, will be operational in 2019 at the earliest,” Microsoft Korea said in a statement.
This could be a major reversal of its “colo model” as Microsoft Korea currently operates its small datacenters in the LG Uplus building in Pyeongchon and the LG CNS building in Busan on leasing contracts.
The initial expenditures of datacenter construction, including network and utility installation costs, could add up to thousands of dollars per square foot.
Control of data security and risk are considered as other problems for global IT companies push to prefer the colo model, which is an attractive alternative for businesses that are highly-sensitive to large capital expenditures, as colocation provides fixed monthly costs related to leasing datacenter space based on needs and usage.
But Microsoft Korea CEO Al Koh, a former Samsung SDS CEO, looks to hedge the expected investment risks by winning support from the Busan government.
Microsoft announced its strategic alliance with Busan Metropolitan City for collaboration in the cloud computing business. Microsoft said it will purchase needed land from BMC for the datacenter in the country’s biggest harbor city.
“We will purchase the land in Busan,” Koh told reporters in a press conference to local media held at the company’s headquarters in downtown Seoul. “Microsoft Korea will continue investing in the Korean market.”
Koh declined to comment about benefits that Microsoft expects to receive in return for its decision to construct its own datacenter in Busan.
But officials say Microsoft Korea will gain a sizable amount of tax benefits,
administrative support with electricity and water, as well as other various tax-related incentives as gifts for its decision.
“Microsoft Korea is well-versed about the growing desire of the Busan regional government to invite more companies to ramp up the cloud computing business in the city; therefore, it’s no surprise to see that Microsoft will get more advantages than other companies which also have plans to build their datacenters in Busan as well,” said an official.
The executive said Microsoft Korea will promote its Azure products here. Koh said the initiatives are in accordance with the growing demand for cloud computing services all over the Asia-Pacific region.
It remains to be seen whether Microsoft Korea’s decision to build its first company owned datacenter in Korea will encourage other technology giants which have been operating their datacenter services through leasing contracts.
Amazon Web Service (AWS) has been providing its cloud service since January this year.
AWS was in talks with KT and LG Uplus to jointly operate its datacenter, here; however, it’s still uncertain whether AWS will increase its direct investment in Korea such as the construction of its own datacenter.
“Recognizing risk is a consideration; however, understanding the existing perception of security needs is another key to deciding whether to build a datacenter or lease one.”