Microsoft raises cloud server lifespan from four to six years
The move will help the company save $3.7 billion next year
Microsoft is increasing the lifespan of server and networking equipment assets in its cloud infrastructure from four to six years, joining other cloud giants.
Chief financial officer Amy Hood announced the news last week during Microsoft's Q4 2022 earnings call. She said technological advancements, new software tools, and more efficient operation of servers and network equipment will enable the longer lifespans.
Extending the infrastructure's depreciable useful life should save Microsoft $1.1 billion in Q1'23, which started last month. The firm anticipates savings of $3.7 billion for the whole fiscal year.
Both Google and Amazon Web Services have already announced longer lifespans for their cloud infrastructure. Google announced it was extending server lifecycles from three to four years in February. In the same month, AWS revealed its intent to boost the lifespan of servers and networking equipment by a year, to five and six years respectively.
When managing millions of servers and storage devices, small changes to their price and lifespan can have a significant impact on associated costs.
Customers usually react to such decisions with mixed feelings. On one hand, by prolonging server life Microsoft should be able to withstand challenging macroeconomic circumstances without having to raise prices for customers. It could even cut rates, although it remains to be seen whether this price cut will actually occur.
On the other hand, extending hardware life also raises the possibility of failures and breakdowns. Microsoft claims it has software that improves hardware performance and monitors for faults. If Microsoft can actually take preventative measures before the hardware fails, there's not much for customers to worry about.
Microsoft reported profits of $51.9 billion in Q4'22, with revenue from Azure, Intelligent Cloud and cloud services driving an increase in net income of 2%.
The global macroeconomic environment, the conflict in Ukraine and extended manufacturing shutdowns in China, however, had a significant impact on earnings.
Despite these setbacks, Microsoft's public cloud offerings seem to be expanding well.
According to a Gartner survey in June, Microsoft ranks second after AWS in the worldwide Infrastructure as a Service (IaaS) public cloud market.
AWS has a 39% market share, compared to Microsoft's 21%.
When asked about how macroeconomic circumstances were influencing Azure, CEO Satya Nadella described how the firm was focused on convincing organisations that Azure can help them cut costs.
"Moving to the cloud is the best way to shape your spend with demand uncertainty," he said.
He added that Microsoft was working to reduce the costs of customers' bills.