Juha Saarinen: Microsoft's data centres a big deal for New Zealand

Microsoft's proposal will make local data centre operators feel uneasy, as Azure's one giant cat among the pigeons. Photo / 123RF

COMMENT:

Last week's announcement by Microsoft that the company has sought official approval to build an Azure data centre region in New Zealand came as a surprise.

That's because Microsoft already operates four Azure geographically separate regions with multiple data centres in Australia, a much bigger market that's well connected to New Zealand providers.

Microsoft cloud competitors Amazon Web Services and Google Compute Platform also have regions in Australia, which is home to other multinational data centre colocation operators as well.

Why would Microsoft spend somewhere north of a hundred million dollars on North Island facilities (there won't be any South Island ones at this stage) to set up hyperscale data centre shop in New Zealand then?

One reason is data sovereignty. That is, some cloud users have to keep important data within specific jurisdictions, and not store it overseas.

It could be financial or privacy sensitive data, or simply information that the authorities in a particular country want quick and easy access to.

Data sovereignty is now part of Microsoft's marketing material for Azure and called data residency, and it's taken for granted that certain information stays within national borders.

That wasn't always the case, and data sovereignty was deemed to be enough of a nuisance that a ban on it was proposed in the Trade in Services Agreement (Tisa) that 50 World Trade Organisation countries were negotiating in 2014.

Regulatory compliance apart, keeping and processing data closer to users is also good for performance, while Sydney isn't that far away relatively speaking, serving up apps and data from New Zealand will be more responsive, faster and possibly cheaper too although what the local Azure pricing will be once the region is built is hard to tell at this stage, especially since neither AWS nor Google are here to compete with Microsoft.

Data set sizes are getting bigger too which means transmitting them to the cloud takes longer and can really rack up hefty ingress and egress charges.

The timeliness issue is an interesting one: data like that connected from IoT sensors used for process automations has a short life span.

Shifting it over expensive links to clouds overseas for processing and then waiting while getting the results back is a waste of money if you need to see what's happening in almost real time. It also means that you really do need low latency (delay) for controlling timing sensitive processes.

Processing data closer to users is one driver for 5G edge computing, with infrastructure already in the works in New Zealand. Microsoft has the Azure Stack Edge with the Edge Zones that connect over private 5G networks. It's new technology, but the idea is that customers can stand up their own mini-Azure regions close to them.

After initially being talkative about the new region, Microsoft clammed up and didn't want to provide any further detail on the data centre sizes, capacity, locations, or even if they intend to build new or buy up local facilities.

Security was cited for the refusal to provide details, which is fair enough, but another reason could be commercial secrecy.

Cloud computing has become much more complex and diverse over the past few years, and a key requirement for many customers has been to avoid being dependent on a single provider.

For banks, that's often a regulatory requirement. They're not meant to put all their data within a single public cloud. If something goes wrong either at the cloud provider, or the network connections to it, bank customers unable to process transactions would be hit hard.

Now we have multi-cloud to avoid being dependent on a single provider. That means customers who are keen on Azure services will look at another, non-Microsoft provider for that multi-cloud set up.

Multi-cloud could be a great opportunity, but with nothing ready yet beyond an application filed with the Overseas Investment Office, Microsoft wants cloud competitors who might be considering moving into the local market to know as little as possible about the New Zealand Azure region.

That particularly if the competitors are AWS or Google, and we should watch this space.

Hyperscale clouds might offer all sorts of computing features and benefits that simply didn't exist not so many years ago, but they're also ugly beasts that use lots of power for the servers and cooling, with smelly, fumy diesel generators and large batteries to handle electricity outages.

One cloud person I mentioned the NZ Azure region to immediately suggested re-routing the power from the Manapouri hydro-electric generator but with the Azure data centres being North Island only, that might be somewhat impractical.

Nevertheless, our mostly renewable power generation will look good in Microsoft's annual sustainability report. If we're going to have big, electricity-sucking data centres, then yes, it's better that they're powered by generators like the Ngawha thermal field than coal-fired stations in Australia.

With Microsoft's OIO promise to support education and training for people, the Azure region announcement looks like a net positive for the country. It would be astonishing if the OIO turned down Microsoft's application.

This especially since we're trying to get the economy back on boil and beyond hitting up Silicon Valley billionaires for a few million each to go and hide in locally built bunkers the money-making ideas have been thin on the ground.

That said, Microsoft's proposal will make local data centre operators feel uneasy, as Azure's one giant cat among the pigeons. They will have to think long and hard about what that future looks like in a couple of years time.