Microsoft postpones Iowa data center

A day after reporting flat revenue for its online services business, Microsoft said it is postponing construction on a planned data center in Iowa.

It's one of several other cost-cutting measures the software giant announced along with a disappointing financial report Thursday, including laying off around 5,000 people, reducing the use of vendors and lowering marketing spending.

Microsoft will continue construction of its new data centers in Chicago and Dublin and open them based on the level of demand for its online services. The company will revisit its data center plans quarterly, wrote Arne Josefsberg, general manager of infrastructure services, and Michael Manos, general manager of data centers, in a Microsoft blog about its data center efforts.

They referenced Microsoft's cost-cutting efforts in the post, but optimistically described the postponement in Iowa as being a result of successful efforts to improve the efficiency of data center operations elsewhere. “Thanks to the efficiencies we've gained through these ongoing efforts, we will be able to delay the construction and opening of some of our facilities,” they wrote.

Josefsberg and Manos said they expect more companies to rely on hosted services from companies such as Microsoft to save money, and that despite the economic downturn, Microsoft's online services businesses are growing. That's just barely true. Revenue from its online services in the quarter ending Dec. 31 was US$866 million, up just a hair from $863 million in the same period in 2007.

Microsoft revealed in August that it would build the facility in a suburb of Des Moines and use it to host consumer services such as Hotmail, Live Search and Windows Live applications. Like its Chicago data center, the facility would use shipping containers to house servers, the company said at the time.

Microsoft is not alone in reining back its data center expansion plans. Google late last year decided to delay building a facility it planned in Oklahoma.