Microsoft’s plans to build its first data centre in New Zealand shows faith in the country’s digital future, says NZTech chief executive Graeme Muller.

On Wednesday, the technology giant announced it planned to build a data centre in the North Island, adding to its 59 other data centres around the globe. It would be the first multinational cloud service to open one in New Zealand, with the investment likely worth tens of millions of dollars.

Muller said it would accelerate technological solutions that required rapid processing power, such as artificial intelligence systems. “For example, this is ultimately the sort of processing power that will be needed to support a fleet of autonomous vehicles safely.”

There are already local providers of data centres and Microsoft’s investment will increase competition, he said. “While that might be challenging for incumbents, the benefits should flow through the economy.”

Brad Smith, Microsoft’s president, on social media said: “Last year, I spent some time in New Zealand and met with Prime Minister Jacinda Ardern. I was so impressed by that country’s digital ambitions. Our new data center there will only accelerate its digital transformation and help propel all New Zealanders forward.”

However, there were conflicting messages on Wednesday from the Government and private sector about who had control of data held locally by foreign companies.

Minister for Government Digital Services Kris Faafoi said protecting New Zealanders’ data and privacy was critically important. “Onshore cloud facilities give us stronger control of our data and reduce the concerns relating to storing data offshore.”

The country’s new Privacy Act, still making its way through Parliament, included a new information privacy principle which put responsibility on organisations to make sure data stored offshore had comparable protections to New Zealand.

Minister for Government Digital Services Kris Faafoi said the investment had “flowed from conversations between Prime Minister, Jacinda Ardern, and Microsoft President, Brad Smith, last year”.

Don Christie of Wellington-based IT company Catalyst, a local competitor of Microsoft, has long said any data sent out of the country is at greater risk than if it were kept onshore. However, Microsoft and other United States-owned companies still had to comply with US laws, he said.

In particular, the Clarifying Lawful Overseas Use of Data Act (CLOUD Act) allowed data stored around the world to be accessed and disclosed if stored through a US-based service provider.

“Data is taonga and it still needs to be owned, managed and held by New Zealanders,” Christie said.

Faafoi said the announcement could mean construction job opportunities and, in the longer term, opportunities for the ICT industry and local innovators.

Microsoft made a point of saying it planned to support educational programmes to increase employment opportunities for New Zealanders.

Prime Minister Jacinda Ardern described the data centre as a “significant investment”. She said it was still subject to normal regulatory approvals however, “It serves as a signal to the world New Zealand is open for business and quality investment.”

She said Microsoft wouldn’t be investing in the country if it didn’t have “full confidence” in its economy.

In response to a question about whether Microsoft or other large technology companies who set up shop in New Zealand would become “proper taxpayers”, she said: “Everyone who comes into New Zealand knows the expectations that we have for how people operate here.”

She said she believed Microsoft’s presence in the country would bolster rather than crowd out local competition and the onshore storage of data added comfort around data sovereignty.

A Microsoft spokeswoman said the data centre’s location wouldn’t be made public, and it was still subject to approval from the Overseas Investment Office (OIO).

At this stage, the firm wasn’t able to provide a timeline: “Datacenter regions are large-scale and complex infrastructure projects.”

OIO group manager Vanessa Horne said the office hadn’t yet received Microsoft’s application.

 

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