News Archive
Microsoft Challenges Google PDF Print E-mail
Corporate America is increasingly leaving computing to the experts. Why go to the trouble and expense of building and
managing complex systems to handle your spiraling data-crunching needs when another company can do it for you? And
who better, faster, or cheaper than Google (GOOG)?

That's just the kind of conventional wisdom Debra Chrapaty wants to change. As Microsoft's (MSFT) corporate vice-
president for Global Foundation Services, Chrapaty wants to prove that her company is no less capable of running the
sprawling data centers to offer software doled out via the Internet. The company is especially keen to handle the
ubiquitous Microsoft software that consumers and corporations have been running for themselves for the past few
decades. "Google has done a great job of hyping" its prowess, Chrapaty says. "But we're neck and neck with them."
And if Microsoft isn't there yet, it may be soon. Chrapaty, who's in charge of Microsoft's data centers, is stepping up a
multibillion-dollar building binge, BusinessWeek has learned. Her group is embarking on a plan to build in the coming
years some 20 supersize data centers that can cost as much as $1 billion apiece, according to a person familiar with
Microsoft's plans. "We're going to reinvent the infrastructure of our industry," Chrapaty says. She declines to discuss
specifics of the plan.

Google's Got a Head Start
The moves are designed to support what Microsoft describes as the biggest strategic shift since it first targeted the
Internet in the mid-1990s. The company has unveiled a range of offerings in recent weeks that embrace what's come to
be known as "cloud computing." There's Azure, a new operating system that lets companies run software either on their
own computers or as a service delivered via the Internet by Microsoft. There's a new Windows Live offering that lets
consumers store, retrieve, and share photos, blogs, and other Web content with friends. And Microsoft has announced
an Internet version of its Exchange corporate e-mail, and plans to do the same with its Office software. If Chrapaty's
group can't handle the load, many customers may decide to forgo Microsoft's products in favor of rival cloud computing
services.

Traditionally, Google has positioned itself as the leader. "We've been designing infrastructure for the cloud for years,"
says Matt Glotzbach, a manager who works on Google Apps for corporations. "We've got a pretty big head start vs. a
company like Microsoft."

Tapping into Cheap Energy
Still, Microsoft can hold its own, says Gartner (IT) analyst David Cappuccio. "Microsoft may certainly be just as good" in
areas such as energy efficiency, Cappuccio says. And amid the global economic malaise, cash-rich Microsoft and
Google are alone in being able to "throw several billion dollars into something like this," says Matt Rosoff, an analyst at
Directions on Microsoft.

Microsoft's bold data center strategy dates back at least five years. Before that, the company relied heavily on other
hosting companies to do the work. Soon after the arrival of Chrapaty, a former chief technology officer for the NBA,
Microsoft decided to bring the job in-house. When in 2005 Ray Ozzie persuaded Microsoft founder Bill Gates and CEO
Steve Ballmer to make the move to online delivery of software in 2005, running data centers became even more
important. Chrapaty began bringing in industry luminaries from companies including Hewlett-Packard (HPQ) and Intel
(INTC)
Read More
 
Microsoft Challenges Google PDF Print E-mail
Corporate America is increasingly leaving computing to the experts. Why go to the trouble and expense of building and
managing complex systems to handle your spiraling data-crunching needs when another company can do it for you? And
who better, faster, or cheaper than Google (GOOG)?

That's just the kind of conventional wisdom Debra Chrapaty wants to change. As Microsoft's (MSFT) corporate vice-
president for Global Foundation Services, Chrapaty wants to prove that her company is no less capable of running the
sprawling data centers to offer software doled out via the Internet. The company is especially keen to handle the
ubiquitous Microsoft software that consumers and corporations have been running for themselves for the past few
decades. "Google has done a great job of hyping" its prowess, Chrapaty says. "But we're neck and neck with them."
And if Microsoft isn't there yet, it may be soon. Chrapaty, who's in charge of Microsoft's data centers, is stepping up a
multibillion-dollar building binge, BusinessWeek has learned. Her group is embarking on a plan to build in the coming
years some 20 supersize data centers that can cost as much as $1 billion apiece, according to a person familiar with
Microsoft's plans. "We're going to reinvent the infrastructure of our industry," Chrapaty says. She declines to discuss
specifics of the plan.

Google's Got a Head Start
The moves are designed to support what Microsoft describes as the biggest strategic shift since it first targeted the
Internet in the mid-1990s. The company has unveiled a range of offerings in recent weeks that embrace what's come to
be known as "cloud computing." There's Azure, a new operating system that lets companies run software either on their
own computers or as a service delivered via the Internet by Microsoft. There's a new Windows Live offering that lets
consumers store, retrieve, and share photos, blogs, and other Web content with friends. And Microsoft has announced
an Internet version of its Exchange corporate e-mail, and plans to do the same with its Office software. If Chrapaty's
group can't handle the load, many customers may decide to forgo Microsoft's products in favor of rival cloud computing
services.

Traditionally, Google has positioned itself as the leader. "We've been designing infrastructure for the cloud for years,"
says Matt Glotzbach, a manager who works on Google Apps for corporations. "We've got a pretty big head start vs. a
company like Microsoft."

Tapping into Cheap Energy
Still, Microsoft can hold its own, says Gartner (IT) analyst David Cappuccio. "Microsoft may certainly be just as good" in
areas such as energy efficiency, Cappuccio says. And amid the global economic malaise, cash-rich Microsoft and
Google are alone in being able to "throw several billion dollars into something like this," says Matt Rosoff, an analyst at
Directions on Microsoft.

Microsoft's bold data center strategy dates back at least five years. Before that, the company relied heavily on other
hosting companies to do the work. Soon after the arrival of Chrapaty, a former chief technology officer for the NBA,
Microsoft decided to bring the job in-house. When in 2005 Ray Ozzie persuaded Microsoft founder Bill Gates and CEO
Steve Ballmer to make the move to online delivery of software in 2005, running data centers became even more
important. Chrapaty began bringing in industry luminaries from companies including Hewlett-Packard (HPQ) and Intel
(INTC)
Read More
 
Oil Over-Priced PDF Print E-mail
In June, a couple of Dutch energy researchers released a fascinating, long-gestating report on high oil prices. At the
time, oil was selling for about $130 a barrel, and the authors, neatly dissecting the market, argued that prices were only
going to get worse. Just the next month, they did rise — to $147 a barrel.

But, as O and G readers know, there was good reason to argue the other way at least in the short term – Ed
Morse, now shifted from defunct Lehman over to LCM Commodities, asserted correctly that we were in for a
considerable price correction.

So, with prices having gone strongly down, as Morse forecast, I made a phone call to the report’s lead author
– Jan-Hein Jesse, whom I met last year at an OPEC meeting in Vienna – and asked whether he thinks his
thesis still holds. I.E., is another price spike coming down the road?

The answer, Jesse replied, is probably yes. The ‘probably’ covers the event that we are headed into a
long, deep depression, in which case all such previously composed economic analyses are off the table, and one must
reassess the facts afresh.

But if in the next two or three years we come out of recession in fair economic shape, look for another steep rise in oil
and gasoline prices.

Fatih Birol, chief economist at the International Energy Agency, has been arguing the same point while making the
rounds last week and this week in Washington and elsewhere. He’s been explaining the IEA’s latest World
Energy Outlook, which is just as bleak as Jesse’s paper. Jesse wrote the paper with Coby van der Linde.

In short, demand in China, India and elsewhere in the developing world is probably going to roar back and outstrip supply in 2011 or beyond.

That alone will push prices back up. But oil companies also are now responding to $50 oil by shelving oilfield
development projects. So, as Jesse told me, “In 2010 or 2011, we will be in the same situation as [the high prices
of] last year. Then we will start all over again [in an energy crisis], but it will be much more difficult.”
One interesting observation of Jesse’s is that price no longer works as a stimulant in the other direction –
high prices don’t necessarily motivate oil producers to flood the market with supply, and thus tamp down the
upward motion of prices. That’s because almost all the available new oilfields are controlled by national oil
companies like Saudi Aramco, Russia’s Gazprom and Venezuela’s PDVSA. Unlike oil companies such as
Exxon and BP, which if they can are driven to maximize profit by producing more oil when prices are high, these national
companies earn what they need from the higher prices, and let the rest of the oil sit in the ground.

In order to meet rising demand starting in 2011 and beyond, Jesse wrote, these producers – the companies and
countries – will have to bring twice as much newly found oil onto the market in the next 22 years than what they
did in the last 22 years. Meaning they will have to find and deliver 70 million barrels a day of new supply to the market.
Almost no one thinks that is possible.

Jesse’s ultimate forecast is that the West – the U.S. and Europe – are going to have to use a lot
less oil in order to make way for rising demand in China, India and elsewhere. If they don’t, he says, look for
geopolitical tension, and another possible deep and prolonged recession. The coming energy shortages are bound to
produce “sometimes confrontational relationships” between the world’s main oil consumers and the
petro-states, the authors write.

Jesse and the IEA come to the same conclusion – the current global energy model isn’t sustainable. In
order to avoid “the nasty side of oil scarcity,” Jesse and his co-author write, OPEC and other petro-states
need to produce more oil, and the West needs to purse efficiency and the development of alternative energy
Read More
 
Oil Over-Priced PDF Print E-mail
In June, a couple of Dutch energy researchers released a fascinating, long-gestating report on high oil prices. At the
time, oil was selling for about $130 a barrel, and the authors, neatly dissecting the market, argued that prices were only
going to get worse. Just the next month, they did rise — to $147 a barrel.

But, as O and G readers know, there was good reason to argue the other way at least in the short term – Ed
Morse, now shifted from defunct Lehman over to LCM Commodities, asserted correctly that we were in for a
considerable price correction.

So, with prices having gone strongly down, as Morse forecast, I made a phone call to the report’s lead author
– Jan-Hein Jesse, whom I met last year at an OPEC meeting in Vienna – and asked whether he thinks his
thesis still holds. I.E., is another price spike coming down the road?

The answer, Jesse replied, is probably yes. The ‘probably’ covers the event that we are headed into a
long, deep depression, in which case all such previously composed economic analyses are off the table, and one must
reassess the facts afresh.

But if in the next two or three years we come out of recession in fair economic shape, look for another steep rise in oil
and gasoline prices.

Fatih Birol, chief economist at the International Energy Agency, has been arguing the same point while making the
rounds last week and this week in Washington and elsewhere. He’s been explaining the IEA’s latest World
Energy Outlook, which is just as bleak as Jesse’s paper. Jesse wrote the paper with Coby van der Linde.

In short, demand in China, India and elsewhere in the developing world is probably going to roar back and outstrip supply in 2011 or beyond.

That alone will push prices back up. But oil companies also are now responding to $50 oil by shelving oilfield
development projects. So, as Jesse told me, “In 2010 or 2011, we will be in the same situation as [the high prices
of] last year. Then we will start all over again [in an energy crisis], but it will be much more difficult.”
One interesting observation of Jesse’s is that price no longer works as a stimulant in the other direction –
high prices don’t necessarily motivate oil producers to flood the market with supply, and thus tamp down the
upward motion of prices. That’s because almost all the available new oilfields are controlled by national oil
companies like Saudi Aramco, Russia’s Gazprom and Venezuela’s PDVSA. Unlike oil companies such as
Exxon and BP, which if they can are driven to maximize profit by producing more oil when prices are high, these national
companies earn what they need from the higher prices, and let the rest of the oil sit in the ground.

In order to meet rising demand starting in 2011 and beyond, Jesse wrote, these producers – the companies and
countries – will have to bring twice as much newly found oil onto the market in the next 22 years than what they
did in the last 22 years. Meaning they will have to find and deliver 70 million barrels a day of new supply to the market.
Almost no one thinks that is possible.

Jesse’s ultimate forecast is that the West – the U.S. and Europe – are going to have to use a lot
less oil in order to make way for rising demand in China, India and elsewhere. If they don’t, he says, look for
geopolitical tension, and another possible deep and prolonged recession. The coming energy shortages are bound to
produce “sometimes confrontational relationships” between the world’s main oil consumers and the
petro-states, the authors write.

Jesse and the IEA come to the same conclusion – the current global energy model isn’t sustainable. In
order to avoid “the nasty side of oil scarcity,” Jesse and his co-author write, OPEC and other petro-states
need to produce more oil, and the West needs to purse efficiency and the development of alternative energy
Read More
 
Feds to Help Ailing Banks PDF Print E-mail
The Federal Reserve boosted its lending to commercial banks and investment firms over the past week, indicating that a severe credit crisis was still squeezing the financial system.

The Fed released a report Friday saying commercial banks averaged $93.6 billion in daily borrowing for the week ending Wednesday. That was up from an average of $91.6 billion for the week ending Nov. 19.

The report also said investment firms borrowed an average of $52.4 billion from the Fed's emergency loan program over the week ending Wednesday, up from an average of $50.2 billion the previous week.

The Fed said its net holdings of business loans known as commercial paper over the week ending Wednesday averaged $282.2 billion, an increase of $16.5 billion from the previous week.

Financial firms are borrowing from the Fed because they are having trouble raising money through normal channels as the financial system endures its worst crisis since the Great Depression.

Banks are hoarding cash rather than making loans out of fear that they won't be repaid. The Fed and the Treasury have been flooding the financial system with money in hopes that banks can return lending operations to more normal levels.

The central bank on Oct. 27 began buying commercial paper, the short-term debt that companies use to pay everyday expenses. It was one of a series of moves the Fed has made to try to unfreeze credit markets.

The Fed's goal is to raise demand in this area as a way to boost the availability of commercial paper, which has been seriously constrained since the financial crisis hit with force in September.

The report said insurance giant American International Group's loan from the Fed averaged $79.6 billion for the week ending Wednesday. That was down by $5.6 billion from the average the previous week.

The reduction reflected a modification of the government's support program for AIG earlier this month. Under that change, Treasury stepped in with a $40 billion purchase of stock in AIG, using money from the government's $700 billion financial system rescue package. The increased support from Treasury allowed the Fed to reduce slightly the size of its total loans to AIG.

The Fed unveiled two new programs Tuesday in a further effort to get consumer credit flowing again.

It said it would begin buying mortgage-backed securities from mortgage giants such as Fannie Mae and Freddie Mac. And it announced a program to lend to financial firms that buy securities backed by various types of consumer debt, from credit cards to auto and student loans.
Read More
 
Feds to Help Ailing Banks PDF Print E-mail
The Federal Reserve boosted its lending to commercial banks and investment firms over the past week, indicating that a severe credit crisis was still squeezing the financial system.

The Fed released a report Friday saying commercial banks averaged $93.6 billion in daily borrowing for the week ending Wednesday. That was up from an average of $91.6 billion for the week ending Nov. 19.

The report also said investment firms borrowed an average of $52.4 billion from the Fed's emergency loan program over the week ending Wednesday, up from an average of $50.2 billion the previous week.

The Fed said its net holdings of business loans known as commercial paper over the week ending Wednesday averaged $282.2 billion, an increase of $16.5 billion from the previous week.

Financial firms are borrowing from the Fed because they are having trouble raising money through normal channels as the financial system endures its worst crisis since the Great Depression.

Banks are hoarding cash rather than making loans out of fear that they won't be repaid. The Fed and the Treasury have been flooding the financial system with money in hopes that banks can return lending operations to more normal levels.

The central bank on Oct. 27 began buying commercial paper, the short-term debt that companies use to pay everyday expenses. It was one of a series of moves the Fed has made to try to unfreeze credit markets.

The Fed's goal is to raise demand in this area as a way to boost the availability of commercial paper, which has been seriously constrained since the financial crisis hit with force in September.

The report said insurance giant American International Group's loan from the Fed averaged $79.6 billion for the week ending Wednesday. That was down by $5.6 billion from the average the previous week.

The reduction reflected a modification of the government's support program for AIG earlier this month. Under that change, Treasury stepped in with a $40 billion purchase of stock in AIG, using money from the government's $700 billion financial system rescue package. The increased support from Treasury allowed the Fed to reduce slightly the size of its total loans to AIG.

The Fed unveiled two new programs Tuesday in a further effort to get consumer credit flowing again.

It said it would begin buying mortgage-backed securities from mortgage giants such as Fannie Mae and Freddie Mac. And it announced a program to lend to financial firms that buy securities backed by various types of consumer debt, from credit cards to auto and student loans.
Read More
 
[ Back ]