Servers in a data centre. Photo / 123RF
By Russell Palmer and Lucy Xia of RNZ
Amazon’s big announcement with the backing of the PM has grabbed headlines, but additional details are casting doubt on claims of a boost to jobs and GDP.
The major political parties are clashing over whether anyone can take credit for what’s been billed as the biggest publicly announced investment by an international tech firm in New Zealand’s history – so big the Tuesday announcement seemed in many ways to be the same as one from 2021.
Questions being raised are as fundamental as whether the data centres promised back then are even real.
Confused? Intrigued? Read on...
Big numbers: a $7.5 billion investment into data centres, leading to estimated GDP gains of $10.8b and “supporting” 1000 new jobs.
These numbers were talked up on the radio by Prime Minister Christopher Luxon, who was set to attend Amazon’s “Cloud Day” expo in Auckland as a guest speaker.
This is all part of the expansion plans for New Zealand from Amazon Web Services (AWS), which runs Amazon’s cloud computing services, including data storage, networking, analytics software and AI.
As of Tuesday, it was the launch of an AWS New Zealand “region” – one of 38 around the world – backed by a “cluster of highly secure data centres across three different areas around Auckland”.
Information security expert Anthony Grasso from Titanium Defence explains it will let people using Amazon’s cloud services choose to have their data or software stored physically in New Zealand, rather than relying on data centres in Australia or Silicon Valley.
It means the data can be accessed slightly faster, and doesn’t leave the country – which can be important for some government data, for example.
“And we in New Zealand have the additional requirement that Māori data as well is handled in a way that is suitable for the Māori population and held within New Zealand,” Grasso said. “So, a couple of very good reasons why we’d want to have data centres physically located in New Zealand.”
The announcement also showcased Amazon’s commitment to the Government to offer training in cloud services to 100,000 people in New Zealand, with more than 50,000 such training courses already provided. A new initiative with IT training provider Lumify for another 10,000 courses contributes to that goal.
In his keynote speech, Luxon said AWS was the “lifeblood of New Zealand business” and the country needed to make itself more attractive to big investments like this.
“That’s why earlier this year I announced that New Zealand would be forming a new central one-stop shop for investment called Invest New Zealand, and AWS’ investment in New Zealand is a fine example of the capital, but also the expertise, that we can attract if we do that right.”
Amazon is the global leader in cloud computing. Microsoft also has big data centres in Auckland, and – until now – has been probably the biggest player in the New Zealand market.
Some of it is. The plans for setting up data centres were first revealed in 2021, with both the Labour Government and National saying it was good news.
Amazon had lobbied Prime Minister at the time, Jacinda Ardern, and the Government for a wider push into cloud computing, and celebrated the move as an “ambitious partnership”.
The jobs, GDP and investment figures were all from that initial announcement.
Labour has criticised Luxon, saying he was trying to take credit for something he had little involvement in. The Government maintains he wasn’t doing that, just celebrating a valuable investment.
The dispute was thrashed out on Morning Report by National and Labour’s deputy leaders Nicola Willis and Carmel Sepuloni today.
The launch of the new “region” and the training commitment were new details on Tuesday.
However, the plans as laid out in 2021 have changed a bit – even if the numbers touted by the accompanying marketing material have not.
It turns out “ambitious” may have been a rather prescient adjective to apply to the data centre plan. At that time, the company was planning to build three physical data centres in Auckland, due for completion by 2024.
Whereas that initial $7.5b reveal was projected to be spread across 15 years, AWS on Tuesday refused to say what kind of timeframe it was on now.
The plan to “build” data centres also seems to have morphed into this new “cluster” model.
Basically, the data centres are real – they’re just not big new buildings being constructed by Amazon. Instead, the company is seemingly renting spaces across the city to fit out with its own data centre equipment.
Newsroom’s Jonathan Milne reported in March last year that Amazon had not built anything on the site where it had consent to open one data centre on Fred Taylor Drive, near Westgate, which had required draining a wetland and removing a dabchick nesting site.
Auckland Council confirmed to RNZ the only resource consent application it had received from AWS was for the Fred Taylor site, where “the earthworks phase has been completed, but actual building work has not commenced”.
When asked about this, AWS refused to say where its data centres were located for security reasons.
“You won’t ever find AWS disclosing their infrastructure locations, buildings, or any land they own or store data anywhere in the world – this is their global policy on security,” Suzanne McNamara from AWS’ PR firm said.
“The fixation on buildings and location appears to be at the expense of what is an incredibly positive story for New Zealand.”
Grasso describes this leasing approach as “the next best thing”, and says keeping the location of data centres hidden is standard practice, although the information does tend to leak out eventually.
“You don’t want to advertise these things ... the idea for that will be around protests or terrorism and sabotage,” Grasso said.
“Data centres are an aggregation of – most likely – your company’s or your government’s or your community’s most important information all stored in one place ... imagine you just had a bucket of water and were able to get access and just throw it over the computers, it would cause, you know, utter disruption.”
But as Milne told Nine to Noon, while it may be a standard practice for Amazon, that’s not the case with many other companies.
“If you look on datacenters.com you’ll see that photos and addresses of data centres all over Auckland and around New Zealand,” he said. “So, I think what you need to see this as part of a reasonably large marketing play on Amazon’s part.”
McNamara’s response explains a bit more about how the new “cluster” approach works.
“A Region is made up of three Availability Zones, which are spread across three different areas around Auckland – these are far away enough to protect from natural disasters or issues but close enough to provide high speeds. In each of these three zones around Auckland is a cluster of highly secure data centres.
“AWS has specific security standards, dedicated fibre optics to connect the three zones across Auckland, their own servers, racks and Graviton chips. A Region in New Zealand is designed to the same specifications as a Region in the US, UK or Singapore.”
Grasso said renting a space and making it secure is far cheaper than a massive construction, so Amazon may have decided the latter simply wasn’t viable.
Amazon’s Manuel Bohnet was a bit vague about exactly where the jobs would be and who would be offering them.
“We expect to support 1000 new jobs and the multiplier effect of these investments will affect local businesses, drive skills, but most importantly, will accelerate the transformation of New Zealand into a leading technology hub,” he said.
“The jobs that we expect to create are mainly in the supply chain.
“So, think about jobs that are needed to operate a facility, to run a data centre, but obviously also telco engineers and everything you need to have the infrastructure.”
Tech commentator Peter Griffin said AWS said the figures being bandied about should probably be taken with a pinch of salt.
“They’ve added up every dollar and probably things that they’ve replicated from overseas, like training courses and all of that, they put a value on all of that, added all of that together,” Griffin said.
“For the GDP figures they’ve extrapolated what will happen in the economy: how many more businesses will offer cloud services; will create new applications; will hire more people ... They’re adding all of that up and then probably adding in a healthy margin as well.”
Catalyst runs a New Zealand-owned cloud storage service that competes with AWS and its managing director Don Christie is even more scathing.
“I think Amazon are taking New Zealanders for fools,” he told Nine to Noon.
“A thousand jobs being created? Now, if I was investing $7.5b in New Zealand – and I’ve invested a lot in New Zealand – I’d be creating a lot more than 1000 jobs.”
He said more of this infrastructure across New Zealand is critical for resilience and capability regardless of which company is building it.
“But don’t mislead us. Don’t pretend that you’re doing something so magic that nobody else in the world can do. They’re talking about fridges cooling down hot [computer] chips. It’s not complicated.”
The use of data centres – and AI in particular – requires a lot of power. But it’s also true that New Zealand already has many data centres distributed across the country.
AWS’ Bohnet emphasised in his speech the company had committed to being 100% renewable-energy powered by 2040.
This is backed by a deal between AWS and Mercury Energy, which he said had meant the Tuatira South wind farm near Palmerston North was built at a larger scale.
When questioned about how that 100% target could be guaranteed, Bohnet acknowledged “we are getting power from the local grid”. He also refused to say exactly how much power the data centres would need.
Griffin said the Amazon data centres would likely not focus much on AI – at least to start with – which would mean little change in overall power consumption.
“They’ll do typical things like storing data and applications in the cloud, that’s what the bulk of New Zealand businesses are doing so consumers won’t necessarily notice much of a difference in terms of their local power company or telco or retailer service seeing them,” Griffin said.
“I can’t see a scenario immediately where we’re going to be training large language models in the Amazon data centres in Auckland, that sort of stuff is done closer to the action in other countries, in places like Silicon Valley.”
However, the total increase in power consumption from data centres generally – not just Amazon – could result in prices rising further, he said.
“You start to get to a state where you know what happens in the middle of winter, in a dry winter, when there isn’t much wind, suddenly, are we going to have to sort of buy lots of coal?”
– RNZ