Everyone knows Google. What started up as a small company at Stanford University is now one of the best-known websites in the world. This phenomenon took the world by storm in the late 90s and has been a part of our lives for over two decades. Whenever we have a doubt and we decide to look it up online our head’s immediate thought is to search it on Google. It has become our go-to search engine, it’s easy to use and it seems to have all the answers to any possible question.
Less than a week ago, the company made a big announcement that did not get too much attention. They’ve decided to expand their offices across the US. As of last year, they counted with offices and data centers in 21 states. This year, 2018, they are opening data centers in Alabama, Oregon, Tennessee, Virginia and Oklahoma. Not only that, but they are either opening or renovating offices in California, Colorado, Illinois, Massachusetts, Michigan, New York, Pennsylvania, Texas and Washington. This massive expansion is just a small display of how much the company is growing.
This growth needs to go hand in hand with sizing capacity. We learned in class that there are several strategies for sizing capacity. These are:
- Forecasting demand accurately
- Understanding the technology and capacity increments
- Finding the optimum operating level
- Building for change
In this case, Google must have forecasted its demand. By doing so, they noticed that they needed more space to be able to supply every client on the long run. Not only that but since they are a technology company, they must keep their data centers and offices ready for the next big thing to come.
Another topic we saw in class related to planning capacity was the different timing strategies to expand businesses. These included: leading demand with incremental expansion, leading demand with one-step expansion, capacity lags demand with incremental expansion and attempts to have an average capacity with incremental expansion. The company took a leading demand with one-step expansion strategy which means that they plan to stay ahead of the demand, thus minimizing the chance of sales lost to insufficient capacity.
In order to complete this strategy, the company has to make huge investments. Google is spending over $2.5 billion dollars on the data centers alone. For each of these servers the technology enterprise needs to hire around 1,900 employees. This is the capacity requirement the firm has calculated for each data center. In one of our latest lessons we saw that capacity requirement is the capacity necessary for a future period of time to meet the forecasted demand of the firm.
Google has grown over time to become a billion-dollar firm, with over 600,000 employees in 50 different countries. Although I only focused on Google US on this topic, the same strategies are being applied in the rest of the countries where this innovative and resourceful company is located.
Can you think of any other tech company that has been expanding its capacity lately? Maybe one that has been using a different timing strategy to expand?