There may well be a time when Facebook, YouTube, Digg, and the other Web 2.0 fashion plates make some real money, but for the moment their results pale in comparison to those of the most unexpected beneficiary of the web’s recent evolution, the industrial-age stalwart Caterpillar. As the delivery of data and software applications shifts to the Net, a wide range of companies, from Google and Microsoft to SAP and Intuit to various hosting firms, are rushing to build big modern data centers to meet current and projected demand. A critical component of those data centers is backup power supply, which more often than not includes multi-megawatt diesel generators from Caterpillar.
In its latest quarterly financial report, Caterpillar revealed that, in North America, “sales for electric power applications increased 41 percent [from year-earlier levels] supported by data center installations.” (One of Caterpillar’s major competitors, Cummins, also reports record revenues in its generator business, with worldwide sales jumping 33 percent over the course of the past year.) Demand for the generators is so strong, in fact, that shortages of the machines appear to be significantly delaying the construction of new data centers. A year ago, Data Center Knowledge reported that the lead time for the delivery of a two-megawatt generator, a mainstay of today’s data centers, was a full year. I hear that supplies remain short today, delaying construction projects nine months or more. Rumor has it, in fact, that Microsoft and Google have locked up a significant portion of Caterpillar’s production for the foreseeable future.
Web 2.0 has joined Silicon Valley and the Rust Belt at the hip.
UPDATE: On October 19, Caterpillar released its third-quarter financial report. North American sales of electric generators rose 20 percent from year-earlier levels, a gain the company again attributed to strong demand from data centers. The growing generator sales were a bright spot in what was otherwise a difficult quarter, as many of the company’s lines of business were hurt by the overall construction slump.
This is particularly interesting to me given the “the server market is dead” argument. I’ve never believed that the server market is dead, because the server market is simply evolving. Yes, cloud computing and computes-on-demand and EC2 are all affecting the server market, but overall demand is going nowhere but up and the server market will continue to grow.
I’ve drawn the analogy before that the “utility” analogy proves this out: I think I even had a blog post titled “They still make generators, don’t they?”
Despite changes in the way we use electricity, there are still immense markets for both off-site and on-site generation.
Could it be possible that, despite changes in the way we use computers, there will still be immense markets for both on-site and off-site computation?
Dead nuts on. Ancillary issues include 1) a shortage of efficient transportation of these devices 2)capable and affordable active monitoring systems for these devices 3)Technicians to service these units (they’re complex engines after all not little Honda personal units). Some of these power systems are as big as a hotel ball room and the techs are engineers..not grease monkeys.
Love it.
Just like the best individual bet you can make during a gold rush is selling shovels to the prospectors …
The general store seems to always do well in gold rushes.
Wasn’t that point the concern of Google. . . Two years ago? So if Nick is six months in advance of everyone else, then this makes Google. . .
Nick:
I hope these power-hungry server farms start looking to reducing their energy footprint. One startup company working to this end is PowerIt Solutions. Their system identifies when and where power is not needed in an industrial computing environment and shuts it down or reduces the electricity demand by putting equipment into standby mode. Sure it’s great news that an old school giant like Caterpillar is benefitting from the need for uninterrupted power, but what about the need to conserve and take care of the big, blue marble? I cross-posted on your piece to http://blog.innovators-network.org The Innovators Network is a non-profit dedicated to bringing technology to startups, small businesses, non-profits, venture capitalists and intellectual property experts. Please visit us and help grown our community!
Best wishes for continued success,
Anthony Kuhn
Innovators Network
Another aspect of providing data centers with emergency and prime power generators for additional power is the emissions created by diesel powered generators. Emissions include diesel particulate matter, NOx, carbon monoxide and hydrocarbons. These emissions can be dramatically reduced by including emissions control technology (filter/silencer) at the time of installation. In California, stationary generators come under strict pollution control regulations that usually mandate the installation of air pollution control products. Unfortunately, much of the rest of the country does not follow the same air quality standards for generator emissions.
Jeff Atwood wrote a great article on this subject over at Coding Horror.
“When Hardware is Free, Power is Expensive”
http://www.codinghorror.com/blog/archives/000868.html
A particularly great quote:
“If server power consumption grows 20 percent per year, the four-year cost of a server’s electricity bill will be larger than the $3,000 initial price of a typical low-end server with x86 processors. Google’s data center is populated chiefly with such machines. But if power consumption grows at 50 percent per year, “power costs by the end of the decade would dwarf server prices,” even without power increasing beyond its current 9 cents per kilowatt-hour cost, Barroso said.”
With the big datacenters moving to homebrew proprietary equipment, the real winners seem to be the infrastructure providers.