Microsoft has confirmed Fonterra will be one of the foundation customers for the data centre it will build in Auckland.

The company earlier named Fonterra and Spark as customers who would benefit from the local server farm, which will mark the first time one of the Big Three in the cloud computing wars (Amazon Web Services, Microsoft and Google) has built a data centre in NZ.

Microsoft drew plaudits from Prime Minister Jacinda Ardern on May 6, when it first announced its plan to make a "major" investment in a regional data centre, which will be built in Auckland.

At the time, Microsoft named Fonterra and Spark as examples of its big NZ customers who would benefit from the build.

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"Microsoft wouldn't be investing here if they didn't have full confidence in the New Zealand economy and saw us as a safe place for operation in both the health and business sense," Ardern said.

The local data centre should also help Microsoft win more business with certain government agencies, financial institutions and others where data sovereignty - keeping data within NZ's borders - can be an issue.

Other details remain scant.

"At this stage, there is no timeline on the completion of the data centre," a spokeswoman for Microsoft said this morning.

The 48 per cent Infratil-owned Canberra Data Centres recently said it planned to open two "hyperscale" data centres in Auckland by the end of 2022. CDC and Microsoft parnter on data centres in Australia, but neither has commented on whether they will be cooperating on this side of the Tasman.

Bluff talk damped down

There has been talk of a giant, power-hungry data centre filling the smelter void in Southland, particularly now the Chilean government is floating a plan for a possible Valparaiso-Sydney-Southland submarine fibre optic cable.

But the Microsoft spokeswoman said, "The location is still Auckland."

As things stand, Auckland makes the most sense in logistical terms. For broadband performance, geography is destiny, and our largest city hosts landing points for the Southern Cross and Hawaiki trans-Pacific cables, as well as NZ's largest peering exchange.

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Billions being invested

Microsoft is also schtum on what constitutes a "major" data centre investment.

The company has around 100 data centres worldwide.

Data centre investments can easily run to hundreds of millions. Google for example, recently unveiled a US$1.2 billion ($1.98b) plan to build two new server farms in the US.

But the data centre that IBM built in Auckland's East Tamaki in 2013 is probably of a more comparable scale. That project ran to $80 million (or $88m in today's money). With OIO approval in the frame, it seems likely Microsoft's local build will top $100m.

While a construction boost, and a boon for companies who use cloud services, it is unlikely the data centre would directly provide many jobs once up and running. Data centres are largely automated.

Data centres are famed for the amount of electricity they consume, largely through air conditioning to cool servers. But in the US, Microsoft has had a focus on solar power and other clean energy solutions and the company has set the goal of becoming carbon-neutral by 2030.

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Covid boost

Cloud technology already accounted for 15 per cent of the US$1.56tn spent on IT worldwide last year — up from 7 per cent in 2015, according to analysts at Morgan Stanley. They predict that the increased reliance on the cloud with pandemic remote-working will only cause this shift in IT spending to accelerate.